Good afternoon, everyone. Welcome to CD Projekt's conference call dedicated to H1 of 2020. My name is Adam Kicinski, and I will run this call together with Piotr Nielubowicz and Michal Nowakowski, who will join us at the Q&A session in the second part of the call. Let's start with the presentation that sums up the first two quarters of 2020. It's available on our webpage, cdprojekt.com. Firstly, a short COVID update. We keep working from homes mostly, and will continue to do so till the end of the year, at least. It's not a perfect setup for a creative company, but we kind of got used to it. At the same time, we remain proactive in supporting the needs of our team. We've also recently introduced our latest COVID prevention protocol, created and supervised by medical experts. Please move on to slide three.
Cyberpunk is in its final stage, and all our forces are preparing a global release on the 19th of November. As previously announced, the game will be launched on Xbox One, PlayStation 4, and PC. It will be also available on Stadia, although the launch date on this platform is yet to be announced. Moreover, thanks to the backward compatibility, Cyberpunk will instantly play great on the next-gen consoles as well. Now, please jump to slide five. The key moments for Cyberpunk were hands-on that we organized in June. Despite pandemic circumstances, we managed to invite over 100 journalists, YouTubers, and bloggers from 15 countries to play our game. That was supported by 60 interviews and resulted in hundreds of articles and previews. Please take a look at slide six and slide seven with just a few samples of these first impressions and magazine covers.
Let's go to the next slide, number eight and nine. Also, in June, we started revealing more features of Cyberpunk at digital events that we've called Night City Wire. In the first two episodes, we covered different lifepaths, weapons, music, and Braindance gameplay. There are a few more Night City Wires to come, with the next one coming up in September. Now, please go to the next slide, number 10. You probably have seen it before, it's updated with the addition of the trailer released in June, "The Gig." Again, the difference in viewership compared to the most viewed trailers for The Witcher 3 is huge. We keep building the hype. On the next slide, number 11, I'm pleased to share the most recent achievement.
Cyberpunk has got five awards at Gamescom, making it the most awarded game at this most prominent European gaming event. The last thing before financials. Please move to slide 12. We've announced our first movie project, the anime series called Cyberpunk: Edgerunners. It's co-developed with one of the best Japanese anime studios, Trigger, and will be aired on Netflix in 2022. T hat's all from me regarding the recent key business events. Please move to the next slide, so number 13, and let's dive into the numbers. Piotr, the floor is yours.
Thank you, Adam. Let's start from page 14. In business terms, the first half of this year was very good for us. Our total sales revenues reached PLN 364 million, which is nearly 70% above the result of the first half of last year. Most of this revenue came from sales of our own products, over PLN 237 million, over two times more than last year. This was driven by The Witcher 3, including The Witcher 3 on Nintendo Switch edition, and GWENT, which had the best six months in its history. Our product sales were accompanied by respective cost of product sold of PLN 50 million, comprising mostly depreciation of expenditures on development projects for GWENT, The Witcher 3 Switch edition, and Thronebreaker. This position stayed at the same level as last year. Also, revenues from sales of goods and materials grew nicely by over 70%.
This was thanks to the growth of sales of GOG and revenues achieved by CD Projekt RED on sales of physical components of our games, both Cyberpunk and The Witcher. This also includes the activity of CD Projekt RED Store, which commenced mid- 2019. The cost of goods and materials sold also grew, mainly driven by the cost related to relatively low margin technical sales of physical components at CD Projekt RED and in proportional increase on GOG's side alongside their increase in sales. All in all, even though this year, unlike last year, we had no revenues from sales of services, which were related to extraordinary Cyberpunk promotional cooperation with our publishing partners, our gross profit on sales this year increased by over PLN 100 million and exceeded a quarter billion PLN. Operating costs for the first half of this year were slightly higher.
Operating costs for the first half of this year were slightly higher than for the previous one. The main growth drivers are salaries and provisions for bonuses dependent on our financial results, which this year were much better than a year ago. Needless to say, marketing, both of Cyberpunk and GWENT, took an important share in our selling cost as well. Finally, our net profit for the period between January and June this year reached PLN 147 million. That's nearly three times more than a year ago. Most of this result was delivered by CD Projekt RED, which reached a net profitability of 50%.
This result and growth we achieved in the recent months was obviously supported by some external factors like the COVID pandemic or Netflix series further popularizing the Witcher universe. But it's fundamentally the result of our consistent policy that pays off in the longer term. Please have a look at page number 15, CD PROJEKT Group sales. This is the fifth consecutive period of six months where CD PROJEKT Group revenues continued to grow. The main event, the Cyberpunk release, is still ahead of us, planned for the current half of 2020. However, revenue is just the beginning. On the next page number 16, I also visualized our profits for the last 2.5 years. Current profits are the results of our current trading activity based on historical releases. Most of the group employees are deeply involved into thinking, developing, preparing, and planning for Cyberpunk.
Which leads us smoothly to the statement of our consolidated financial position on page 17. A major change among our assets is visible on expenditures on development projects that grew by PLN 97 million. The increase is mainly driven by our works on projects within the Cyberpunk universe, parallel to the depreciation of finished products, mainly GWENT, Witcher 3, Nintendo Switch, and Thronebreaker. There is also a new position on our balance sheet, other fixed assets that consist mostly of T-bonds we have acquired during the second half of this year. Approximately 1/3 is presented among fixed assets and 2/3 together with the valuation of respective hedging transactions among working assets. Altogether, our financial assets, including cash, bank deposits, T-bonds, and respective hedging transactions, increased over the first half of this year by PLN 160 million. I will go into more details on that in a moment.
Another visible change among our working assets comes from receivables. Natural decrease from the high amount as per the end of 2019 linked to the intense end-of-year sales. On the equity and liability side, two major changes are visible. Equity itself grows by PLN 155 million, mainly due to the profits of the period. Deferred revenues increased by PLN 45 million up to PLN 206 million. This comprises mostly of licensing royalties associated with pre-orders of the digital edition of the PC version of Cyberpunk, and the so-called minimum guarantees for future royalties from foreign publishers and distributors, again, in relation to Cyberpunk. Those should become our revenue upon release of the game. Let's go to the next page, number 18. We started this year with PLN 482 million of cash and bank deposits.
Our cash flow was based on great operational performance and net profits of nearly PLN 147 million for the period. On top of that, open receivables decreased their balance by PLN 75 million, which translated into additional cash flowing into the company. The next correction is related to the increase of the deferred revenues line, mostly advances on royalties for Cyberpunk. Our major investment this year was strictly linked to our core business and development of games and technologies. We spent on that PLN 114 million. All in all, our financial assets, cash, bank deposits, and T-bonds increased by PLN 160 million. It's fair to say on aggregated numbers that all the new cash earned by the group was invested into T-bonds, keeping the balance of cash and deposits at the opening level for the year. Let's jump to the next page.
One more thing, not directly related to our past results. Between the 30th of July and the 17th of August, for 13 days, we ran our share buyback program. We bought 516,700 shares. The aim of the buyback program was to offer the bought back shares free from lockup to all participants of our recent incentive program in order to enable them to sell the shares and gain source of funds with which to finance their participation in the program and expected tax liabilities. Toegther with a brokerage house, we designed and recommended to our employees a coordinated way to market the shares. We believe it's most fair to do this in a process similar but opposite to the previous buyback, extended for up to 15 working days, subject to a daily transaction limit of 15% of the daily trading volume.
Participants of the motivation program declared the wish to transact approximately 490,000 shares, which is around 9.5% of the whole incentive program pool. Participants are entitled to amend their sell orders by changing the number of shares to be sold, changing their minimal sell price, or canceling the order. This amount may vary over the course of the process. To sum up, we at CD Projekt spent PLN 240 million on the buyback. However, PLN 129 million should be paid in or actually back to CD Projekt by program participants. Therefore, our corporate net participation via shares we acquired from the market should amount to approximately PLN 85 million, which is close to the value of the dividend we paid last year. All in all, thanks to this action plan, issuing new shares as part of the incentive program was limited by nearly 517,000 shares.
The remaining part of the incentive program will vest by newly issued shares, which will carry a one-year lockup. We'll progress with that in the coming weeks. That's all from my side. Adam, the floor is yours again.
Thank you, Piotr. So, what's next? Please go to slide 21. Here you can see the very simple graph describing our promotional activities till the end of this year. The thickness of those four bars is symbolic, just to highlight that the vast majority of marketing activities are still ahead of us. With the most intense part starting in the first half of November. As I mentioned before, you can expect a few Night City Wires in the next 2.5 months in digital line, among other activities. Stay tuned. Now, I would like to come back to The Witcher world for a moment. Please go to the next slide, number 22. Three years ago, our friends, who had already released many small mobile games under the Spokko label, approached us with bold ideas.
They were dreaming of bringing The Witcher universe to a mobile augmented reality game based on geolocation, with monsters, quests, and stories hidden just around the corner. Here we have The Witcher: Monster Slayer. The game is being soft-launched in New Zealand as a first step of a series of public tests. We'll keep working on this promising project and continue building our studio Spokko. The game will be released on iOS and Android, and we are expecting to reveal the launch date later this year. There is one more thing I would like to share with you today. Please go to slide number 23. We've been working on this project for some time, and today we are happy to announce that our best game so far, The Witcher 3, will be released on Xbox Series X and PlayStation 5 next year.
Expect a full-blown next-gen bells and whistles version with great features of the upcoming generation. Of course, we'll release it on PC as well. I believe that it will greatly enhance the longevity of this amazing game. That's all from me, and I'm passing the mic to Piotr again.
Thanks, Adam. The last slide, number 24. Recently, we called for an extraordinary general shareholders meeting scheduled for the 22nd of September. The aim of this meeting is to vote two resolutions regarding our long-term incentive program. As you may know, for the last general meeting, we proposed a number of resolutions, among them, two referred to the next CD Projekt incentive program. The first resolution gained the required number of votes and established the incentive program, so technically, we have it in force. The second resolution was to permit the issue of subscription warrants and new capital issue, which is one of the tools by which the new incentive program is to be implemented. Unfortunately, this one failed to gain the required qualified super majority of votes represented at the general meeting.
After the meeting, we gained the feedback from investors and found three major points to adjust in our program in order to meet the expectations. Vesting period is to be minimum three years. The reference dates used to determine the market goal should start at the current date and not at the beginning of the year when the previous program ended, and discount to the excess of size price can be applicable only if mitigated by extra performance requirements. We applied the changes and proposed corrected resolutions to address all the three aspects. However, the status quo is what we know from our investors, that one of the proxy voting agencies are recommended to vote for the resolutions and one recommended to vote against. We believe investors may be puzzled by this situation.
Basing on the feedback we received, there are three areas where our intentions potentially were not meeting the expectations. The first, the program must be sufficiently long-term in its nature, and the vesting period needs to be a minimum of three years. The program and its goals are designed for four to six years with an option of earlier attainment if we deliver the four-year profit target early. However, the changes we proposed limited the earlier attainment of the goals and the program itself to a minimum of three years. The goal in such a scenario would be to generate net profits of a minimum PLN 6 billion during three years. It means PLN 2 billion of net profit on average per year.
It's an extremely ambitious goal, taking into consideration that our best ever financial year, the year of release of The Witcher 3, our consolidated net profit reached PLN 342 million, and the average profit for the last three financial years was PLN 162 million, 12x less than the next three years aggressive premium goal of the program. It obviously requires huge acceleration from us. I believe it's fair to say that our incentive program is based on very challenging targets and is designed for four up to six years, with a minimum duration for three financial years. The duration of it is in line with our development cycles. Some confusion may be linked to the proposed warrants validity period. In our program at the grant date, participants will get entitlement, which can be compared to conditional options.
Participants will hold the conditional options until the general meeting accepts our financial results fulfilling the goals of the program. Once the goals are met, the company may either offer them shares acquired in the buyback program or warrants which entitle participants to claim for shares from a new issue. Warrants in such case are just technical, formal tool to grant the reward after the job is done and the motivation long-term goal of the program is met. The second area, discount to the exercise price. The program allows a conditional 5% discount to the exercise price for reaching the premium targets. What do I mean by premium results targets? The standard results targets required to the products to accelerate from a company earning tens or small hundreds of millions PLN per year into a company earning that in billions of PLN.
On the premium results targets require to generate at least from 1/6 to 1/4 higher or faster profits. The reward for entitled employees is a potential 5% discount in the exercise price. Again, I believe this is a fair reward for a much bigger results increase. What is even more important, it's not a discount set for the sake of discounting. It's a part of the whole logic of the program we created, and we continue with good results from 2012. The third area, it was mentioned that the post-market goal does not appear challenging. The market goal for our shares is responsible for a minority of 20% of entitlements. It's not less challenging. I would say it's differently challenging than the results goals are. But this is intentional. It wouldn't make sense to set all goals equally difficult and materializing at the same moment.
If all goals would require the same effort and result, one goal should be enough to measure the success. We intentionally put a certain graduation of the goals. The market goal requires our share price to grow over the period of the program by 100% plus the growth of the WIG index. Assuming the WIG index grows by 30%, we want to be 130% on plus. If the overall market grows by 60%, we want to grow by 160%. WIG index is put into equation in order to allow correction of the target for general macroeconomic changes, resulting in overall changes of share prices on the Warsaw capital market, where CD Projekt is listed. Looking at our historical price performance, one could say that growing by 100% above the market is less difficult than to increase our profits 10x .
That could be true, but please take into consideration that our current share price is already calculating in future profits an incredible acceleration expected from the release of Cyberpunk. In order to further grow the share price by another 100% above the general market, we need to first deliver the expectations for Cyberpunk, profits in the amounts we've never had, and on top of that, instill confidence in the market as to further growing 100 percentage points above all other stocks measured by the WIG index. Our intention is to start next incentive program at the latest in October, and grant entitlements in the program to key employees before Cyberpunk is launched. This incentive program is for the next four to six years, and represents a continuation of two earlier incentive programs, which together constitute a continuum since 2012.
It's expected by our team, we know we need it to motivate and attract the most talented people to work with us. If any of you hesitates or has suggestions how to reasonably tweak the program conditions to meet your policies, please get in touch with us. We're open to discuss it and learn from each other. Finally, I would like to encourage all our shareholders to attend the coming general meeting and to support the resolutions. According to the local law, we need 80% of votes present in the general meeting to vote for it. This Monday is the last day to register your shares to participate. Thank you, let's proceed to the Q&A section.
We've received the first question. It's from Omar Shah of Morgan Stanley. Your line is now open, please go ahead.
Good morning, everyone. I have three questions if I could. The first one's on Cyberpunk. You mentioned that you obviously reiterated that you are on track to release the game on schedule. I wonder whether you could just tell us what is there left to do, and how would you characterize the risk of a further delay? That's the first question. Then related to that, you mentioned that you've got a next-gen version of The Witcher coming next year. I think in the past you've mentioned Cyberpunk may also have a next-gen version published during 2021. I wonder whether you could confirm that that's still also going to happen. That's actually just the first question. The second question is on The Witcher. I wonder whether you could just talk about, we're almost through Q3 now.
I wonder whether you could talk about the trends that you've seen for Witcher sales during the course of July, August, so far, and how that compares to what you experienced during Q2. That would also be helpful. Then finally, on Monster Slayer, I know it's very early days, but I wonder whether you could just give us some color on how the beta in New Zealand is going, and when you talk about the release date, are we talking about this year or next year? Thanks
Hello, Adam Kicinski. I will cover the first one. Yes, we are confirming and yeah, we are finalizing. Actually today, we've started preparation for the final certification, so we are very close. Of course, we'll work on the title till the very end. That's kind of normal. It's a huge game, but as we said, everything is on track, and we are planning to launch it on 19th of November. Regarding Witcher 3 and next-gen version of Witcher 3. Actually, this project is developed outside with our proven partner, who delivered before 4K version of Witcher 3 and Witcher 3 for Switch. They've already know our technology very well. So we asked them to prepare the next-gen port.
As I said during the presentation, expect full next-gen experience with great next-gen feature, but it doesn't interfere with next-gen development of Cyberpunk, because next-gen development of Cyberpunk will be done internally by the Cyberpunk team. Yes, we are confirming that Cyberpunk will be released in the next-gen version. We have to differentiate two things. The current version, which will be released in November, will be played from the beginning when next-gens are released due to their functionality. It will be able to play the current-gen version games on the next-gen. From day one, you will be able to play Cyberpunk. Actually, you can expect a bit high quality than on the current gen. But the full-blown next-gen is planned for next year, and it will be developed internally. I think I've covered the first one.
Maybe, Piotr, you can cover the second bit.
Yes. Our sales in July and August. Each year, July and August is usually the quietest time of the year, comprising of two summer months, holiday months, and the sales are lower than either at the beginning of the year or at the very end of the year for the pre-Christmas time. Right now, everybody got used to the support from the pandemic situation and lockdowns. What I observe, or what I believe looking at numbers, is that the COVID support was especially strong during the hard lockdown that was implemented in many countries, especially in March, April till May. Then most of the world got unfrozen for July and August. This effect will no longer be visible in the same scope as it used to be before.
The most important month of the third quarter is always the September. September is in general still in front of us.
All right, the third one, Adam Kicinski again. Regarding soft launch in New Zealand, it's too early. Actually, it's too early. I'm not sure whether we'll discuss any details about those phases. We are gathering data. It's a very normal practice that we'll try this and that, and you can expect some more soft launches. But it's a purely mobile game and has to be as perfect as possible before it's launched. We have to go through all those phases. We have to gather all feedback and then implement it into the final product, which is going to be released later on. As we said, the release date will be announced this year after we will have this feedback from soft launches.
Okay, thanks. Does Spokko have any other mobile games in the pipeline?
For now, no. They are solely focused on this project, and we are not discussing any further project. Of course, they are not established just for this, but we are still focused on this one and focused on building. The studio at Spokko is fairly independent from our main studio, and it's on purpose. It's a lighter structure prepared just for mobile development.
Excellent. Thank you very much.
Thank you.
Thank you. The next question is from Matthew Walker of Credit Suisse. Your line is now open. Please go ahead.
Thanks. Good morning. The first question is on digital versus physical. Is it still the case that you're expecting for the launch quarter, roughly 50/50 physical, digital? How do you see that going into Q1 of 2021? The second question is, when would you normally think about discounting the price, either for a sort of Christmas 2021 sale, or would you do a summer sale? When would you move to a discounted price for the game? Finally, how aggressive do you want to be on when you do launch the multiplayer, how aggressive do you want to be on monetization of multiplayer? Thank you.
First, the digital versus physical split 50/50. We, in general, in our planning, are quite conservative and we put the 50/50 ratio. If we were to change it, definitely, that the change would go for the digital side. At the same time, the truth is that nobody knows what the digital sales will exactly be. You can, to a certain extent, plan the physical sales because they cannot be higher than the number of stock you manufacture. In case of digital, sky is the limit. As far as the first quarter of next year results are concerned, hard to say. In general, the older the game gets, the more of the sales migrate to digital and physical is getting weaker.
But next year will be a very special year with the next generation consoles becoming more and more popular on the market, and this may also somehow influence the trends. I would say not less than 50/50, probably more on the digital side. How much? We'll see at the end of March.
Hi, this is Michal Nowakowski. I'll take the discounts question. If you recall, with "The Witcher 3," it took us a long while before we actually went in the direction of giving any promotional discounts, and even then, these were not very large. We do not expect anything else for the "Cyberpunk 2077." In fact, we expect it's going to take us longer before we get into the stage where we're going to offer any promotional discounts. Again, when it happens, and of course, I'm not going to provide a specific time on this call, but when it happens, these discounts will definitely not be deep. That's pretty much it.
The third one from my side, Adam Kicinski. Well, we are never aggressive towards our fans. I mean, we treat them fair and we are friendly. Of course not. We won't be aggressive, but you can expect great things to be bought. The goal is to design the monetization in a way that makes people happy spending money. I'm not cynical. I'm not trying to hide something. It's about giving a feeling of the value always. Same with our base games and our single-player games. We want gamers to be happy while spending money on our products. Same with micro-transactions. So, you can expect them, of course, and Cyberpunk is a great setting to selling things, but it won't be aggressive, so it won't upset gamers, but it will make them happy. That's our goal, at least.
Okay, thanks a lot.
Thank you. The next question is from Lyle Leach. Your line is now open. Please go ahead.
Hi. Good morning, guys. Thanks for the presentation. My question would actually be around the Monster Slayer. I'm just wondering if you could give any color on the, basically, development expenditure for the mobile game. How complicated it is to develop an AR mobile game versus a traditional one and could you also maybe talk about some monetization strategies you have for the Slayer, Monster Slayer game? Thank you.
All right. This is very special because the very beginning was because we've met with great people, and we had already known them for years. Actually, they convinced us that it's worth investing in this kind of project before we started the company with them, because they have a 25% of the company. We went through the long test period. They prepared prototypes. But it's a part of our strategy. We want to be on mobile. We want to be on mobile, but not as our basic or our core business lines. It's worth providing gamers with mobile experience in our franchises. It's kind of a very lucky situation that without disturbing us from our main activities, I mean, big games, we are able to deliver mobile experience, which is created by experienced studios, experienced people, specialized in this.
I don't know if I've answered your question, but that's the story behind. Monetization, it's too early. I mean, of course, the game is for free, but expect some monetization inside. We'll test monetization as well in soft launches. But as always, as I said about multiplayer, "Cyberpunk," it won't be too aggressive. Expect no paywalls, no over-milking gamers, but of course, the game is going to make profit.
Thank you. Sorry, just to clarify, basically the majority of the development of Monster Slayer is done by Spokko, and could you maybe provide some color on how much did CD Projekt actually invest into the development of this game?
Yes. I would say that 100% is done by Spokko. Of course, we consult them, we provide them with assets and licenses and so on, but it's their project. We want to be them, responsible for this, so it's created in Spokko, not in CD Projekt RED.
Got it. Thank you.
Thank you.
Thank you. The next question is from Vladimir Bespalov of VTB Capital. Please go ahead. Your line is now open.
Hello. Thank you for taking my questions. First, could you maybe comment a little bit on the way to the release of Cyberpunk? Do you see any risks inside CD Projekt and the risks beyond your control, which could still delay the launch on the date announced? My second question will be on your marketing budget. As far as I understand, in the third quarter, there will be no major spikes based on the slides that you presented, but there will be a significant increase in the fourth quarter. Maybe could you provide more color how big the spike in the fourth quarter could be in terms of your marketing cost? The third question is probably longer term on potential capital allocation post the release of Cyberpunk. You have a pretty good cash pile right now.
It will increase probably manifold after the launch of Cyberpunk. How are you going to spend this money? Are you going to do some M&A activities, invest more heavily in new products, or maybe just return this cash to shareholders? What is your longer-term thinking in this respect? Thank you.
I'll cover the first one. Adam Kicinski. Philosophically, if we talk about future, there are always risks, but 19th of November is the only date we have and we'll deliver. I don't see any chances to have another date. We are focused on this, and we are very close to send the build for the final certification. This is the only date the whole company is working on, from development to marketing.
The second question about marketing budget for Cyberpunk. I would say it is accelerating in the third quarter, starting with the Night City Wire with it and all we prepared for it. Obviously the main push is targeted for the window around the release. Couple of weeks before and then lasting few weeks more after the game is released. How big will the push be? Definitely the biggest ever in our historically. We did not reveal the marketing budget for Cyberpunk yet. But the scope of the campaign is supposed to be at least three times wider, three times bigger than what we had for The Witcher 3. What I would like to underline also is that actually the marketing budget for Cyberpunk is in a certain way dynamic. We try to spend certain percent of the expected revenue.
Along with increase of expected revenues, also the marketing budget is tuned. Therefore, we try not to announce it before, as we know that the final amount will depend on the final expectations from our distributors, from our market analyzers and may change on the way to releasing the game.
The third one, Adam Kicinski again, regarding cash. Starting from M&As, we've been always mostly about organic growth, and I think that's our destiny. Of course, we might one day join forces with some smaller teams, but our mission is to build a company based on organic growth. Dividend or buyback, yes, it's possible, but it's too early to discuss. We paid dividend twice, so if we decided to propose it to shareholders meeting one day, we will. Same with buyback. The most important thing is to have a decent pillow for the further growth. I mean, we want to grow the company. In our industry, the scale of the company is strictly linked with the size of the team or teams. We want to grow, we want to have more people, we want to work on more titles and all of this costs.
We need buffers for future productions and future internal investment in this regard.
Thank you very much.
Thank you.
Thank you. The next question is from Matti Littunen of Bernstein. The line is now open. Please go ahead.
Hello. In 2015, there appeared to be a surge in pre-orders in the weeks immediately before Witcher 3 launched. Is this a pattern you expect with Cyberpunk as well? Then, a more technical question about Witcher Monster Slayer. Do you know if Spokko uses Google Maps SDK for that game? Thank you.
Hi, Michal Nowakowski again. I can take the pre-order question. The answer is definitely yes, this is traditional. The moment in the final weeks just before the launch is when quite a big portion of the players interested in a given title decide to pre-order the game. It's simply due to the fact that the game is just within the reach. They can see that it's launching any moment now, and this is when they feel fine with spending their money on the game, because that's very often, depending on where they pre-order, means they're paying either some or full amount for the game. Yes, we do expect a spike in the final weeks before the launch.
Hello, Adam Kicinski again. Regarding maps, yes. The Witcher: Monster Slayer, the Spokko project, is based on Google Maps. That's true. I can confirm. Thank you.
Great. Many thanks.
Thank you. The next question is from Matilde Casalegno of Barclays. Your line is now open. Please go ahead.
Hi, good morning. I wanted to ask two questions. The first one is, given that you're reporting the third quarter a week after the release of Cyberpunk, can we expect any first week sales figure at that point? Then, my second question is, can we have any idea, information on when the open and closed beta launches will be for Cyberpunk? Thank you.
Yes. The first question, yes, definitely we will address the release of the Cyberpunk during our financial meeting for the third quarter. It's hard to say what data we will immediately have to share with you. I mean, we would definitely love to share reliable and complete data, and some of them are delivered to us with a certain delay. But as much as possible, we will be willing to share and comment on the performance of the game. The second question, Adam Kicinski here. I would like to just to clarify, are you asking about betas to multiplayer or Cyberpunk 2077 single player?
Cyberpunk 2077, sorry.
For single player, there are no betas. I mean, we have internal ones, of course, and we had them. We are now finalizing the product. In terms of public beta, we are not providing any public betas because it's a single-player game, and we never did it, and no one does it for this kind of product. You sell the final game to gamers. You won't allow them to play it before launch. It's a normal practice.
Great. Thank you.
Thank you.
Thank you. The next question is from Robert Berg of Berenberg. Please go ahead. Your line is now open.
Hi, just to follow up on a couple of previous questions, if I can. I'm interested in digging a little deeper in the physical digital shift trends. It's probably a quick answer, but given the significantly different economics for both, I just wanted a bit of clarity. Have you adjusted your physical units order? You mentioned you will only sell as many as you order, but have you adjusted that order over recent months, either upward or down? At the same time, have you had any communication with your distribution partners? Are they showing any willingness or desire to increase or decrease their own marketing budgets up or down during the period as sales potentially look more likely to be online? Maybe you would offset that with some more direct marketing of your own. Anything on those points would be very interesting. Thanks.
We negotiate who will answer the question, whether Michal or myself. Michal starts, I may add something.
All right. Again, Michal Nowakowski, I can start. Regarding the shift to digital, especially this year, because there's been some, for sure, and we've seen it in quite a few new releases this year, where digital was taking larger share than in the years past. That shift is really also dependent on where you are based as a consumer. It's not exactly the same all over the world, to be honest. There are still some regions which are way more physical. For a lot of reasons, there's regions which are transferring more to digital also because, for example, the COVID situation to this very date is more serious there than in some other places.
There is no one clear answer to that question, although in general, if I were to comment on a global situation, yes, I would say that the digital on average is going to have a higher share than, for example, one we would have seen say, a year ago. When it comes to the distribution partners, whether they are shifting anything in terms of units or marketing commitments or anything of the kind, we have actually, I don't want to point fingers to specific ones, but we've actually seen shifts, yes, and we've actually seen shifts going up in some places in terms of physical units and in terms of some of the marketing commitments as well.
You're saying you've seen increased marketing budgets? Is that what you're?
Yes, because very often marketing spend is correlated. For example, if it's about trade, let's say, because it's a marketing spend, it's very often correlated to the number of units that is supposed to go to the retail. That's the reason why. There were some increases. I'm not saying these increases were, I don't know, crazy skyrocket-high, but there were some increases, yes.
Okay. Interesting. Thank you.
Thank you. At the moment, there are no further questions, so I would like to hand back to you.
We have some questions on webcast. Now we'll go through them, and we'll answer the question we got through the system. All right. The question from Maciej of Noble Securities. "What is the estimated number of CP 2077 pre-orders as of today?" Well, we are not revealing those numbers, so we can't answer this question directly. The only thing we can confirm that we are really happy with pre-orders, but no numbers is to be provided. Let me read another question from Albert Rokicki. "Are you going to continue to buy back your own shares in the future to offset supply from motivation program to some degree?" That was the first question.
The second, "How you can compare sales of pre-orders of CP with pre-orders of Witcher 3 at the similar stage before the launch, two, three months before launch?" The third one, "Did you hit over 1 million pre-orders of CP already?" Maybe, Piotr, can you cover the first one?
Yes, I will cover the first one. Actually, the shares that the participants of the motivation program will be selling over the next two weeks come from the buyback program. The two events were not happening exactly at the same time, but that were two similar transactions with opposite direction, I would say. First, we bought back the shares. I don't know whether you noticed the detail, we decided to buy back the shares with a limited participation in daily liquidity. It was limited versus the official requirements, down to 20%. Right now on the process of selling the shares, we've further limited this maximum participation down to 15%. The idea of it is to have as little influence on the market as possible.
I believe there is no other buyback required to really meet the supply of the shares if the supply is limited to such a low percent as 15%. That was the first question. The second question, how can you compare the pre-orders of Cyberpunk versus The Witcher, Michal?
Yeah, I can take this one. We are definitely in a much better spot with the pre-orders of Cyberpunk than we were at a comparable timeframe for The Witcher 3. Transferring directly to the third question, as Adam mentioned, we are not discussing specific numbers and 1 million you mentioned in the question is a specific number, so I cannot answer that directly, unfortunately. We are happier. We are in a better position than we were with The Witcher 3.
The next question from Adrian Kowalik, AlphaValue. "Is The Witcher: Monster Slayer going to be released on iOS and Android smartphones at the same time?" The second question, "Can you confirm that it will be a free-to-play with item sales game?" So, the goal is to have simultaneous release on both platforms, so iOS and Android. I can't confirm it in 100%, but that's our goal. Yes, I can confirm that the game is going to be free to play with some micro-transactions inside. We are not revealing too many details about this, but you can expect some items to buy. All right. The next question is from Piotr Łopaciuk, PKO BP. "New consoles are backward compatible. How enhanced Witcher 3 edition for new consoles will work with people who already own the game on old consoles?
Will there be an upgrade for purchase? As we announced during our call, because there was a press announcement with more details. We did it like before, like we always do. So for all who have bought already Witcher 3, there will be a free update on the platform they have. On PC, they'll get an updated version of the PC version. On Xbox, a free update to Xbox Series X, and same on PlayStation. But of course, it will be a new product for new gamers on each platform. From a certain moment, we'll sell a new version. From a certain moment next year, we'll sell a new version of Witcher 3 with all those enhancements and upgrades. The key thing behind this decision is to, as I said, to extend the life cycle of the game. Witcher 3 is still selling great.
I mean, are selling great. We believe that having it updated on par with the most recent games or the games that will be released, it's a great advantage in terms of sales for the next, I don't know how many years, five, maybe more. In the long term, I really do believe it's a meaningful addition to our back catalog sales. All right, the next question from Filip Klijewicz, Santander TFI. "CP 2077. How's the optimization of the game going? If you could give us a color, how did you improve FPS in the game since hands-on time?" Well, it's going well. I mean optimization is usually something you do at the very last moment when everything is ready. Of course, we have to optimize it. I mean, without this, the game can't be released. It's going well, and the game looks stunning.
We expect that everything will be as optimized as it should be on release.
I can take the next one. It's from Mr. Filip Klijewicz, Santander TFI. "Can we expect that the price for in-house developed games CP 2077 designed for next-gen consoles should be released next year, should be around $70/EUR?" In terms of EUR 69.99 has actually been a full price SRP already in the current generation. For PS4 and Xbox One, new games were released at EUR 69.99. Yes, you should expect that this is going to be the leading price around the market in the Eurozone. When it comes to USD, we have announced, and we have launched our pre-orders at $60. Of course, we're going to keep that price for the consumers. We're not going to change it last minute to $70. Just to confirm, these prices are out in the market anyway. You can check them on the various sites.
$60, and so $59.99 and EUR 69.99 is what we're going for.
The next one from Daniel Paczkowski, StockWatch. "How many DLCs are you planning for Cyberpunk? Will this project be developed similar to The Witcher 3?" Yes, you can expect a similar path after release. You can expect more, actually. We are not going too much into the deals today, but everything will be clear before release. We are before release, so expect fairly soon. All post-release things will be revealed. A series of free DLCs and expansions, everything will be described. You can expect it, and as I said, fairly soon, and everything then will be clear.
Okay. Michal Nowakowski again. The next question is from Mr. Alexey Philippov from JP Morgan. "Do you plan to price games on next-gen consoles at a premium like it was recently announced by EA?" I'm assuming you're referring to increased SRP in the U.S. As I mentioned in the previous question I answered, we already announced a while ago pre-orders for our game in the U.S. going at $59.99, we're not planning to change that price last minute. This has been out in the market and with the consumers for a while, we're not going to be shifting that. Whereas in Europe, our SRP has been announced, has been marketed by quite a few retailers for a while as well. In other words, we're not planning to change where we are last minute for the consumers, for sure not.
Actually, the next question I'm going to take as well, that's from Mr. Piotr Radek from PKO BP. Same question for PC version of enhanced Witcher 3. "Will there be an update to enhance how it will be priced roughly?" For Witcher 3, I believe Adam mentioned that before, but there will be an update as well. Mind you, for PC, it's a little bit different because there's no actual switch between the platforms or anything of the kind, like is the case with consoles. It's more of a patch adding additional visual quality and a few extra features that will be added. Of course, we're not going to be charging people for a patch. It's going to be just something that they're going to download. It's going to upgrade their game, upgrade their experience, but we're not going to ask them extra money.
If you have your game on PC, you will just download an update, and the game will continue to cost what it currently does on the PC market. We consider that as an upgrade of the currently existing game.
The next question comes from Konrad Krasuski from Bloomberg News. Do you see that COVID new reality with bigger focus on digital sales that helps smaller studios, makes competition in gaming industry fiercer, and it allows to new entities to emerge globally? Do you consider any strategy changes to take this new phenomenon? Digital distribution is definitely much easier to access for smaller developers than creating a chain of physical distributors all around the world. So, I would say yes, this trend is quite obvious in a situation where the digital keeps growing. At the same time, to be honest, the digital was growing for the last 10 years. Maybe there is certain acceleration, but it's not a totally new trend occurring or happening nowadays. It's simply accelerating. Does it change our strategy? No, our strategy remains unchanged.
We want to develop the best games on the planet. That's our aim, that's our dream, that's what we want to do, we will be delivering them to gamers in the way gamers want to buy them, want to consume them. Either physical or digital or streaming in the future, that's all among our distribution lines of interest. All right. It seems there are no further questions. Thank you very much for participating in the call. As Piotr mentioned, there is stockholder meeting in plan, the last registration date is next Monday. So please register, if you have any questions regarding the meeting and what we will voting on it, please give us a call because it's kind of technical, but for us as a management, it's a very important tool.
Would be great to have it set before Cyberpunk is launched and provide people with the next plan as we did in the past nine years. All those programs so far were very successful, and we really do believe that the next one will be as successful as the previous ones. Thank you very much