Paradox Interactive’s Best Ever Quarter Ends a Strong Year – Q4 & FY 2018 Results

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Paradox Interactive has released its year-end report for the company’s 2018 financial year and what started strong has ended even stronger. What started with an initially strong first quarter became stronger with a record second quarterly revenues, this continued with a strong third quarter, only to end now with the best quarter, ending December 31st, 2018, in the company’s history.

The 2018 financial year has been capped off with quarterly revenues of SEK 336.9 million, a year on year increase of 51%. Operating profits, on the back of this, amounted to SEK 146.8m, a 69% YoY increase. Over the financial year, revenue amounted to SEK 1.127 Billion, a 39% increase on last year’s 813.7m, with operating profits of 455.1m, a 34% increase on last year’s 339.8m.

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The Paradox Interactive Plan

Over the past two years, I've spoken at length about what Paradox Interactive call their long tail plan. The company generally releases titles that can be played for an extensive amount of time with a huge amount of replay value while also supporting them over a number of years with further downloadable content (DLC) and expansions.

This quarter alone has highlighted this tactic with the release of not one single new title, but with six expansions, each for different titles. These are as follows:

  • Crusader Kings II - Holy Fury
  • Stellaris - Megacorp
  • Europa Universalis IV - Golden Century
  • Cities: Skylines - Industries
  • BATTLETECH - Flashpoint
  • Surviving Mars - Space Race

Across the whole of 2018, there were sixteen expansions of existing titles from the company. What seems to work for the company is the number of people that come to their titles long after their initial release. An example given in the report is Crusader Kings II, which was released in February 2012, seven years ago. The Holy Fury expansion released in November sold more copies within the first month than any previous expansion for the game within the same time period.

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These later sales of the base game are often driven by discounts and seasonal sales, something the company has long lauded as a strong tactic to drive in new players. The last quarter of the year saw the Steam Winter Sale, which the company marked as an important event and participated in with their catalogue of titles.

CEO Ebba Ljungerud had this to say:

2018 was an eventful year for Paradox Interactive. I am proud and happy to announce that we are now putting our best income quarter on the books. We do this without having released any new games during the quarter, which again demonstrates the strength of our core strategy to develop and support games and brands in the long term. Continuous updates and expansions give our games a long life, both in terms of number of players and recurring revenue.

Overall, the company has seen resounding success and placed itself in a strong position for the future.

Futureproofing the Tail - Acquisitions, Developments and More

Naturally, even games that help stand Paradox Interactive apart from other companies have a finite life span. This can be seen in the history of the company by sequels of titles and the general length between them. Europa Universalis III (2007) was followed up by Europa Universalis IV (2013) after six years, Hearts of Iron III (2009) was followed up by Hearts of Iron IV (2016) after seven years.

The internal development studio, aptly named Paradox Development Studio, is currently working on Imperator: Rome and within the next month will see the launch of the console version of Stellaris. In addition to this, other developers that are part of the Paradox Group are working on new titles. Triumph Studios, a wholly owned developer, will release Age of Wonders: Planetfall on the 6th of August. Hardsuit Labs, a minority-owned developer, is also working on a title for the publisher. Other titles are also in development, though they have not yet been announced.

In addition to further developments, Paradox Interactive are securing themselves for the future through acquisitions. In addition to buying Harebrained Schemes, the developers of BATTLETECH, the company has also purchased the IP rights and assets to Prison Architect. While the game itself is many years old and no true possible avenue for further releases, Paradox Interactive actually published the mobile version, it's the use of the brand that the company seems to value the most.

Through the acquisition of Prison Architect, we are laying an important building block for future growth within the management genre, where Cities: Skylines and Surviving Mars are currently our most successful games. Constantly adding new games and brands to our portfolio remains a core part of our strategy. It helps ensure longevity and lessens our dependency on all releases being hugely successful from day one.

Development of a sequel and future 'Architect' games will likely be the route the company goes down. Outside of these acquisitions, it seems the companies previous purchase of White Wolf may prove to be the start of a new venture, with Paradox Interactive seemingly teasing a return to the World of Darkness, where the Vampire: The Masquerade titles were set. Bloodlines, the second title, is regarded as a cult classic and still retains a lot of admiration from those who have played it.

Should Paradox Interactive continue from the successful year they've had, with two large confirmed titles and a successful back catalogue and the potential for major new releases, the future is bright. Particularly so as the company retains a core, but growing fanbase of their titles, which is only likely to expand as they expand their offerings.