Remedy Entertainment Oyj -ketju (Osa 1)

Tähän Remedyn pelien tulevaisuuden arviointiin kannattaa ottaa sekin elementti mukaan, ettei kyse Controllinkaan kohdalla ole varsinaisesti yhdestä pelistä, koska omistajat todnäk. haluavat jatkuvia ja ennakoitavia tuottoja. Jos Control menestyy, se ei tarkoita vain hyvää tulosta tilikautena 2019 vaan poistaa merkittävästi epävarmuutta seuraavilta vuosilta: syntyy arvokas IP, josta voidaan tehdä DLC:tä kevyemmillä kustannuksilla ja jatko-osia, joiden taloudellinen riski on huomattavasti matalampi fanikunnan vakiintuessa (ääricase esimerkiksi strategiapeleihin erikoistuneen Paradoxin ärsyttävän hyvin rahastavat loputtomat DLC:t sen menestyspeleihin, sekä pitkäikäiset pelisarjat kuten Hearts of Iron, Europa Universalis jne.).

Jos Control taas epäonnistuu, ei se tarkoita vain Atrian pinaattilettuja loppuvuonna 2019 omistajille, vaan sen lisäksi tuo aiemmin kuvattu skenaario häviää ja eletään taas epävarmuudessa, kunnes seuraava itse omistettu IP julkaistaan. Todennäköisesti myös luottamus yhtiön kykyyn luoda menestyviä pelejä järkkyisi, ja odotukset alentuisivat kautta linjan markkinalla. Selusta on kyllä turvattu ja alihankinta, kehitysmaksut sekä tuhti nettokassa takaa sen ettei “puh pah pelistä pois” -skenaariota syntyisi tästä vastoinkäymisestä, mutta olisi se silti osakkeelle melkoinen “turn off”.

Hyvä puoli tässä on, että osakkeen arvostus ja siihen ladatut odotukset ovat epävarmuuden vallitessa melko maltilliset, jolloin nousuvaraa on jos peli onnistuu. Ja näin se korkean riskin yhtiöissä pitääkin olla.

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lisäksi seikka, että mikäli Control menestyy veikkaan Sony ostavan tämän v. 2020 :scream:

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Täytyy sanoa, että kun minä sijoitan tällaisiin kohteisiin, niin ne kyllä yleensä ei menesty :)… Muutaman hassun tonnin heitin peliin :slight_smile: Ajattelin, että kun saa mallisalkkua havemmalla :smiley:

Kuitenkin toivoen, että joskus tällaiset riskikohteetkin tärppäisivät, eikä aina tarvitsisi ostella ponssea, huhtamäkeä ja Nokian renkaita “halvalla” ja myydä kalliilla pelkästään :wink: .

No minun salkku alkaa kyllä jo kohta sisältää varmaan 30 yhtiötä. En malta olla pukematta ostohousuja jalkaan aamuisin.

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Pieni bongaus tuoreelta techtalk-videolta: Remedyllä on sivuston käyttäjien konsensuksen perusteella lähes yhtä hyvä strategia, kuin Nesteellä.

kuva

way to go!

Edit: Myös johto on parasta AAA-luokkaa

kuva

Edit2: Katsoinko oikein, että pari minuuttia viestini jälkeen yhtiön kurssikin pomppasi pari prosenttia kovempaan nousuun :wink: ehkä en katsonut…

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Tarkkasilmäinen bongaus! :smile: noita analysoitaessa kannattanee huomioida, että meillä on datanpyörittely vielä pahasti kesken, tullaan sitten tuloksien kanssa ulos vähän järjestelmällisemmin, kunhan saadaan dataa vielä vähän lisää ja siistittyä enemmän! 🕵🏻‍♂

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Podin lopussa keskustelua Remedystä mahdollisena ostokohteena.

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Pystyykö Microsoft torppaamaan mahdollisen Alan Waken PS4 Remastered version? Remasteroinnilla tehtäisiin Alan Wake PS4 pelaajille tutuksi ennen mahdollista jatko-osaa. Kehityskulut olisivat myös maltilliset ja kyllä tuosta kassavirtaakin saisi.

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Hi!

Im an swedish investor and im invested in Remedy ofc ;). I hope youve seen the analysis from Redeye?
Hope its ok that ill write in english. Feel free to respond in finnish. I can translate.

Well my biggest question is about Crossfire. It seems that Remedy is developing a story mode (which would be finished now) for both CrossFire HD and Crossfire 2. I guess that HD is an remaster and CF 2 is the real deal.

  1. Is the story mode the same for both games?
  2. What kind of revenue stream are there for Remedy. Work for hire + royalty? For both games?
  3. Any rumours when HD/ CF 2 will be out? Redeye thinks H1 2019 but i dont know if they mean HD och CF 2.

And for IR… start with quarterly reports!

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As far as I know:

  1. No, it seems CF HD Story mode development is pretty much done and the new announcement from Remedy concerning the project with Smilegate could be CF 2 Story mode.
  2. For CF HD Story Work for hire + Roalty. I don’t think there’s info about how it is for CF 2, but I think there’s no reason to believe otherwise.
  3. CF HD is already in beta phase in China and with the co-operation continuation announcement (Meaning some project is most likely pretty much completed already, CF HD?) H1/2019 sounds reasonable although there’s no info on this.

CF HD and CF 2 are mixed up quite often. Probably because it’s an Asia focused game so the English info is quite varied. For example this announcement from 2 years ago says Remedy is making the story for CF2. And this Remedy webpage says they are making “the Story Mode for CrossFire HD and CrossFire 2.”

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Its interesting how in Redeye’s analysis they have a target price range of 6-21€, which is exactly the same as in Inderes’ analysis published first…I’m not saying anything but…

Thank you for your great response!

Yeah thats what confused me when Remedy first said it will make an story mode for CF 2 then after a while they saying “for Crossfire HD and CF 2”. Well for me this is even better. Maybe this means that Remedy will get royalty from two Smilegate games. Nothing that i will count for but good for the case!

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Yeah… the difference is what i can see the base case. Redeye has 13.6 euro and Inderes has 8.5?

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For Control i guess 505 have an recoup that says they will get 100 % of revenue after cuts until their costs are recouped. At their presentation it says they invested 10.95 million euro total in the case.

If we say that 100 % of sales goes digital ive made this easy calculation:
Baseprice: 59.99 euro
VAT: 12 %
Plattformscut: 30 % (less in retail but will go for 30 % as an conservative alternative)
Currency difference: 15 %

35.6 euro.

10 950 000 / 35.6 = 307 584 copies before Remedy gets any revenue. This feels anyway okey for me. Ill hope for 1-1,5 million units sold this year.

1 000 000 - 307 584 = 694 416 * 35,6 * 0,45 = 11 124 544 euro
1 500 000 - 307 584 = 1 192 416 * 35,6 * 0,45 = 19 102 504 euro.

I think these both numbers are conservative because i think the extra deal 505 have made with Sony will contribute for a great amount of sales.

Feels rather ok for me + continuesly revenue stream from the work for hire + eventually royalty from CF HD. Dont think there will be a problem to get to Redeyes 2019 forecast

Hope its ok that ill write in english… there is an swedish discord channel for Remedy but its not any activity there… Remedy goes under radar in Sweden unfortunately… For example only 102 people in Avanza has invested in Remedy… But maybe this year will change that?

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Nice to get new viewpoints on this case :+1:
I have also wondered why so few people interested of Remedy in Avanza. But in general, I think more people will get interested when Remedy reveals the release date for Control and they fully start marketing the game with 505. Hopefully some effect to be seen on the price of the stock also…

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Well Remedy is quite what you call a “traditional gaming company”… What i mean by that is quite “boring”. Remedy used to have long developing times on their games which is not interesting for investors. Now they are starting to make the transition to have multi-projects.

I also think Remedy will be interesting for investors when we get release dates of CrossFire and Control.

Some aspects to consider in the future for Remedy is capitalize development costs (which is kinda the norm today in the most gaming companies) and to change to quarterly reports.

A few more questions to you investors in Remedy:

  1. Have remedy spoken before about change to Capitalize development costs and to change quarterly reports?
  2. Have Remedy spoken something about going for merger and acquisitions of companies ?
  3. Have Remedy spoken about starting a publishing business before?
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My understanding is currenty as follows:

  1. Not yet
  2. Not yet
  3. Not yet

I may be wrong in case I have missed something.

I see that we (Remedy) are in an early stage of implementing this new strategy - which needs to be focused on currently. Once the new IP or IPs have been successfully established we could see somethin like in your questions 2&3. Just IMHO.

Edit: it is also somewhat likely option that Remedy will be acquired by either Sony or Microsoft if the Control games receives success (unfortunately).

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No, and I don’t see any benefit for Remedy in acquires or mergers. Remedy has been recruiting a lot of people in the past year so if they would still want to grow this is a rather easy way for them. Recruiting has also apparantely been quite smooth with a lot of applicants.

Like Aston said it is more likely that some bigger company would acquire Remedy instead. Mikael (Inderes analyst) also talked about Remedy being a potential purchase in the next few years in the most recent Inderes podcast. However, if some company wanted to acquire Remedy they need the big owners who have been in the company since mid 90s to agree. And I don’t believe they would be very eager to let go of the company.

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True. Probably bigger chance Remedy will be acquired, specially because of their graphic motor.

Feels like Control has a really great chance to be spread out to the big mass out there.

  • 505 has made an extra deal with Sony, probably because of Remedys first title on PS4 in a long time.
  • The collab with nVidia of the raytracing seems to be liked by nVidia since they pushes all the Control trailers on their official social media.
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Referring to the table i made of some benchmark game sales for Control last autumn, I did a few scenarios of Control’s sales with the following variables:

Variables

  • Unit selling price varies by scenario
  • Units sold varies by scenario
  • VAT assumed 20% (Fin 24%, UK 20%, EU 18%. US doesn’t have gaming VAT as far as I know, but different states have their own sales & other taxes.
  • Distributor cut of game sales 30%. In practice, it’s around 25% in retail and 30% on digital. As far as I know, there aren’t any plans to release on cheaper PC platforms like GOG on PC. Steam has a 30% cut. In retail there’s also COGS, if I understand correctly, but these are likely to be paid by the publisher 505 Games.
  • Remedy’s cut after distributor is 45%, 505 Games’ cut 55%

Scenario 1: “Out of the park home run”
Control receives 85+/100 in critic reviews, Sony succeeds in their marketing and Remedy’s fanbase on Xbox also find the game. Control sells as well as other successful new IP entries e.g. Dead Space, Dishonored. Success on consoles, preorders and first 3 months’ sales drives average sale price up to 42.5€. Control brings a whopping €43.75M in revenue with 3.9M units sold.

I admit this is scenario is overly optimistic and on a personal level, I don’t think the probability of this scenario is very high, even if the game was a success.

Scenario 2: “Careful optimist”
Control is well received, 80-85 in critic reviews. Commercially a success, although doesn’t reach sales of iconic games new IP games such as Dead Space or Alan Wake. A -40% adjustment is applied to the average game sales of successful new ip entries. Game price is a solid 37.5 and racks in €23.2M in sales with 2.35M units sold.

Scenario 3: “Inderes base scenario”
AKA case: Quantum Break
AKA case: Ninja Theory’s Hellblade: Senua’s Sacrifice

Control scores a solid 75-80/100 in critic ratings and sells according to analyst base expectations. PC sales discounts bring the average sale price down to €35. Control bags in ~€10.8M in revenue. A -70% adjustment is applied to the average of successful new IP launch game sales. Game sells roughly as much as HBSS or QB.

On an interesting note, Ninja Theory, the studio behind Hellblade: SS, moved from a work for hire model (Devil May Cry series) towards a more indipendent model with Hellblade SS. After Hellblade was profitable after about 500k sales, Microsoft acquired the studio. Personally I find the studio to be an interesting and suitable benchmark for Remedy. In total Hellblade announced in 6/18, it sold over 1M, of which roughly PS4 and Xbox sold equally.

Comparing Control’s visibility to e.g. Hellblade, Control has received about as much visibility on e.g. Youtube as HBSS. Considering HBSS has been announced at least 1.5 years prior to control, I’d consider that Control receive more/better hype prior to launch.

It’s (much) possible I screwed up something or have some biases or flaws in these calculations so feel free to point any such things out! And obviously these are under no circumstances to be taken as any recommendations for the stock. Just want to bring my own thoughts out.

I also agree that in my opinion Remedy is likely to be an interesting target for M&A due to market consolidation trend and Remedy’s Northlight game engine technology.

Sources for game sales are from

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  • Distributors cut is only 30 % on digital sales. Retail copies is from what ive heard only 12 % percent.
  • VAT of 20 % is way to high for Remedy games because of the high percentage sales in US. According to vgchartz the first 10 weeks of retail sales was 56 % of Quantum Break and 50 % of Alan Wake in USA. In all of my analysis of games ive had 12 % VAT
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