Paradox Interactive AB (publ) (PDX) Earnings Call Transcript & Summary

Hi, and welcome, everyone, to Paradox Deep Dive. We are so happy to have you with us today, both of you who are joining us from our Stockholm office and you watching the stream from around the world. We have prepared something truly special for you today. Together, we're going to dive deep and explore Paradox Interactive from the inside our strategy and growth, the things that makes us unique in the things that makes us stand out. We have a full schedule with lots of sessions and speakers, and we divided them into these 3 chapters. And after each chapter, there will be room for some Q&A. So please send your questions to our Investor Relations e-mail, [email protected], and we will cover it at the end of each chapter. We hope that you're excited to take this exclusive peak under the hood together with us. And let's just jump right in and open up the first chapter here. This is where we're going to lift you in our growth strategy and show you how we plan to seize the opportunities ahead. And the first speaker, it's someone who says that I just wanted to make the games that I like to play and he found a group of like-minded people who share the same drive. And publishing their own games and other titles as well give them the funds to invest in other games that they believed in. And over 20 years later, he still want business to do just that. And here he is today the CEO of Paradox Interactive, Fredrik Wester. Welcome.

Thank you, Paula, for that nice introduction and very good to see you all here and thank you for joining on the stream as well. And actually, I'm going to change my presentation to start with. So this is me. I'm going to change how I wanted to start because I got the question, why are you doing this, this deep dive in the Paradox Interactive. And I know some of you, analysts, I'm not going to mention any names, you've drawn your own conclusions already. So I'm not going to elaborate on that. But whatever that happens, I get a lot of text messages as well. So it's always a good refreshing way to know that we're in the media. But a common question I get when on a cocktail party, which happens very rarely, by the way, say you're at the barbecue instead, is should I invest in Paradox Interactive, is a very common question I get. And it's very hard for me. I'm not an investor by myself. I'm not a very good investor at least. So I never give any advice to anyone. But I always say that if you're in it for the long run, I definitely think you should do it. I definitely think you should give it at least a chance. But the main reason we're holding the presentation here today is that for a long time, since I came back as CEO, even before that, we've had a lot of questions about how Paradox works, what are the forecasts? We're not going to give you any forecast today, by the way. But wanting to look under the hood of what we're doing, how we're thinking the abstracts, the strategy, et cetera. And we have been a bit of a black box in the minds of people. Even if we have created a good company over time, you can see it growing from the outside and you still don't really know how we're working on the inside. So in the name of transparency, we want to give you the best possible presentation of how we work, our thoughts, our ideas, our strategy on how to grow and how to make a better company. So what should you expect from Paradox speaking in an abstract way again? The 3 things, U.S. investors should expect from this company. It's top line growth, good EBIT margin, EBIT margin and a stable cash flow. Those are the 3, not 1 of the 3 and not 2 of the 3, but 3 of those 3. It's going to look different between quarters. Some quarters are going to be better in one aspect. Another quarter is going to be good in another aspect. But over time, these are the 3 things you should look for. And you shouldn't judge us as a company by the promises we make. You should judge us by 2 things. The reportion of the numbers that we deliver and if you believe in the strategy that we're presenting here today. Those are the only things. I'm also super happy to say from our perspective that the rumors of the death of the games industry are greatly exaggerated. That was a bit funny. Wasn't it? Yes. Good. So we'll start with just running into it. So Paradox Interactive is built brick by brick, as you can see here. Go back to 1997, where the company Paradox Entertainment was founded. You can see that we release games at a certain pace. It's not a lot of games every year. These are not all the games. These are some picks that we have. some of the core titles, if you like. So we released sequels. We released games built by our internal studio which are, for example, Crusader Kings, Europa Universalis, Hearts of Iron, Stellaris, et cetera, Victoria 3 and the latest one, we know this one, Age of Wonders 4. That turned out to be a great release for us as well. We're super happy about that. Combined with that, we have some other releases that are externally developed like Magicka and like Cities: Skylines as well, they all recognized. So normally, we produce a sequel when we need it from a technical perspective, and I'm going to dig a bit deeper into that later on as well. We're not doing it mainly for commercial reasons because if you take a game like Hearts of Iron 4, it has 4x the number of players monthly today than it had the month on release in 2015, almost forgot when it was released June 2, 2015. And if you look at the business model, we have changed and adapted over time. So we started out, we physical distribution through partners. We licensed out to send a gold master basically disk to a distributor who would copy this into thousands of different units and ship it around. We started our own physical distribution together with Atari, early 2004 and kept on doing that for a long time. We still do some own physical distribution as well, even if it's less than 2% or 1% of the total revenue. We partnered up with Steam for digital distribution in 2007 and already in 2010 around here, we -- more than 50% of our revenue came through digital. We developed our premium DLC model starting with Crusader Kings II and -- a game that was kept alive and just kept on growing as well up until we released Crusader Kings III, 8 years later. We are also now looking at not only a premium DLC model, which is still the primary driver behind our revenue and growth, but also new value propositions like how we present new things that our gamers want and that we can actually produce for them. So that is basically the brick-by-brick approach that we've been using ever since the foundation back in 1997. If you want to measure if a video games company is healthy or not, you should follow the MAU, the monthly active users. That will tell you a lot about do people play their games or don't they? So you can see here, when we started measuring for real, we had the analysis before 2017 as well, but we started at around 2 million and we're quickly or not quickly but somewhat quickly approaching 6 million at the moment as well. So how does the revenue curve look if you compare it to the MAU curve? Well, as long as we keep focused on the core business, it will stay really good. We start looking at other things that might dip a bit. But we're actually back and we're following the trend, which is very positive given the recent releases as well. So we haven't got all the numbers like Age of Wonders 4 is not in here, for example. So again, our absolute top KPI is monthly active users because if the users are there, it's much easier to do business, right? Makes sense. So when we're going to summarize how we're going to grow into the future. We summarize it in 3 different ways, 3 different legs, if you like. And we call it dig in, stock up and break out are the 3 ways to grow. Some months are going to be great for one of those, some months are not. So it's going to vary in between the quarters, even in between the years. But there are 3 stable foundations, I would say. If you look at digging in is focusing on the games we already have live, on the games that we already have in production and the games that is the core of Paradox Interactive, mainly 8 different brands or games at the moment. Building this, the most important thing for us always when we do something is to add player value because if you don't add value, no one wants to buy your product. So the core focus on all of these is how can we add more player value in everything that we're doing. And the second -- the way we do it now mainly is through what we call live game content. It can be DLCs, it can be music packs, it can be different ways to also monetize on this because we're not only adding this for free, but we also charge for it. A lot of it is for free for the people who only bought the base game. So if you bought, say, Stellaris, when it was released in May 2015, it's a totally different game today because we've added so much free content to it, even if you bought it on a steam sale at a very low price. So it's a good value proposition for the gamers anyway in our perspective. We also have a couple of what we call new value propositions that I mentioned before, and that's a new way to approach the market for us, a new way for our gamers to find value and maybe step into our games in an easier way because sometimes we come late into the game, the amount of DLCs and the way to get into the game might be a bit steep, for example. So this is one of the examples we have of -- this is the first time we're actually showing any numbers. So you should really bring out your notebook. So this is -- we tried. We've just been trying. We added in 2020 in January, we started with subscription for 1 game, if it was Europa Universalis, I think. We added Crusader Kings II and Hearts of Iron IV. So we've done basically nothing with this, just added it as a way to consume our gains for $5 a month. And as you can see, it's been growing organically. So we are at the moment at around 100,000 subscribers a month, which tells us this is a healthy way for us to grow as well. This is a way that our gamers want us to present maybe the games. So in the future, who knows, maybe subscriptions is also going to be an integrated model in how we approach the games industry. So you can see at least 100,000, this is not going to move the needle a lot, but it's good as a test. It's mostly done with our left-hand on titles that are a bit older. So if you look at stock up, the second one, you can see that we also create new games, right? So Cities: Skylines II is replacing probably Cities: Skylines. Even if I think Cities: Skylines is still going to be around for many years, it's a great game with a lot of content. As we said, we released a Age of Wonders 4 that had a really good -- is having a really good first month. But not only sequels in the stock-up proposition, it's also new IP. You've all seen Life by You that is developed by Paradox Tectonic in Berkeley. Hopefully, releasing an early access later on this year. I don't think we have a date for it yet and The lamplighters League that is releasing later on this year as well from our studio in Seattle. So it's a twofold way of working with -- when we work here with new IP, we make sure that the studio has a previous track record in the type of game that they're doing, and we're basically going in the direction where the studio created is really strong. Breakout is the way for us to find super promising games in the market and make them grow unproportionately big. These are 2 examples; Magicka in 2011 was produced by an 8-man student team from the godforsaken [ Tano Coleto ] in Northern Sweden, and Cities: Skylines in Tampere in Finland, by -- I think there were 14 people, very low budget compared to the Steam Cities, for example, of the world. So these are historical breakouts made by small teams that carry a strong creative vision, and we believe that smaller teams have a better creative vision than if you put 200 people together to create a new game. We strongly believe that the foundations of the game is being scaled over time and not only as a splash release to bring in a lot of money in the first quarter, but it's going to grow over 10 to 15 years. And that's how you create stable and reliable and profitable games with a great player value as well. And that's why we started Paradox Arc. So Paradox Arc is our way to find and to locate and to start cooperation with those studios that carry the same creative vision as Paradox does. So they share our way of looking at things. They share our way of to create a vision on how a good game should be. Paradox Arc, so we cast a wide net. We go out wide the big funnel. And here are the numbers for that. At any point in time, we have 10 to 15 games under consideration. We work really wide with all developers we can find basically match the criteria of Paradox Interactive. A year, we invest between SEK 75 million and SEK 100 million and hopefully to a good return of investment. We cancel between 60% and 80% of all the titles that we start engaging in. And the big deal breaker is the player retention good. Does this grow over time? Can we make a healthy, good business model with a great player service attached to it or can't we? So that's the defining factor of which Paradox Arc is working on there. And Paradox Arc is working a bit on the side of the rest of the Paradox Interactive not to interfere with the rest of the business because everyone loves new games. Everyone loves to talk about new beams, right? So my summary is that there are no shortcuts to a solid organic growth, but we think we're on the right way there, at least. These are the steps on the road. And that's all I'm going to say for today because I speak too much on behalf of this company anyway. So I'm going to let some other people speak as well. So Paula, if you want to take over the mic now.

Yes. Thank you so much, Fred. Thank you. So keep on standing your questions to Fredrik and to the other speakers. We are going to cover them. Thank you in the end of this chapter. But Fredrik, he just gave us the recipe for growth here. Now we're going to examine how to pursue this potential, and it all starts with the fans. The next speaker is someone that have had many different positions at this company. He started off as the first full-time producer and he has also been Head of Studio, Head of Publishing, COO. And currently, he is the Chief of Staff, and he is the second in command to the CEO. Welcome, Mattias Lilja.

Thank you, Paula. Hey, everyone. So we're going to take a look into what we mean by tapping our potential. And as Paula already gave all the way, it's about our fans mostly, not very surprising maybe. What you see here on your -- I guess, your left is a picture taken runoff Steam by just as an illustration of the engagement our fans have compared to other strategy games. These are available, of course. And we know that we cater to a kind of star audience who really know our games and know the company. They -- we know they want more content because they say so. And when we ask them and otherwise as well, we also know that looking back, let's say, for September last year, we released content for all our major games at the same time with 0 cannibalization between them. So there's room for us to produce more to give the fans more, and we're not running out of -- we're not running out of DS or running out of the business that way. There's also -- this is a highly demanding audience. You're going to see more about that later today as well. A few anecdotes that might help to remember that is we get some pictures, somebody says "This tank presenting is not the tank. You think it it's a different tank, look at the placement on the antenna. Or it could be this village that you placed in Poland in 1936, it's actually across the border in Soviet Union, you need to step up your game." So they know what they're talking about. They know the games and they know the subject matter. So they're not -- they keep us honest. We get away with very little when it comes to quality. They decide what's good and we have to live by that and of course, want to as well. They can also be, as I said, much less on quality. We had a player who played Crusader Kings for several hundred hours and ended with the review, do not recommend. So they do their homework, they're not sloppy. And that's how we like it, of course. So how do we serve our fans in the best way with value. Well, we've identified 5 main drivers of this. We are already operating in all of them, but at very different stages. We've come far and some not so much in others. And I'm going to show you them and talk a little bit about each one. Hard to not be in the way of my own. So mods or modding is something we've done since the beginning. We allow players to -- we give them access to the code. They can change aesthetics game systems, entire games. They can take it off and do a total conversion model into something else. We've allowed all that from the beginning. It's one of the -- that and the complex game play is one of the reasons mainly why people can play our games for a long time. There's a lot of content and the fans are on board, the communities on board creating that. We've come quite far, we think, in this respect. We could be better tools for the modders. We could also perhaps help people with presentation like this is the time of game you play like this. Maybe this is also a content you want to look at or mods that might suit you. But otherwise, we've come quite far. The DLC model, probably know that if you know anything about Paradox, CK II really premiered this and we run it on all games. It works really well. It's as I said, we cannot produce content fast enough for our fans. Well, as long as it's good because if it's not good, they tell us both verbally and by not buying stuff. It's very clear. So we need to keep up to their expectations on it. And otherwise than that, it's -- we have quite a lot of room there. Again, presentation is the thing. Our games live for a long time. Lot of DLCs, what do you pick if you're a new player, how do you -- how do we -- how do you find the content that you might want. That's also an area where we think we can do better apart from making more. Multiplayer, again, one of those things that have been around forever in our games, we didn't support it a lot initially, but we've done -- we've taken steps. Quite a lot of people play. And it's not mainly against each other. That could also be hard. Some of our games are inherently unbalanced, Ottoman Empire versus Ulm, for instance, would be a tough match. But people play together, so more co-op and, of course, also spectating. So people watch when other people play. And here are things that we definitely could do a lot more with to make that easier to get into, easier to do and more fun to watch, for instance. So that's definitely an area. Multiplayer, by the way, it's harder to do on a live game. It's more suited to do on a new game, perhaps a sequel where somebody that really tackles it from the multiple angle. A lot of systems and other things need to be built from the ground up to really exploit this possibility. Page UGC. This is any type of content created by fans that where we have, let's say, a royalty split. We do this in Cities: Skylines quite a lot today with content created packs, where we, thanks to it, we curate it and then it's sold and we share the revenue. This set aside the -- of course, the makers of the content gets paid, which is good for them, so they can do more of it. The fans already want more stuff and we know that. So this is a perfect way of feeding into that. And we, of course, supply the platform in as the game and is part of the revenue share. Accessibility. Again, one of those that we struggle with from the beginning, we have really complex games. And we don't want to dump them down because fans don't want dumb games. They want complex themes that are easy to get into. Accessibility is probably where we have most way to go. Again, this is also a game -- sorry, a feature that we probably do best in new games. You build it from the ground up. If you see the earlier generations of Grand Strategy game sources later, you see Stellaris taking huge steps this way. The game is not -- it's not a wall of info that you have to climb. It's more of a steep staircase. And we could probably keep leading that even more. And it's probably done best through sequels, new games but you can do things in live games as well. So player value. We need to stock up on the right items. We need to have -- and paradoxically enough, it's a lot about not releasing games. It's about killing stuff and killing it early. Again, the core of quality is not to release bad things. And the earlier we can stop this, something that is not going as we thought it would or hoped it would be better this. Our current kill rate taken from 2013, so in 10 years, is about 47%. So the mortality rate of games among games of Paradox is very high, but 1 in 2 see the light of day. Fred mentioned Arc. They have, of course, even more aggressive numbers for not releasing or not going to early access with games. This is key for us to remember that this is something we have to do. Usually, you don't see this, and you shouldn't as investors because we have to stop it early. Sometimes you see it as a write-down, but that's, of course, a specific type of failure where we've gone quite far in a project before you have to realize that this is not going to work. So 10 years, 28 released games, 5 what we call endless, I'll talk more about that, 15 what would be profitable and then 8 misses would be the same. That would land us on 71% hit rate from profitable endless being hit and breakeven, we have a special category here called breakeven, but they also fall into the misses. We have higher expectations than getting our money back. An endless game is not born like that. They are launched and then worked on until they become endless. It is a constant flow of us doing things, getting feedback from the fans, the fans pitching in with modding, and over time, it becomes something that just keeps going. We can keep investing in this with good returns, and we have the players with us. We have five of these games today. We also launched Victoria 3 for recently, and of course, Age of Wonders 4. They are profitable now, they're over there on the right end because they're fairly young. They haven't been able to develop into endless. We don't know if they will. We have high hopes. We don't see any reason why they shouldn't, but it's going to be quite a lot of work to get there as always. And the fans decide ultimately what this is. So trying to summarize this will be that we dig in and stock up. And we do more of what works. We build more on that. And we focus on -- always on player value, and we do that in a disciplined way, not getting carried away when things work and thinking that it's easy to operate when you're not at your best. We should stay close to that. If you look at 2022, this is a rough split between -- green is released, which I've referred to as live mostly in this presentation. Pipeline is the games in development and Arc, the 9% is the more experimental titles that Fred mentioned. This shift quite a lot for us during the year. It's not particularly static. It depends on long dev, development time for games. And when they launch, of course, shift -- things shift from purple to green. Of course, things from Arc might go either directly live as an early access game, but it might also be we see the potential here. We need to do something more with it. So we're going to put some devs in it and release it. So both of those might happen over time. So what we're trying to do is we're not going to change how we invest in these categories, but we're going to change the content mostly on the purple one, which is development. We're going to look deeper into what is our core how do we work on sequels and do things we're good at or better at and take more calculated risk, especially then using Arc as the business an experiment, let's accept that it is an experiment and try it over there. where we handle risk better. This is what we think will be more, do more risk-adjusted return, that makes sense over time for Paradox. Again, we get nowhere unless we have a high bar for quality, and we make sure that we always hit the targets we have. So keeping an unsentimental view on what games get to live and launch and what doesn't is also -- it's going to be key for us in the future as well. And again, to become an endless game, which, of course, is the goal of everything we do. We don't always succeed, but that's always the goal, is the players who are going to decide that. We talk to them. They help us out by making mods and other things, and we work together. And over time, we hope to get there. That was all for me. So back to Paula.

Thank you. Thank you. And just as Mattias showed you, our focus on player value is relentless, and our players are the foundation for our very existence. Now we're going to dive deeper into that. who are these players? What makes them tick? Why do they love our game so much. And two people who can tell you all about that and who sits on the treasure of qualitative and quantitative data are Anabel and Stefan, and they can't wait to share some golden nuggets with you. Please welcome Anabel Silva Rojas, Head of Data and Analytics; and Stefan Eld, Head of User Research. Welcome.

Yes. Thank you. So we are here to talk about the PDX players. So before we start with that, we want to give a bit of introduction into what we do here at Paradox. So my name is Anabel. I'm the Head of Data and Analytics at Products, and I lead the team of around 10 people working on our data platform analytics and BI. And our focus is basically working with the game teams on understanding what our players are doing, how they're playing the game, of course, looking into player numbers and things like that. But to get an even better understanding of the players, we work a lot with user research and Stefan's teams.

Yes. So my name is Stefan Eld, I'm the Head of the User Research team. And as Anabel said, you try to figure out what the players are doing and then my team of 8 researchers, we try to figure out why are they doing these things? What motivates them to play our games. So in the next few slides, we will try to explain to you what we know about our players, but we thought it would be interesting first to look at some actual numbers and some stories from our players. So let's see, Anabel, what we have.

Yes. So some other things that play has been up to in 2022. So there's been a lot of murders. So 26 million murders in Crusader Kings done both by players and AI characters. We also had a lot of Eiffel Towers built in Victoria 3. Then we have 95 billion citizens in Cities: Skylines. So this is basically all our players, great cities that they've been building during the year, has a lot of citizens. And then 20 million wars won in Hearts of Iron, of course. And then last but not least, they've been colonizing the galaxy in Stellaris. So 27 million planets colonized in total. So yes, our player has been up to a lot of things. But Stefan, maybe you can share why?

We thought it'd be interesting to sort of understand, so what is it they actually do when they play like this, the things they create. Why do they do it? And I thought I'd share a few just examples of player stories. For example, we can have a player who says, "Well, I believe a lot in being a pacifist/xenophile. And I believe so hardly -- hard in this message, I'm going to battle my way through the galaxy to make other people believe it, too." That could be a typical Stellaris scenario. Or we can have people who go, "Well, when I have my enemy is, I will torture them. I will torture them by reading poetry." So you need to have a game that lets them do this. And that's, of course, is the CK game. Some other people, they may be more inclined to running a business. So they may say that, "Well, I'm going to become the most profitable and the biggest banana producer in Central America. And I'm going to make sure I share that wealth together with my upper class." Typical Victoria scenario. Or if you're more so inclined, you can talk about intersections, roundabouts, wind mills with other peers in order to plan how to make traffic flow in your Cities: Skylines game. These are typical stories from our players. But it doesn't really explain who these people are. So we thought we'd show you a little bit more of that.

Yes. So starting by looking at some demographics. Of course, our players are more diverse than this, but this is basically looking a bit on average and a general view of our players. So majority men around the ages of 25 to 35 years old. They have higher education, so it could be academics or within tech and employed. But most importantly, they have time to play. So they have time to play. And as previously mentioned, they spend a lot of time playing our games. So if you have this much time to play, what are you looking for? So our players are looking for a strategic challenge. So this is something that they can plan ahead, kind of just take time to try to control the outcome of the game, experimenting and stuff like that. So not something that is fast pace or that requires a fast reaction time, but more something that we can spend time to plan and strategize about their games. So Stefan, maybe you can go a bit into strategy?

Yes, because a strategic challenge, you can find in a lot of different games. So all players have their motivations as to why they are playing a game. So what we have attempted to do is try to understand what the motivations are for these people. So in our work, we have identified, I would say, 6 different player groups or player motivations. This doesn't mean that every player sits in one single category. They can be in several. But all in all, we'd say that we have 6 different types of categories or motivations that bring people to place strategy games. And our games cater perhaps not to all of them, but I would say we have 4 player groups at the bottom of the screen. And they are all playing our games, but they are the smaller groups for us. So for example, we have at the bottom corner over there, we have the chill and create group. They are more looking for a quick burst of escapism. They want a quick play through. They want a game that is easy to pick up and sort of quick to put to the side whenever they have time. And on the other side, we have the peer and prestige people, and they are more people looking for a competitive game where there's maybe a winning or losing state and usually play together with other players, so a multiplayer player. But what we have come to realize when looking at the people playing our games, not surprisingly, perhaps, is that we have what we call the proficiency players. And we also have those who seek a lot of freedom in their games. And I have chosen to call these groups, the hardcore specialists and not surprisingly, the storytellers. These 2 groups represent more than half of our player base. And if we look at the hardcore specialists first, they are the smaller of the 2 big groups. What they look for, they look for a challenge. They want to be playing a very complex game. There can never be too many rules. They love mechanics and if a game was a car, they'll be looking at the car and they go, "Really nice, really interesting. Let's open the hood." They want to see if they can make this car run faster. Or can I make this car run longer on the same amount of fuel. So for them, it's all about understanding how can I use this to my advantage, min/maxing. But they're not only happy with that. For them, it's important that they can be creative in how they solve problems. So they want to be able to run into, let's say, similar problems in separate play throughs, they want to be able to approach and solve the problem in different ways. So quite a challenging player to have. These players, they like to talk about, they like to think about the game and how they're going to play the game as best as they can. So they like to share ideas with each other. So they are active on various forums and communities. That's good for us because that means we can reach them to talk about all the fantastic things you can do with our games. And not very surprisingly, these are avid gamers. So gaming for them is an important activity. If we move over to the storytellers. For them, playing the game is all about immersing themselves into a new world. They want to play in experience and tell long epic stories. They are a bit like the hardcore specialists in that they want to experiment too, but not for the same reasons. The hardcore specialist, he wants to sort of see if -- can I push the engine here. They just want a vehicle that can take them wherever they want to go. So they need a car that can bring them out into the jungle or into a very crowded urban area. So for them, it's more what I can do with the game. So they want to push the story, the narrative of what you're playing. Also interesting is that these people tend to be less about communicating what they're doing. This is me time I sit down in front of computer, and I want to do something, tell the story for myself. It's a space for reflection, not to share and talk with others. And we can help them get this as long as we provide them with an open world and narrative elements, then they will be really happy. So those are the 2 major groups that we have, demanding players, but really good to have. What we haven't talked about is so how do they go about choosing which game they want to play.

Yes. So looking a bit on the -- our game portfolio. So just a quick number. We can see that about 30% of our players own 2 or more PDX games. And then looking a bit into what games do they chose. So we talked a lot about strategy. They like a strategic challenge, which I think our games provide. But we do have a large portfolio. So what we can see is that the game that is used is based on their interest. So if the players are more into history, like more historical settings, they might play something like Crusader Kings or Europa Universalis. If they're more into building and in more present setting, they might choose Cities, or if they are more into futuristic, Sci-Fi, fantasy setting or interest, they might choose something like Stellaris or Age of Wonders 4. So they tend to choose the game based on their interest, not necessarily mixing games that are in different settings, but keeping with it, those interest basically. And then looking a bit into how they plan their sessions, or they play sessions. So we said that they have a lot of time to play. And what they do with this time is basically planning their sessions with a clear goal in mind. So this could be something like, for example, I want to be the biggest banana producer while making my upper class very wealthy. And then, okay, I need time to do this, and I set my goal so that I will time box my time and plan for achieving that. So that could be planning your sessions around weekends where you have more time, stuff like that, Yes. So they're looking for a strategic challenge with a clear goal in mind. But then how -- what does our games kind of provide? What purpose does our game have in their play sessions?

Yes. So what we can see, what we talked about is that our players, they are quite invested in what they're interested in, they have very much knowledge in what they're doing. They have a very special interest that our games can help them work with. Our games can help them learn things. So even if you're quite well versed in a specific area. Quite often, our games are so, I would say, broad and deep that you can always learn more things in your specific field. So a lot of people come to player games to learn things. We've also seen that we have a lot of players who come because they want a new challenge. They have played other games, but they've heard about Paradox games and so they're sort of curious about, well, maybe I should take my strategy gaming to the next level, and that is exactly what we are. So they come to us to try out new things. That could also be when we release new content, of course, that gives them another reason to come back and sort of see if they can excel at this particular theme. And as we also mentioned, of course, if you're very knowledgeable about something, you tend to sort of follow and read up and watch things in this particular area. And we've also seen that a lot of people, they come back to play our games because they saw something on TV, or they read something somewhere. So they start making these stores in their head saying, "Hmm, I wonder how will that work if I tried that out in EU or in Stellaris or something." So they have all these scenarios in their heads and they go, "This game can help me try to figure out how that would happen if I tried it out." So that can bring them back to the games. And whenever we also release content, if you have an interest in that area, you go, "Ah, at last, I can try this out. Now I have more to do in this particular country." So that brings people back constantly to our games because they get to sort of work even harder and deeper on their specific interest. So thanks to that, they come back regularly. And I think you have a couple of numbers on that.

Yes. So like you mentioned, they return regularly and how can we see this in numbers. So about 60% of our MAU are retained players, and with retained, what we mean is basically that you play during the last 30 days period and also you played during the previous 30-day period. So you play during 2 consecutive 30-day periods. Then we can also see that about 30% of MAU is reactivated players. So these are players that have not played during that previous 30-day period but being active in some other period before that. So it could be that they're coming back for a release, a patch, a mods update or something else that piqued their interest. About 40% have been playing for more than a year. So players have been active in our games for the past year or yes, for the past year has also been active some way, some time before that as well. And then to summarize basically what we're talking about. So our players like to have a strategic challenge. They like to plan their sessions. They spend a lot of time playing and they also stay with us and they purchase content revenue over time. So I think that's wrapping up a presentation.

Thank you.

Thank you.

Thank you so much. And please stay and let's welcome in Fred and Mattias again because it's time for a Q&A session since we're wrapping up this first chapter here. And for you who are sending in questions, keep on sending them in. And if we don't have time to answer all of them during these sessions, we will follow up every single one of your e-mails and reply straight to you after the show. But let's see. One of the questions here, in general, your strategy of returning to the core, is that specifically about investing in fewer projects overall? Or how do you -- what do you have to say about that?

I think we'll look for opportunities. We don't have a number of games we have to invest in. We don't want to invest. It will be a few if we don't find good opportunities. There will be more if we do find more. I think, is the simple answer.

No, it's a very good summary, and we invest in a lot of different things, but we keep a high kill rate because we only invest further in the games that are good enough for our portfolio. So hopefully, a lot of games, but we will see.

All right. Then there's a question about the digging in, Fred, that you covered in your presentation. Which one of these aspects in the digging in, do you believe will provide the strongest potential for growth, is the question here.

All right. I think that -- and we know that our gamers want us to produce more content for the games and the content velocity has been lagging a bit. So I think the most obvious and the lowest hanging fruit is increasing content velocity overall across the board one all our games. So I think that's the fastest way for us to grow on revenue in the safest way. But there are many different ways to do it. But if I can only choose one way to do it, it's obviously that.

Thank you. how much growth do you foresee coming from current live games vis-a-vis new titles?

We don't make predictions. But we have high expectations of all of them. That's why they're in the portfolio.

Yes. Then there's a question about the player groups that you covered, Anabel and Stefan, in your presentation. You focus there on 2 of the 6 strategy player groups. Any chance you will find further growth in the other audiences? How would you do that in that case?

Well, I would say, first and foremost, like Fred said, I think we can still find growth within the 2 large groups that we have. So there's still room for growth there. And of course, when it comes to the other groups, I'm sure we can find particular areas in which we can do better. We mentioned the multiplayer, for example. That could be an area. So we will, of course, look into the motivations that various groups are looking forward to see is there something we can do there, low-hanging fruit or long-term fruit, so to speak. But I think growth in one or 2 smaller areas, the focus on the 2 big ones.

All right. People are also wondering about value drivers. By when do you plan to have developed for enough to have tapped into our value drivers? Can you scope the potential for us? Mattias?

Yes, it's the same kind of answer. It's going to be ongoing. We've come a long way. In some of them, we're like modding, we're far along, accessibility, multiplayer, less so. with the others in between. As we keep growing and MAU keeps growing, I don't think we'll run out. And we might even find more than these 5, but those are the ones that we -- in the coming years we're going to focus on?

Thank you. Do we have any questions from anyone in the room here? I can see some hands over here. I will move over.

Martin Arnell with DNB Markets. I have a question. How do you categorize a game going from profitable to endless? What's the hurdle for you in that category discussion.

It's not a hard number. It's if we can keep investing and having good returns and fans are happy what we do, we will keep doing that, and that's the criteria for being endless. They are not the same. All of the 5 games are not identical. They're quite different in size, but they all share that. So when we're looking at it, how effectively can we make content and how much do people want it. So it's more the time arise as long as it makes sense to us, if that makes sense.

A question on Paradox Arc. What's the most successful game spun out of that project?

We started our first release was in August last year, and that was Across the Obelisk that we think also fulfill the criteria for being added into the general portfolio. So the retention is good. Game is getting great reviews. I think we have 91% positive on Steam, and we think that there is room to develop this game further. So we'll probably add that as well. We released Mechabellum last week on the 11th of May, showing some promise. I had hoped for a bit more, to be honest, but I think it's doing okay as well. So -- and we're going to see more releases throughout this year. So hopefully, like I didn't mention in the numbers, but hopefully, we can add one game a year to the portfolio or so from the Paradox Arc. Considering that we've looked at probably 70, 80 games during that year and signed probably 8 to 10 of them. So just to give you a view of the hit ratio of the games that we see. But retention is the driving factor. The MAU and the retention will be the deciding factors whether we continue with the game or not.

I saw another hand raised over here, so let's get the mic to you.

[indiscernible] For these 2 new IPs that are coming this year, Life by You and Lamplighters, it'd be interesting to hear how you think of them in terms of the 5 value drivers and also in terms of the player characteristics or the personas for those 2.

Yes. So considering the personas and the play types for these 2 games, they are, of course, a little bit outside what we have done historically for Life by You. I believe that, that is definitely a game that fits a lot of the things that we're talking about, again, that offers a lot of or endless possibilities in shaping our game. So that's, of course, what we're looking for. So -- but yes, these games are targeting somewhat a new play base for us. which is good because that forces us also to try to find players outside of our sort of normal player base. So it's good for us.

And just adding a bit on like the things that we look at from like a data perspective is basically just tracking seeing like do they have the same. We, of course, want them to come back that's kind of been the -- what we want to achieve with all our games. So then that's what we are going to be looking at. Is that basically what happened with these players as well over time.

And in terms of those five value drivers with DLCs and modding and so forth.

Yes. [Lithoids]is designed as a platform for modding and has potential, and we will probably do something along the lines of page UGC there, at least lends itself to it, again, execution dependent. We will try things and see what defenses long stay with us on that. Lamplighters League is less, I think, moddable. It's more of a single player experience. So it's more -- I would say that's another step outside the -- what we usually do, but it's a strategy game or a tactical game that we hope people will enjoy, but Yes, they hit different on the drivers.

Simon from -- [indiscernible] from ABG. You have talked for a long time about content velocity. Could you maybe explain a bit about the main obstacles for it and how you are tackling it?

I'll fill in, I'll start, and you correct me. Quality is always going to be the thing how -- what can we create that fans want. The tempo is limited by the value that we can create, I think, is the main hurdle. It's not a technical issue per se. Of course, games that have been live for a long time, run into different kinds of problems. It might be tech debt. It might be what else is interesting here as we explored new things. So it depends quite a lot on what game you're looking at. It's not going to be the same answer for Victoria that's just live and doing post-launch support and also want to do DLCs and E4 has been going for 10 years and have done quite a lot so what's left there. So it's not the same answer depending, and we also have to be innovative in the way that we approach the market as well. So we don't get stuck in a model where we only produce the same thing over and over again. But we actually follow what are expecting, what people want in the market as well. That's where a user generated content plays a very interesting role. And that's also something we have to work with internally every day. I mean if you just take such a simple thing as music, we didn't produce anything in that aspect 5, 6 years ago, and we have a pretty big music production at the moment, not that it moves the needle too much, but just to give you an example. So there are a lot of things to be done on it. And we've basically been producing big DLCs with everything included in that. We haven't elaborated too much on, for example, story driven experiences, just smaller ones, not more graphic heavy ones. So there are many avenues to take. So I think it's a mix in between the two.

Just a follow-up. So do you have any examples of what you are like the most unhappy about what you could do better in terms of [indiscernible].

I think from time to time, our worst competitor is ourselves. And that is always -- there's always an unwillingness and it's not unique to Paradox. It's with all companies, I think, in general, but software and gaming companies in particular that you see your own product every day and all you see are defaults with the product and you're unwilling to let it go. So it leads to a lot of delays, for example. And so I think that's a part of it, part of the problem, and we need to stop competing with ourselves, I think, to a certain extent. But maybe you have something better on that.

I think that's the main thing. We've seen that they sometimes take longer rather than shorter to do. And I think finding ways to releasing more often and maybe not always as big, I think. But as long the line that Fred said, it's always hard to -- we're fierce critics of ourselves. So that's teaching the teams what good enough means, and we know what the fans want. But we're inspired as well by different companies, like a lot of the online gaming companies, they're releasing stuff every week. And I know that the Stellaris team is releasing from their custodian team, for example, more often than the others, not things that we charge for, but just to keep the player base updated and come out with new content. So we can also learn from within the different teams. So different teams within Paradox has different things. They're innovating and experimenting with to actually make us better as well.

And we have a final question from this side of the room.

This is a question about the long tail. It was a very interesting presentation about the players average 25 to 35 and also a historical present and future fantasy. And my question is how long time do you see the average player be a customer and a player in each of these areas. And the question is then, of course, lifetime value of the players and how this has developed over time. when you get bored or leave or do something else?

Yes, that's a good question. I can't share specific numbers. We do look at that kind of stuff for the games, and it's very different from game to game as well. So don't really have a good answer other than we are looking at that kind of stuff. And that -- the main thing that we are seeing is that group players are returning back. So the difference in looking at things like lifetime, for example, what is lifetime mean? Like is there over there? Like we could have -- you probably have a sense they've been playing our games sense we started making games, right? So are we counting that long time period? Or are we talking about 1 year or just a few months. So that's -- it's a tricky question, but definitely something that we are looking at internally.

I also think that we see players of all ages and 25 to 35 might be the spot where people have a lot of time to play, but it doesn't mean that they don't play when they're older. And we're for sure now that people start when they're much younger. So we have a final where -- but you said this is the normal if we had to define a typical player that would be it. So we're not seeing any -- we don't see this trading all for being weakened. Yes.

[indiscernible] between the different type of games in this area.

We don't have that data right now. But yes, there are differences in the games, how they -- demographically how they look.

All right. Thank you so much. Lots of interesting questions. This is when we wrap up the first chapter of this program, we'll take a quick break. And when we come back, we're going to talk about how -- what goes into making these games. So we'll be right back to Paradox deep dive where we are exploring the inner workings of Paradox Interactive. And we just wrapped up the first chapter where we looked into our strategies and the fundamental relation to the players. Now we're entering Chapter 2. And this is what we're actually going to look into what goes into making these games, making bringing these great ideas to life. And the first panel today of Chapter 2 is going to ask itself how to find a fun in a challenging and the complex. And this panel and the next few panels are going to be moderated by Marcus Halbe, our Communications Manager here at Paradox who actually put this program and this together. And I'm going to leave it over to you, Marcus, to introduce the panel.

Thank you. So now that we've gone through our corporate development, it's time to dig into the nuts and bolts of paradox. And something that is at the very center of our game development is our game pillars, Alice, which summarizes how we think we can find the fun in the difficult. And to discuss this, I have three of our senior game directors with me. Please welcome on stage. Thank you. So without internal hierarchy. We have Daniel Moregard, our Game Director for -- previous game director of Stellaris. He used to work -- he used to work on Stellaris and now working on an unannounced title. Yes, Lennart Sas, game director Age of Wonders 4, big congratulations and also Studio Manager of Triumph Studios. And last but not least, our own creative -- Chief Creative Officer, Henrik Fios. Welcome. Thank you so much. So instead of going deeper into your pedigrees, I thought we'd run right into the topic. And let's start with our slogan. We make the games you create the stories. What does that mean in your work?

I think it's a great slogan. I think it perfectly encapsulates what makes us special. We make replayable games that you can come back to and be surprised every time experiencing new stores. We don't make games that are based on a plot like a movie that might be entertaining once and then that's fine. We make games who want to play forever essentially.

So we applied that slogan directly to our latest game Age of Wonders 4. This was the first game that we developed fully in corporation with Paradox Interactive. And yes, it's basically as game directors, you like to be sort of in charge, right? You're projecting a particular view on game, but this is really about making the player central because my fantasy for world domination might be different from your fantasy of world domination. So that's very useful. That gives three advantages. Like one is ensuring that we appeal to a wide variety of users of a diverse set. Secondly, it helps with replayability because you can try different stories to generate different stories, not just a finite story. And thirdly, the structure that we built ensures that is highly expandable. So you can just keep on adding new elements that allow us to generate new stories. So that really drives the growth of our games.

Yes. Definitely. Because like you said, like all these alternatives you have or things you can do in the game, it really empowers the player to tell their own stories because we aren't designing stories that we want to tell other players or players like many other games do. We don't have a certain type of plot or a certain type of story that we're trying to convey but rather we build these tools that are the players themselves to sort of have fun and create their own worlds and their own imagination and like forge that into their own player stories. And I think it's really a powerful tool. And for us, it's really been something that really sets us apart. And for our games, I think it's made us very successful with what we do because we're able to capitalize on that really well.

Yes. Now it's our art. Our art form is creating those systems will create the stories for people. To use a bit of industry lingo, this refers to emergent narratives, which is a holy grail for us, as a company and of course, as an industry, what in your experience is most important or critical when trying to facilitate those player or emergent narratives?

Yes, it's something I thought about a lot. I'll talks about that as well as the GDC. For me, at least for what works in strategy games, it's the struggle between independent free agents like this can be AI agents. They're pursuing their own goals, competing over the same limited resources like the players are. And in that conflict, if they can express their personality and their opinions of each other and you, you will have emerging stories essentially. So it's one way of something about in strategy against.

Yes, it's like this -- just to make it more clear exactly what the emerging stories is, emerging stores that emerge from the players engaging with the game. These are not stores that we have created, but it's where the circumstances that happen to the player, and therefore, they emerge. So it's really fun to see these kind of things where we are putting in these individual puzzle pieces in our games. And then when the game players are engaging with the games and playing with these AI actors that Henrik talked about, for example, there could be narratives or stories that emerge that we've written but then it doesn't -- it changes the whole like what all the overarching story is about. And that's really what kind of stores that do emerge. So on a higher level, there's a really interesting narratives that can really be created from these smaller pieces in ways that we have not designed or intended or even thought about, which is really cool to see when the players have these amazing moments of these random events to happen. If it have to work, you basically need to create like a huge amount of systems that all interact. And sometimes we call that logics and is for the player to decide like with which systems do they interact with more, like if you are more a diplomatic player, you want to engage more with diplomacy systems. It's also tied to the war system like that has an effect on the diplomacy system and so forth. And all these interactions between all these little machines create new narratives. And I think one of the next pillars that we don't talk about, which is the living world, like a huge part of creating those emergent narratives right? And we'll get back to that later. So some of the good stuff for the end of the panel. I'm going to be a little bit reductive, but in a sense, our games are quite sandbox as we give the players a high degree of freedom and tying into the logical soup. How do you set and follow a vision that on one hand, encompasses all the opportunities we want to give the player. But on the other hand, is also a smooth and cohesive experience in our sandbox.

Yes. I mean it's all about the player experience. The systems are there to give the players an experience. And say, again, it's a strategy game I want to take score on that from the evil king. So how can I do that? Well, I can declare war, that's one system. I can do it through intrigue by murdering the [indiscernible] perhaps and letting my son inherit, or I can do it through the diplomacy, buying it or something, right? So these are ways that different systems serve the same goal for the player, but in different ways so that I can sort of live out their fantasies.

So I think also like you said there with -- or with the original question, I think something that's also like difficult on like how to get there, is we just need to some degree, trust their own intuition like what our vision is and how close we are to getting to that vision and like what the player experience should be. And it's a lot about just like having that experience talking to, for example, beta testers and so on, talking to team members continuously playing and testing the games and trying to understand the master player as much as you can. So having that connection with both your development colleagues, but also beta testers and so on is very valuable for getting that feedback and seeing that you're on the right track. And then also not sort of being too tied to your own ideas? Because in the end, it's sort of what the players like and what opportunities can happen that matter. So kill your darlings, in case it's not actually making it better for the players, like those are -- there's no like formula how to do all of that. It's very difficult, but it's all about just having that sort of end goal in mind and having an open mind and trying to find our way there. I think also like a big part of it is creating those systems within a setting, which is highly appealing and world as a place where the systems resonates with the player, right? So they have a preexisting interest in World War 2 or in the Middle Ages or Fantasy. And I think that really helps making these complex systems relevant to the user, definitely. I think having a familiar subject matter makes it a lot more inviting, which is also one of the pillars we have, which means it a lot easy for players to get into the games.

Sure. I want to dig in a little bit to the player experience and player feedback because understatement of the day, you all have very strong creative visions and opinions. But all of you also have your own respective high councils who also have very strong contributions, our fans. How do you balance the creative idea and intuition you have with our fans creative requests? And I actually want to start with you Lenard because you have an actual high counsel.

Yes, we have a collection of highly engaged fans of our games, which we as we ask to try out the game at a very early stage in development to ensure that we have particular ideas because in the case of like Age of Wonders, as we make sequel but we want to ensure that our games are not stuck in the past. So we need to find a very good balance between innovation attracting a new audience and realizing growth that we've seen with Age of Wonders 4. And still keeping our offense on board because in many ways, they are evangelists of with the brand and of the game, that's a big part of their life, and they've been fans sometimes for decades, right? And so were not going to high like the radical changes that we have in store for the game. So we pitch it up to them. So what do you think of these radical changes? I mean we have got some stuff that you love. We know it that you like and then we get feedback on them. Sometimes they like it, sometimes they don't like it. And some features, we actually with Age of Wonders 4, we shipped regardless of a certain percentage of our core fans saying like, yes, I don't like it because of these reasons because we then are aware of what those reasons are, and we can anticipate on that. At the same time, if you think the upside is bigger, we proceed.

Yes. No, I mean it also plays into post-release schedules and what we do post-release. It's great to have a plan for the DLCs we want to make ourselves and so on, but it's also great to leave room for fan feedback and listen to them and communicate with them and make sure that we cater to their wishes as well. Yes, I think that's super important because I think as game developers, not just our company, but I think it should be applied to everyone. Like we should take responsibility and feel responsible for having a good line of communication with our fans and our communities. And if that line of communication is not working somehow, it's up to us to sort of improve that because there's so much value to be had when you can have a constructive interaction with your community and with your fans and with your players to sort of both being able to have a constructive dialogue about what they want, but like how they want it, when they want to be to talk about like most of these kind of things and just get feedback from all kinds of things about the game from the players, super valuable. And maybe to get some kudos to the UR department. They are a huge part of this process. So like one thing, that's talking directly to your core fans and listening to them, that's one part of the corn, right? The other point of the corn is doing research with a group of players that are maybe not your super fans and get their honest opinion and not just look at what they say, but what they do in game and look at how they actually experience the game by videotaping the play sessions. So when you look at their expressions might say something entirely different than what they actually type in their -- in the form, right. Or what they're actually clicking out.

Exactly.

Yes. And most of the fans, I think, are also silent. -- like they don't interact on the forums or as a community, right? They just sit there and play quietly. So you don't necessarily get access to their feedback unless you do things like you are...

That might be the largest group.

Yes, so if you listen to the more vocal majority or the vocal minority in some cases, it might be misleading in terms of what the larger label actually wants. So you need to be aware of both sides of potentials.

Thank you. Let's move on from those broader questions and dig in a little bit more on our philosophy. Just as a help will not go through them all here, but we have five game pillars that describes the experience Paradox tries to give. I'll ask this to you, why do we actually need them for our whole development organization? And how do you work with them on a day-to-day basis?

Cool. Yes, I think you can derive them from our slogan really. We make the games, you create the stories. We sat down and thought how can we create a pneumonic for that, that people can remember both our employees and how can we speak about ourselves. So these pillars describe our business and who we are, the games we make, and what we're good at. So they help us keep us on the straight and narrow, if you will, and maybe not went through too far into territories that we're not very good at.

And we can look at games that we made in the past, both successful and less successful. And like look at these pillars and see correlations like this is less successful because it was less inviting or it was less successful because the living world was not very engaging, so on, right?

Yes. But it's also like what are our strategic goals and how do we achieve them. We want games that are infinitely replayable and can be monetized forever, essentially. How do we achieve that well through this. How do we create fans out of players who are engaged and love us hopefully, again, through the pillars.

You pointed towards cerebral, which is an interesting one. Can you give us all of you give a rundown of what that means in a game like Age of Wonders, Stellaris or one of our historical, the Grand Strategy games.

Sure. Do you want to go first? Yes. So cerebral is off the mine. So that means that we make games that do not require players to have twist reactions like primal reactions -- but thinking games. That's not just about like do I develop a strategy that wins like a chess game. It also applies to the players' fantasy, for example, and role playing that happens in the mind, right? So just like you read a book, there's something happening in your head which paints an entire structure. And I think that's really key in creating these experiences as well, right? Because they -- those power fantasies and those map games that we make, they come alive in here. So for me, that is a part of it.

Yes, I think it's -- that's what I said. And it's also -- you can think about our games when you're not playing -- we take them seriously. We take our fans seriously. We take the law in the game seriously and history seriously, et cetera. And you can really nerd out on that. You can nerd out on the equipment of World War II or medieval events or the units of Age of Wonders and the lower there as well. So cannibalistic helps.

Yes, it's really about that like the sort of puzzle and the imagination like solving a puzzle. What's the optimal strategy? How do I become the strongest nation in the game are playing right now? Like how do I solve this problem? It's very cerebral, but then also with the goal that you have an internal goal for yourself as a player that can be this imaginative, emerging storytelling that you're also engaging with, so that's why it's very, very cerebral.

Going from cerebral and the sort of mechanical thinking of it and going into a little bit more of the storytelling aspects of this, which would be living world, which is a pretty interesting pillar because I'm curious, what does it mean to design a living world in the context of 1s and 0s?

That's really difficult one, right, because we're trying to create a believable world that feels like it's alive and what -- how we do that is we create like a simulation with all these AI agents that Henrik talked about earlier. So we're trying to create this believable world and have these events and things happen within it, that makes it feel like it's alive. So the players are part of this living world and things are happening in this world without the player being directly involved with that. So things can happen independently of the player being involved directly. So it is like living even beyond what the player is doing. And then the player can come back and interact with that living world. So it's really about building a believable simulation that makes our games stand out a lot, I think.

Yes. I think it's really what creates the replayability of our games if we do it, right? It's about sort of simulating a world but it's more condensed than our actual reality and more interesting all the time. But yes, it's about simulation to a large degree.

Yes. And there's a huge challenge, especially for the historical GSG because you take an era where people already have like this massive interest in like World War II that people know all about the landscape there of a lot of -- there's many historians who like heart Heart of Iron, for example. And they're assimilating the entirety of the world for the years around and in World War II. It's a huge task. And being able to go in and play one of these nations. And I'm seeing how the rest of the world reacts to your choices that you make in that scenario, that that's an immense draw to players.

And every time you start one of our games, you start a new game in our games. It's usually your different alliances form, different things happen immediately in the beginning that is immediately going make sure that if you just restarted again at the same time, 5 minutes later, it's going to be completely different, like how it plays. So there's so many things that goes into it that makes it really an endless sort of replayable experience.

Yes, it relies a lot on chance, on butterfly effects and procedural generation as such tools.

Because that goes into systems as well because all our games are a bunch of independent systems in some aspect. How do you balance or do you even wish to balance those systems?

That's a good one. Balance is super good for the player experience, of course, because you feel if it's too easy, you're not going to be that immersed. You're going to lose interest in the game and walk away. If it's too hard. You rage quit, stop paying. So balance serves player experience, I think, at least for me.

Yes. I mean if it's not very engaging either because it's too difficult or too easy, you're not you're not putting a circumstance where you can try to solve that puzzle, right? You're not getting that cerebral experience. It just becomes -- it seems like it's boring or that is a chore. There's a really difficult balance to get the game balance done in terms of pacing, like how many different emotions players experience in different intervals, for example, like it's difficult now? Or is it easy now? Am I tensed? Am I relaxed? That's the key balance, right, between excitement and boredom and that's the flow curve, right? You want to ensure that people stay between those things and have the sweet spot in between those two. And I think that's what we try to achieve as game designers. And when it comes to like, for example, balance in terms of symmetry, that's often that's something that we do not achieve, for example, in Hearts of Iron again, you can play a country like the Netherlands, yes, of course, you're in the power , but then you can still play a particular scenario in trying to save the Dutch government by moving them to Indonesia, five of the Japanese and then come back and conquer the homeland, that's something you can do. But it's not balanced. I mean you're weaker than the United States, for sure. But yes, that sort of thing is really cool.

Keep speaking on balance in the first experience, like personally, one of my first experiences with every paradox game is about 10 to 30 hours of numbers going read and things going wrong, and then I crawl my way to some sort of working understanding of what's going on. And the very common feedback is that our approach to interdependent systems and high complexity is that it makes them pretty tough to crack and master. How do you design a learning curve to make this moving in puzzles a little bit easier.

Well, I can say one thing immediately, and that's in games like Stellaris, where you start small or Age of Wonders, this is a much easier task because you start with one planet and then the systems are gradually introduced to you as you go along. So you ease into it. But with our asymmetrical games, if you start at Luxembourg maybe that could work. But if you started the Soviet Union, it gets pretty overwhelming immediately, right, in Hearts of Iron. So -- but I think we've made some strides there in how we bring the players' attention to important events that are going on or situations. So in CK III, for example, we have a system where the player is notified of opportunities and problems essentially that should be solved in a pretty good way. But those are some things we're doing, and there's more to be done, of course.

It's a really difficult thing to achieve. Some of the other things we're doing is creating like new systems that are more explicit in their challenges to the players. Like mission trees or questions on like do this, get this reward because then it gives the players something to grab on to, like short goal in the short term, and then they just keep going from these goals. I think stuff like that is also something we started doing since a couple of years ago. And I think it's also helping.

Yes. It give the player direction, what can I do? And of course, we invest in like very good like contextual help systems. But one of the first message is that we put forward in Age of Wonders for a like, hey, this is a complex game. We're not going to lie about it, right? But first session, just don't worry about it, right? Don't put the difficulty level too high and just create a fraction that you want to role play that you like, right, and go from that experience, do something that looks good, cool character and then play with it and then gradually you learn. And so that's the message we try to give. And because the one thing we don't want to do is dumbing down the game because people come to us for the complexity, that's what they like.

That's a real risk. It's a good point.

I think that's all the time we have for this panel. Thank you so much. I will have you back on stage for Q&A later.

Thank you very much. Interesting discussion there. Among high consoles and logic soups and all of that. I think it might be time to remind everyone to send your questions to the Investor Relations e-mail. [email protected] because we're going to pick a few of those questions for the Q&A session when we're wrapping up this chapter. It's time to move on to the next panel and dive into the more like the development side of this, making the games happen.

Yes, we went hard on this headline. So it's full of promises. We've heard a discussion on the creative vision and design to make our games fund inviting and challenging. Now it's good time to dig into the material of that process, how to make it happen repeatedly and over a long time span. And with me, I have a host of people who will help us discuss. Please come on stage. Thank you. So that is not the first time to just happen during the event. With me, I have one of our cofounders and most senior game directors as well as Studio Manager of Paradox Tectonic, Johan Anderson, Rice Ostlund, who is heading up PDS Green, who's doing the home of Stellaris and also had a hand in many of our titles historically. And last, but definitely not least, the person who holds our whole operations together, our Chief Operating Officer and Head of Studios and Central Tech and Services Shant Nielsen, Welcome. Thank you. So let's start this pretty broadly. We develop games for a very specific audience in very particular niches. What does that mean in your day-to-day jobs?

I can start. So being the Chief Operating Officer means a lot. We set the strategy. And overall, we believe in small independent team. But setting the strategy and keeping focus on the priorities is super important. Having this player, the niche of players that we can cater to, I think, is fantastic. And there is a lot of focus on playing our own games and liking what we do ourselves.

I can just add to that way. I think we probably have the most fun job of everything, like the combination of creativity and business in the same thing.

Exactly, we work with incredibly passionate people every single day, which is great and really enjoy and it's also fantastic to have players who really enjoy our products a lot.

All right. But let's start paying homage to this promising title. And I'd like to move on to discuss the success for the success metric, which is a very broad term. Some of our endless title, we've iterated on for more than 2 decades. I mean Europa, the first Europa Universalis came 2000, which is your brainchild. In your experience, all of you, what is critical in the development of a successful game.

I would say that the most critical thing to be successful in the game is to actually cater to your audience, like making a game that fits perfectly fine for the players. And you can't do that if you're not a player yourself. You have to be constantly playing the game, understanding the type of game we want to do. And else you can't be creative. Exactly. And extremely important to understand what the players want as well, right, not always what they say, but what they actually want. And to try to sort of gather that feedback both from internal play sessions but also looking externally.

Yes, it's a significant difference between what people say they want and what they actually want. Because a lot -- if you ask people all the analogy of the cars and the dog carriage then, that's the same, you don't ask people what they want. You have to try to figure out what they want.

Is there -- but what's the tricks of the trade to figure that out? Because that seems like a pretty -- in a system-driven game, that's a pretty complex topic.

I think we have a lot of system to actually work with that. One thing, as mentioned already, is that we play our own game like it ourselves, so understand the DNA of these games. The other is that as you heard from the game director sessions and also from you on that having Game Director owning the vision throughout the development of the game, I think it's crucial. And as you can guess, with passionate people who actually have as many opinions sometimes even more than people we interact with. So the people in the teams, the people in the company and our players, et cetera, have opinions, and they don't say the same thing. So having the conserve feeling of what is the actual thing is crucial, and that's something that in endless of discussion, we really make sure that we get there and develop that over time. We also have a number of mechanism that we work with, we think about peer reviewing. We talk about user research, analytics, et cetera, to really dive even deeper because we innovate, and that means that we try new things that we actually don't know if people like or not. So we always are sort of on the edge of what we know and that's why we also really like to gather information.

We also spend some time talking to our teams, especially with the leaders on the team for them to understand sort of the balance between the creator side, the business side and organization, so striking the right balance for having a very successful product, which also makes it a lot easier. So we don't have as many struggles with the teams, as you might imagine, when we track the balance between what is good for the business and what is good for the game creator. And to add to the aspect of user research and analytics, we also look heavily on what people are writing, what you call, YouTubing and everything online about what to think about the games we're developing and have developed as well.

Let's pick up on the discussion of value drivers that we had earlier in the presentation and see go a little bit deeper into the material, which you -- I mean it is to say players want more cool stuff or more content to play. Internally, I know you guys often discuss like a clock of innovation, rate of development and quality of release. How do you actually balance those aspects when you set your studio plans?

So the key here is that we try to look long term. So we -- it's quite common that we try out innovate for stuff that might look like. We're doing it for now is actually because we are planning for something 2 years down the line and trying to figure something out. And when doing that, it becomes a lot easier to prioritize between what we think is most important for the game right now and what we think is most important for the business.

We've also had very long creative plans for the long tail of our games. I remember, having like written 5-year plans of exactly detailed creative visions for E4 back in the days. And you can plan creatively in advance quite a lot. That helps.

Exactly. And in those long-term plans to also work a lot with various scenarios, of course, given that plans, of course, has changed constantly.

Yes. I was actually curious when you said you had a 5-year plan, how much of that actually made it into the final cut. A lot -- like the way they gave good ideas were like we put up like a broad thing, we want to have a warfare focused one. We want to have a piece there. We want the economy focused and then adjust a little bit. But it's kind of funny like looking at back and comparing documental 2013. I'm saying like names and focus like, okay, yes, we made that armored one. Yes, we made an emperor one, and we actually had that in the original plan.

Can I add one thing? With this innovation, it's for our different IPs there is different plan. It's not -- this is the recipe, and we just copy that every time. So there is a lot of innovation. We try new things that we've never done before, and we do different things with different teams. But as it was mentioned in the previous group, we also learn from each other. We discussed a lot what is the learning from one game to another to really see how we can benefit. And it's not always a perfect fit. It needs to be evaluated. But we share a lot of experience, and there's a lot of things that we try meaning also that there is a lot of things that we cancel and say that, okay, this will not work. This is not okay.

Yes. We're different human individuals who have different skills, who have different backgrounds, bu different things. I mean we work together for years.

Many years.

Many years, but we're like -- We're completely different skill set and different things. So like Henrik and Daniel and Leonard talk previously as like we have something in common, but we work differently. We have different judgments and do things differently.

Speaking on sharing, we previously said we have an unsentimental view on quality, and I haven't been to an internal seminar where we don't mention quality, but how do you actually define quality for our type of games, any magic format. Do you want to start [indiscernible]?

I can start. It's easy to talk about quality and then still people mean different things. What people easily recognize is the functionality you want to game to work and that's, of course, fairly basic. There is two other things that is critical in this area. One is it needs to be fun and that you can debate endless on what is really fun, but that is crucial for our success. And the other one is also the player expectation, and making sure that meeting their expectation. And of course, then our sales and marketing team is also crucial for us to make sure that we explain and tell them the right thing about the game. But I think this is actually a fairly wide area, especially since people mean different things.

Yes. I don't think toward quality, it can be defined on its own. It's always tied into the two easy measurable things. Are people buying the product? And are they enjoying it and playing it? That's the whole thing that we can measure and work on.

Yes. And the key is what Fred talked about earlier, our goal is to have endless games, games that we can continue to develop on for a very, very long time. And what that also means is that when we release again, what we look a lot at is trends. So is the game growing? Is it declining? At what rate is declining? It's usually a small decline right after launch. And then we look at those trends and try to think long term, like long-term plans to see the growth that -- for some of the game it happens after sometime.

Yes, we're like what is it, I don't know, how many times more people paying are trying for compared to the launch and it [indiscernible] for a lot of our titles. So I mean we can always make a product and sell it at launch at high numbers, marketing people are really great that those ways, but we want to sell that game for long and make more products for it. And worth mentioning, we have touched upon it earlier. We talk a lot about business because the love that our players can show us is that they actually buy our products, and we can follow now the monthly active user, how well they play it? So not having this, together with the transparency in the team to actually know follow numbers, I think is one of our crucial things that we try to be very transparent with our team on how things going and what can be improved. But it is critical to have the business tied to the creative when it comes to game.

We -- I want to touch upon the -- [indiscernible], you mentioned that you had an iterated process or following trends. In the previous panel, we discussed learning curves, which is one access of a broad term accessibility. What are you doing to improve games accessibility and onboarding of new players over time?

So we are constantly working. And one example of that is when we released Stellaris in 2016. It was viewed as one of our most accessible games. These days, we have people talking about Stellaris, talking about as being one of our more inaccessible games when comparing to CK III and Victoria and so on. And I think that is also an indicator of that we are constantly at least getting better, but it's still quite difficult because we have that complexity. Our players want that complexity. But one thing that we are trying to do is, of course, that was mentioned in the panel previously, I believe, that we try to think about in which rate we introduce systems to the players. We're also trying to make them understand that they don't need -- they don't need to understand every single aspect of the game in order to help us sort of get over that hurdle. Anyone want to add anything?

No. Then let's move on and look back a little bit to look forward. Historically, we've been fast in on quite a few areas, the DLC model came quite early, digital distribution, margin and so forth. Sort of curiosity, what are you exploring right now? Plenty of things. We're trying out quite a lot of things. I know you are a big advocate of AI, right, [indiscernible]?

Yes. And the AI is, of course, big everywhere, but I actually think the gaming industry is a place to use it in many aspects. There is a lot of updates. So we try and experiment in this area and use it to some extent. But the updates in these areas are keeping us almost busy. But I think there is a good potential here.

Yes. And not just talking about AI, we try to innovate a but the user experiences as well in the UI, a learning curve has mentioned before, we are new things that we're discussing there?

Yes. We'll continue to look at different platforms. For example, console is still definitely on the table. We have subscriptions we're looking at as well and then various other stuff.

Yes, we're always looking at different business models and how we're tying in the business model together with the game design and trying out various things there.

And I think this is crucial. This is part of the DNA of the team that we always try to find new things. What we say, especially on the live games that we have that we innovate with a foot in the ground. So we should, of course, take good care of what we know is successful, but we always need to innovate. And this is crucial to offer something new to the player, but it's also to be able to serve in the future. In the future, people might prefer stream. They might prefer other models, and we need to be there to be able to serve our fans.

I'll round off this whole discussion because I have time for one more question, I think, which is like it goes without saying great games are made by great people. So all of you in your managerial capacities, how do you actually attract and retain people, talent. Different ways, I would say. We are in a good position in that we have games that are fairly popular with people that spend a lot of time playing it and dreaming about working here. So a large chunk of people that we hire working on design-related aspects are fans of the games.

Yes, definitely. I don't think 10 years ago, it was maybe more difficult for us to recruit, but these days is not that hard for us to find the talent we need, I think. And this, of course, helped by the fact that we have a very passionate teams to build an environment that's really enjoyable for everyone, including us.

And besides having to work with your favorite game, hopefully. We also have fairly small teams, meaning that your impact on the actual outcome is really large, and we trust people into new roles and trying out new things. With us growing and trying new things. It's really enjoyable for people and push the boundaries for what we can do.

Please, go on.

I just have to add, again, we have the best work in the world. And I love my work.

We take recruitment to then afterwards. That is a nice way of ending it. And let's move on. Thank you so much. Please stay here for the Q&A session.

Thank you very much. I agree. We have the best job. And please join us. Let not Daniel and Henrik because we're moving into the Q&A session, wrapping up the second chapter. And while they are coming back in here, let's start off with a question based on what you were just talking about AI. We have a question here. AI is nothing new to games. It has already been mentioned a couple of times. In the context of emerging narratives is the chat GPT or other large language models, a tool that will prove value for Paradox. And in that case, how.

I mean it is a fantastic opportunity, but we're keeping a close eye on, of course. Some games some already starting dabbling with it. It's very early days, but I don't think we can afford to not exploit it for purposes of [indiscernible] . The problem right now is it can be rather immersion breaking if it's something a little wrong, that completely takes you out of the experience. So -- but with care, absolutely. And also text-to-speech generation, fantastic having your characters in the game actually role play the situation with voice and everything. It's amazing.

There are some many areas, AI will affect actually. So I think we have not seen the end of it. There will be many sort of going from text to speech, as you mentioned, localization, more languages, being able to do that when we iterate and change do a lot of changes. So many things that actually can be done.

And even now, we just using chat and similar models to aggregate the data and gather data for you in a presentable way saves so much time?

Yes, it lies a bit. If you ask it for like 10 medieval games, it can say, well, kids played with trains. Wait, No, did they really Oh, sorry, no.

You cannot trust that it will be perfect. You cannot use it straight up, but the AI is currently right now is a good tool.

It is now amazing.

Thank you. Thank you very much, and thank you for all of your questions as well. So let's take another one here. You've been more or less alone in the grand strategy niche. And if fear competitors might arise.

Civilization took the war, I don't know. They're not growing strategy games. Are they now bigger than us...

It's a good question. We keep a tally of close competitors, both well-known and less well known. Of course, something could come out of China or something completely unexpected at any point, but we will try to create an economic moat and make it hard for people to duplicate what we're doing.

That's also a reason for being very innovative in how we work with our games to benefit of the platform we have. But we also -- I'm not worried at all about the innovation here because we usually want to push the borders even more than maybe it's reasonable every time. So we are our worst competitor at the moment. So also be able to hold down on where we can go because everyone wants to do the absolute best for our players.

I think one great thing as well with our games will have a long tail is the fact that only give us more revenue over time, but it's also the fact that these games become quite strong by the fact that we continue developing. That means that we are actually defending the position they have on the market, which I think is also really good.

Yes, we're in the same situation there that will work [indiscernible] for us for many years. No competitor could easily unzip them because they have to cope everything they've already done.

It's also something called switching cost, like if a player already invested much in a particular game by buying DLCs but also installing mods or maybe even moding themselves, they are also like not just financially, but also emotionally invested in our brands and jumping to another one is a huge sort of jump to make.

Thank you. Let's see, we might have time for 1 or 2 questions from the audience. We have one here.

[indiscernible] just for [indiscernible], if you look at the pipeline, I mean, given the sophistication in green lighting, is it easy to have a feeling if the pipeline is good? Or is it more of a lottery ticket when you release the game, succeed or not? And second, in [indiscernible], if you read the recent reviews, they seem to get better and better. Is it impossible or doable to kind of revamp and create a new road map for an already released title and go more to the endless perspective?

Good question. Yes. You said the word doable, it was in your question and everything is doable is that I think it's all about the opportunity cost. Is this better to do this than spending resources doing something else? Probably not. Henrik?

No, no, I agree with that. It's the best way of using our resources at the time.

And the pipeline, is it easy when you work with this all the time, you are so dedicated to have a feeling if it's a good pipeline? Or is it always up until release? You see what people react, et cetera, et cetera.

I find that most of the times, if you're listening to the community, and you communicate in advance with development [ diaries ] and posting stuff and communicating with them that in 90% of the case, they have a good feedback that helps you. It's when your vision and their vision is not perfectly aligned that you run the risk that the release is not stellar.

Yes, I agree. I think you need to have a sort of continuity with releases, especially if you have a series of titles that you don't let your existing fan base down, like we see a lot in the entertainment industry, to be honest. We exist in a niche, and we need to take that niche seriously.

I can also add that it -- I think we usually have a good sort of -- good feeling on sort of how something is going to perform. But of course, we never know until we actually have released, but it's quite uncommon that we feel completely blindsided with the performance of our product.

I'm covering I was like -- I was trying to figure out there's like was there any time? We're like surprised or unsurprised by -- yes, but I can't remember.

I think I can add that we usually consider our grand strategy games to be our safe titles, right? There's not a lot of risk with it because we've been doing this for a long time. So even though maybe we don't hit the market in all cases that we won't all the time, like we are pretty good at like fixing it long term. And then it's just like we talked about earlier, is an opportunity cost like what's best to spend the energy and time on and what value can we create from that? Yes, I don't think we're the process for new things. It's not so risky for especially the grand strategy things, because we have a fairly good idea of what we're doing, even though we take a lot of risk at times as well.

Thank you. That's why we're wrapping up the second chapter, and we're going to take a short break, and then we will be back with Chapter 3, where we're looking more into the financials of endless games and setting ourselves up for commercial success. You don't want to miss that. We will be right back. [Break]

Hi, and welcome back to Paradox deep dive, you who are joining us from our office, you watching the stream. We are just opening up our third chapter today here, making the most out of what we create. And this is where we're going to have more of a commercial and financial focus. So specifically for this chapter, we expect a lot of questions from this audience. And by now, you should know what to do. Send your questions [email protected], and we will catch them during our Q&A session at the end of the chapter. This is our final chapter of the day. And kicking off with the first session. There will be a discussion on models, pricing, geographical opportunities, setting us up for commercial success. And once again, Marcus is back. Hit it.

Thank you. So, so far, we've gone into and discussed how we aim to grow, how we build portfolio, how we develop our games and DLCs and how our player -- what our player base looks like. In this session, we'll focus on how we make all our skills, assets, ambitions and communities come together in actual commercial prowess. And to discuss this, I have the best and brightest of our publishing team. Welcome on stage. So with me to discuss this, I have Marine Mazel, one of our senior marketing managers, recently working on Age of Wonders and other titles as well. Mattias Rengstedt, our Head of Sales; and of course, Johan Bolin, our Chief Business Officer. And to just start off, Johan, for those recently joining us, what does publishing actually do with Paradox?

Yes. So a brief introduction of what we do. We usually say that we do 2 things at the company; we make games and we sell games. We focus on the latter. We bring new market -- new games to market, and we build -- we work with building and growing our existing live franchises.

So in all of your respective roles, which are quite different from one another, what's special about publishing a Paradox game? Johan, do you want to go first since you hold the mic?

I can sure do. What is special with us you ask. I think I would like to highlight 3 different areas. First off, this goes very much hand-in-hand with the type of games we make, we make deep, complex and endless games, and this is the way we need to work as well. And we are in it for the long run. We are always aiming for maximizing player and lifetime value. And for us, the release is really only the beginning. This is at least what we aim for. Then we have a year like this, of course. We will release a bunch of new games. We couldn't be more excited about this. So this is a huge undertaking for us, obviously. But we're in it for the long run, and the main focus is always our live franchises. That's the first thing. The second thing I'd like to highlight is how we work. We don't really know -- we do all these projections and forecast internally, of course, but as has been mentioned earlier, we can't really know how a game will perform before we put it in the hands of our players. This is very much the nature of the games we make. So we want to keep an agile, nimble organization, fast moving. We put our resources where we make the biggest sort of impact, and very much tied to that is we want to make sure that the decisions are being made from the teams. So we work from publishing, we work very close with the studio organization. We sit embedded. We work together wherever we can. And these game teams are where the decisions come from. They know the game's best. They know the audience best, they should make the calls basically. And the third thing I'd like to highlight, the third area is our community, our players, our fans. We are super proud of the very dedicated and engaged fan base that we have. So we work close to them with the marketing and sales. It can be everything from interacting with our fans in social media. It can be physically at a PDXCON, or we can even ask what DLC we should make next. We ask, what DLC should we make? They say this, and we actually do that. So these are the 3 areas I'd like to highlight on this question.

Mattias, please jump in.

Yes. So I work with sales, so partnerships and the distribution channels. And from that point of view, I think it's the fact that our games are niche. I mean, they are niche and popular. So that opens up opportunities for us with the players and with partners. So we can fill those spaces. And they also work with commercial aspects like pricing and business models. And from that point of view, that our games live for a long time, they live for many years. So when we take commercial decisions, we always need to have a long-term mindset and we need to think about the lifetime value. So I think it's the fact that our games are niche and that they live for a long time. And I think that's also a part of our [ moat. ]

Marine, please chime in.

Yes. So I work with marketing. And for marketing, we have the same challenge as video game marketing across the industry, meaning that we worked with extremely complex products, the most complex entertainment product with a 100 or 1,000s of hours of entertainment. A lot of people involved. And as the panel before was mentioning it, we have very system-driven games and system-based games. So that adds a layer of complexity. And for marketing, we, of course, need to understand the essence of the game that we're going to market to convey the appeal to the audience. So for us, it's really paramount that we understand our games, right, and that we are able to transcribe their complexity and their appeal to our audience. And that's something we know how to do at Paradox, because we have this experience with these type of games.

Let's stay with the topic a little bit because like we've been discussing how -- what the relationship to our players means from a strategic perspective, from a development perspective. But how do you build on it from a marketing perspective?

I think the strength that we have here is that we have -- we mentioned it several times before, but we have a very close relationship with our players, right? Even before release of base game, we have those debt diaries that are very integrated in our marketing campaign. We also have the forum where we gather feedback, where we understand the opinions. And that's something extremely precious. Before release, so we can, as marketing kind of have a feel for how the game is coming up, how our player base is reacting. But even after release, we were saying before that our games are not born unless they become it, thanks to the community, et cetera. And that's true. We maintain this relationship. This -- we stay connected marketing and the studios very closely, right? We want to be close to the devs, we want to understand the games. So we have this capacity of adjusting -- correcting course, if needed, adjusting the marketing campaign and have like really the synergy between the 2 things. And we can do that because we are very close to the games that we're marketing, I think.

Thank you. And speaking of being close to games and our players, in the last panel, we discussed a little bit on the different ways we tried to experiment and be where our players are, roughly. And we've been working with different ways of making our DLCs and our games available. Which models are we working with currently? And what's our takeaway so far? Do you want to start, Johan?

Yes. So yes, what's been mentioned and what very much has built the success of this company is the premium sales and the DLC model. And this is -- I think it was introduced back in 2012, as Fred showed in [ CK2 ], and this has been very successful, works very well for our type of audiences but also for our games. And this still is a very successful model for us. The latest example for -- with H1 is [ 4 ], of course, releasing with a $50 base game price. If you're a fan or you want to invest more, you can pay $90, and for the $90 premium skew, you get additional content for the coming 12 months. So you get like the 4 first DLCs included, I think, at a discount. And this has been working very well for us even only a few weeks ago. But of course, we want to experiment. We don't know how the gamers and how the audience will interact with our games 5 years from now, let's say. So we've been working with several other business models, quite a lot with subscriptions. I'm talking about subscription, there are several different subscriptions out there. We have partner subscriptions like Microsoft Game Pass or PlayStation Now, for example. And then we have our own subscriptions that Fred showed there in the graph as well. So if we start with -- let's take Game Pass as an example, this subscription, you get the base game for free. So you get the base game and then you try it out, maybe fall in love with it, you might continue to subscribe or you buy the game to own it forever. You can also buy the DLCs. So it's a great way for us to upsell to subscribers as well. And this type of subscription has been a good way for us to find new audiences basically, to reach audiences that we necessarily wouldn't have reached otherwise. Then we have our own subscription. We have it in a few of our games on Steam. And this is working in an opposite way. You buy or you already own the base game, and then you subscribe to the DLC catalog. This is a good way for hardcore players to get all the content within this subscription, but it's also a good way for new players to try some DLCs out. You buy the base game, you like it, and then you want to buy some more content. You've been greeted with this long list of DLCs, which one should I pick? Try the subscription out and then either continue or cherry pick the DLCs that you really like.

So for one of our live games, we might have 2 -- somewhere in the range of 2 to 4 different models that work or different ways to pay for the content. That poses the question, how well do they actually shine with one another? Do you want to, Mattias?

Yes, sure. I mean one game could be on several different platforms, and it could use several different business models. And we think that they are additive. We think that they have different advantages. So some business models are strong to reach new players and some business models are stronger for driving DLC sales. So we think that they complement each other. And we want to be where our players are, and we want to give them alternatives when they buy and play our games. And we also want to experiment, like you said, Johan, we want to find new things. I mean this industry is moving quite fast. So we need to be active, and we need to try new things.

Going back to our first session, like paid user-generated content than delta it because what you got so far is ways to pay for content, and that is a way to enable it. What opportunities do you see in that field right now in our portfolio?

Yes. Mattias Lilja was mentioning it at the very beginning, and I think this is a very good way for us to meet the demand that we actually have for new content. So this is a way for us reaching out to the -- our very dedicated fans that make this mods. We reach out to them. We make some high-quality content together. We package it as a DLC basically. And I think what is it, 10:00 this morning, we released the latest packs with this business model. We call them content greater packs to Cities: Skylines. And this is, again, a great way to increase content velocity. It's scalable, and we have this win-win model where also the creator gets paid for their valuable time, and we do to, of course, as we have a revenue share model with them. But I think we'll see it in more games in the future.

Thank you. I'll leave on that note, because now we discuss marketing and ways to pay, and that kind of naturally brings us to the question of what you actually pay for content. Mattias, we've had -- Paradox has a new or at least more structured way of doing pricing over the past few years. Can you walk us through your reasoning and take away so far?

Yes, sure. I mean we have worked more structured with pricing recently. And first of all, our community is very important to us. Our relationship with the community is a big reason to why we have been successful and why we have been growing the way we have. So when we talk about pricing, it's important that we keep our community in mind. And we want players to experience our content, and we want them to feel that the price that they pay is reasonable and fair. And at the same time, I mean, players tend to spend a lot of time in our games. They put in many hours. So we believe that our content contains a lot of value. And we have been working more on balancing this value that we create with the value that we capture back to the company in terms of price. And consequently, we have increased prices across the franchises and also across markets, and we see good results from this. We see a positive impact on our top line and also our bottom line. We don't see any big drops in volume. So that indicates that we have pricing power. And this is something that we will continue to work on also going forward.

I'm just curious, and let's keep this one short, because we force you out on the forums at least once a year to actually present pricing changes to our happy fans, how do you achieve that balance between value and content?

Yes. I mean it is difficult to balance value and price. And every game is different. There's no silver bullet that works across the entire portfolio. And when we set the price, the value needs to be there and the decisions on pricing are taken close to the games. So the teams are the experts in how their content should be valued. And then pricing has been a bit higher up on the agenda lately. So we have spent more time on this. We have discussed it more frequently. And yes, so this is something we will continue to work on also going forward.

All right. This is a short-term snapper conversation. I thought we'd start off with a very precise question. All of you please jump in, but I want to let Marine back into the conversation. Like your job is selling our games, and we always want to find new players. How and where do you find them?

So finding new opportunities for the game and new players? I think the -- what Mattias mentioned just now, the fact that we worked very close to the game itself, right, the product that a lot of decisions are taken by the team, working close to the product is a big plus. We also have quite a lean marketing team. We all operate on the global level. So we have a very fast turnaround time, right? We can react quite fast when we see opportunities rising. We can react fast and pursue them efficiently.

When you say fast, is it a corporate month or what are we talking about?

No, for Age of Wonders 4, for example, when we saw that the release was getting a lot of traction, we were able to unlock more budget for paid media quite quickly and the team put together their plan and we -- a few hours were necessary for that. So it can be very fast.

So last thing, on these notes being finding new players, all of you, are there any geographies that are particularly interesting to you right now?

I mean we have seen steady growth across markets for many years, especially in our core markets, which is Europe and North America. So of course, our ambition is to continue to grow in those markets. And we also see an increased interest in our games in Asia. So we are working with partners to find opportunities to try to accelerate that growth also going forward.

And I chime in as well. We also see growth with new business model. One business model might be more popular in the West and another business model might be more popular in other geographical -- geographies. And also, the paid [ UGC, ] as I was talking about, for example, the content creator packs were released today for Cities: Skylines, there was one content creator pack called Railroads In Japan. And this, of course, is a great way for us to activate influencers and reach markets with more sort of high-quality content, so we can do these kind of activations as well.

Thank you. We've run out of time, but you will be back for the Q&A session later. And I'll leave to you.

Yes. Thank you very much. Think I can take that one. So we covered a lot today, but what's the sum of it all? It's time to look at all of these layers that we cover today from a financial perspective. Show us the numbers and the one that is here to give us just that is our CFO, Alexander Bricca, Welcome.

Thank you very much, Paula, and thanks, everyone, for attending. So we have -- I think we have 20 minutes of presentation roughly and some Q&A. Then you're going to get what you all are waiting for, some oxygen, I guess. But first, numbers. So I'm going to show you 3 things. We have heard Mattias and Fred speak about focusing on our core franchises, on our existing franchises. And I'm going to show you why that makes very much sense from a financial point of view. So I want to show you 3 things. One is how our core franchises have grown over the last years in revenue. Then we're going to look into one game, an example game and see how the revenues grow over time in base games and DLCs. And then we're going to include cost as well. So we're going to look at a specific game project and look how the cost and revenue develops over time. So let's start with the game, how the revenues have developed over time for our core games. So if you have followed us, you know that pretty much every quarter, we have 5 franchises that is always on the top 5 grossing list of games. Stellaris, Cities: Skylines, Crusader Kings, Europa Universalis and Hearts of Iron. So with some few exceptions, when we launch new games, these top 5 games are always at the top 5 list. And those are our core games. Now during this period, 2016 to 2022, there is only one of those franchises that has gotten a sequel. That's Crusader Kings, when we shifted from Crusader Kings II to Crusader Kings III. Apart from that, all the other 4 games are in the same version since 2016, up until today. Of course, they have received several updates. Stellaris as it was released in 2016 is not the same as it is today. It's a bigger game, but still, it's the same version. So let's look what the revenues have developed like. So back in 2016, we had just released Stellaris in spring, Hearts of Iron IV in the spring as well. Cities: Skylines had released the year before, and Europa Universalis 4 turned 3 years during the year. So fundamentally, a very strong lineup. And we did SEK 479 million in revenues, so quite significant amount of revenues as it should be from that lineup. Now the question is how has this revenue developed since then? Have the games been able to maintain this revenue? Or has it dropped? Let's find out. So 2017, it's actually up 25%, continue; 2018, up another 25%; 2019, flattish. I think it was up 3%. Then 2020, up 35%, partly driven by COVID and work from home. Then 2021, for the first time in a long time, we backed -- I think the revenues for these games decreased with 11%. We didn't come out with content in the pace that we wanted. But then 2022, another 20-plus percent. So as you can see, the revenues have neither remained at the same level or decrease. They have actually increased quite a lot. So from SEK 479 million in 2016 to SEK 1.1 billion in these 6 years. So that is in 6 years, it's 135% increase or a yearly increase of 15%. Now these are -- so these are the 4 games that are in the same versions since 2016 to 2022. So without coming out with sequels or with any new games, these games have managed to increase with 15% per year for 6 years. Now let's look what it looks like if we include also the core franchises that have received sequels. So that would be during this period for sure, Crusader Kings III. Victoria 3, the jury is still out whether it's considered core franchise or not, but let's include it. It has received the sequel during this period, and it has the ambition to become a core franchise. So back in 2016, of course, we had revenues from Crusader Kings II and Victoria 2. So the comparative numbers are a bit higher, SEK 539 million. As you can see, the blue dot is what you see from in the previous slide. So 2017, 2018, 2019, not much difference. It continues with the same increase. But then in 2020, then we come out with the first sequel. So Crusader Kings III comes out. And there you can see now the revenue increase is quite significant. 2021, nothing special happens. And then in '22, we release Victoria 3. So yet another spike. So now it goes from SEK 539 million to SEK 1.6 billion plus. And that's a 207% increase in 6 years or 21% per year. Now I think this chart shows why we think it's such a great idea to really shift focus back on our existing titles. And the good thing with this, apart from 21% per year being a very good growth, it comes with a very limited risk. So these are all existing titles. There is not any new titles in making this revenue growth. And with coming with new titles lies of course, a title risk. So the risk to generate this 21% is relatively limited. And we're going to see later on that also the investments to generate this growth is also I would say, relatively limited. But let's move on and see what the revenue development looks like for a game from launch, because this is why these games continue to -- or manage to grow year-over-year. So this is -- I'm not saying which game it is. You can guess. I'm not sure you will be right, maybe will. So what happens? We released the game, month 1. And of course, we get an immediate sales spike. But already in month 2, it drops off. So month 2 generates some 1/3 of the revenues that you saw in month 1. And it continues like that. It continues -- so the blue line is base game. The orange line is the DLC. We haven't delivered any DLC yet, so that's why it's 0. So the blue line continues down. So the revenue for the game continues down. And it's to that until we come out with the DLC. And we do that at month 7 here. So I think quite a decent pace to come out with the first DLC. And what happens? Well, of course, the DLC comes out, gets its own sales spike just like the base game got its sales spike, not as high, but still a sales spike. But not only that, the DLC generates new attention to the game. So it brings in new players. Those new players buys the base game. So the base game gets a second sales spike when the DLC 1 is released. So the DLC doesn't only drive its own revenue, but it also drives revenue increase for the base game. Now just like with the base in the second month of the release, it drops down. And then some 6 months later, we come out with the second DLC. And the same thing again. The second DLC gets its own sales spike. It brings in new players to the game, some that buys the base game. So the blue line, the base game gets its third sale spike, but now we also have an existing DLC, DLC 1. So some of the new players that buys the base game also buys DLC 1. So DLC 1 gets its second sales spike. And you can see the orange line is if you compare the second bump at month 13 is higher than month 7, and that's because we have more content to sell. And it continues like that, with DLC 3, DLC 4 and so on. And there you can actually see with -- I think that was DLC 3, there, the DLC revenues is actually higher than the base game revenue. Now let's zoom out and have a look at a slightly larger horizon. So now let's look at it some 6 years. And we're also going to look at it -- we're going to look at revenues rolling 12 months to get a better view of the trend. So the first year, you could recognize from the previous slide, so you have the base game generating a lot of revenues and then starting to drop off when we come into the second year. Well I think what is the clear trend here is the DLC revenues, they just continue to increase and increase. At that month 30, it's the same as the base revenue, it surpasses it, and it outgrows it. And after a while, we have more than twice as much revenue from the DLCs that we have from the base games. And this is only half of the truth, because a big proportion of the blue line is actually thanks to the DLC, because if we wouldn't come out with DLCs, we wouldn't generate that many new players to the same extent, at least. So the DLCs are to thank not only for the orange line, but also for the blue line. So DLCs just continues upwards. Base game sales, well, they -- thanks to the DLCs, they are able to remain at a fairly stable level. Of course, it's not going to be as much revenue from the base game as during the release year, but it -- from -- for this specific game after 3 years, it's established at a very solid level, and it continues like that. And if you look at the charts, both read together, I haven't done one for that, but -- you can see -- if you look at month, let's say, 24, so that's 2 years in. If you add the blue and orange together, we are up here. So -- and the same if you look at month 36, we are up here. So the first 2 years or you could say also year 2 and year 3, the game manages to generate as much revenue as it does in the launch year. So the launch here, which is normally a great year for any successful game is being repeated. Same revenue, second year, same revenue third year. But it doesn't stop there, as you can see, because if you start to add the numbers together further to the right, you can see that the total revenue is actually going up. Now let's just look at it accumulated over the years, over the same 6 years. It's clear that both the base game and both the DLC continues to add revenues to the game. And it is a DLC, as I said, that drives this revenue. And this is very good, we think, because the DLCs comes with fairly low investments. I'm going to show you that in the next set of slides, but with also low risk because we don't have to invest in DLCs until we see that they are performing. So of course, you need to invest in the DLC 1 before you can see whether it's performing not [indiscernible]. You don't need to invest 6 years of DLCs, you invest 1 year on your DLCs and then you see if they perform or not. So we are getting not only recurring revenues but also growing revenues for many years with very limited risk and investments. Now let's look at the investments. So this is another game, a typical. I can say, it's one of our core games. So we start off the development, small team. But quarter-by-quarter, stage by stage, the development team increases. So the cost increases. So orange is cost of goods sold, that is mainly development costs. So it's mainly our internal studio cost, some publishing staff as well, but mainly development costs. So it continues like this quarter after quarter to grow. Let's zoom out. You've seen the first 7 quarters. Let's continue quarter 8, just continues like this. So -- and the years goes on, and now we are up during the fourth development here. Now the CFO is getting anxious to get the game out. But we are continuing development. And when we're getting closer to release and having the game announcement, we start to have some marketing costs. You can see a little yellow bump there. Also, the development costs are picking up, because now we go into the most labor-intensive phase of the game development. So everything is picking up. Now we're at Q19. So hopefully, the game is going to come, and it does. So in the 20th quarter, so this game took 5 years to develop. So we released the game. You can see the yellow bar is at its highest. We have the most marketing expenses when we release a game, but perhaps more importantly, the revenue bar in green is significant. And if you look at the blue line, which is the profit pretty much, the accumulated profit for the game project, you can see that we are doing breakeven for this game already in the first quarter. Now this is -- these are calendar quarters. So if the game was released in the first month of the quarter, it means 3 months, but it could be a game that was released in the last month of the quarter than we're doing breakeven in just 1 month. So you can try to figure out which game it is and then see which month it was. Now if you follow us, you know that we capitalize development costs up until the release. So these yellow bars, the COGS, that doesn't show up like that in our external reporting, then we will capitalize it. So it was pretty much -- not 0, but a lot of the costs would be capitalized and then we would take it when we release a game, but now I'm showing you these numbers before capitalization and amortization, so you can get a picture of -- yes, of how the investments are doing in time. So project breakeven first quarter. Now let's move on. Let's see what happens after the game release. You've seen it for the revenues, but let's include the costs as well. Where were we? Q2 -- Q20, right? So what happens? Yes, as expected, the revenues keep dropping. But you see the costs are pretty much continuing. And that's because we are continuing to develop DLCs. We are continuing to market DLCs, so preparing to market DLCs. Now the -- I think the orange bar is slightly too high from Q2 -- from Q20 and onwards because this is -- this was during a phase where we try to increase content velocity by adding more staff. That is probably not the way to go, but that's why the orange bars are higher than I would like to be. And also, what I don't like with this game is that we are now in quarter #6, and we still haven't delivered the DLC. But when we do eventually quarter 7 after release of the base game. Then -- so this is a different game compared to what I went through previously because I don't know if you remember the ratio because between the initial sales and the DLC sales or the sales when we released the first DLC on the previous slide. But here, you can see, for this particular game, when we released the first DLC, we got massive revenues. So almost as high, what's that, like 75%, 80% of the revenues we got when we released the base game. So that's, of course, perhaps worth waiting for. And now you can see that from that time on, now we have more content in the market. We have a DLC. Then revenues are established at a higher -- at a fairly much higher level. So revenues less cost makes the angle of the contribution line, and you can see it is healthy. It's going upwards in healthy angle. Now a few things here. One, this is one of our core games. And like most of our core games, they tend to become more and more profitable with time. So this game has at that -- this point, been alive for was it, 10, 11 quarters, so not quite 3 years. But it's still on a project lifetime basis after being live less than 3 years, it has generated a profit before tax contribution of 47%. And if you just look at the last 5 quarters, we have a profitability of 64%. And when I say profitability, this is fully loaded project P&L. So we have allocated everything down to corporate overhead to the games. So this is the very bottom line before tax. There is no more cost left at the company to allocate. So we are doing 64% on this game. And it is one of the top 5 games, but not necessarily the one with the highest profit margin, but it's up there. Now there are a few things I like about this economics. Of course, the obvious, 47% profit margin lifetime [indiscernible], 64% profit margin, if you look at the last year or we're getting breakeven already in quarter 1, great. But there are other, I think, perhaps more detailed things to look at. One is that if you look at the -- when we are actually experiencing the cost for the base game, it ramps up just before the launch of the game. And this is important because that increases the return rate, of course, on the game project. The other thing is that to continue to generate these high revenues in year 2 and year 3, we don't need much -- we need kind of limited investments and those investments goes into make DLCs. So as I mentioned, those are decisions that we can take when we know with very high -- when we know pretty much for sure whether the game is going to do good or not whether the investments are going to make good returns or not. So to try to summarize these 3 main pictures. I think we are seeing that we are getting a substantial revenue growth from our existing franchises. 15% CAGR for 6 years, if we are not counting sequels, 21% CAGR for 6 years, if we're including sequels. So very, very strong growth, I think. And this strong growth comes with limited risk and limited investments. Risk because 21% yearly growth without adding new titles, so no title risk in this at all. And investments are made over time as we see progress. Of course, high profitability. I think it was 64% in the previous slide, I'm writing plus 60% here. I can say that last year 2022, there wasn't 1 of our 5 core franchises that had less than 60% profitability. All in all, I think why are we focusing so much on our existing franchises? Well, we get a very strong growth. We get that growth with very high profitability and with limited risk. So it creates a very compelling risk-reward offering. That's it.

Thank you, Alex. So let's bring back the previous panel as well. Mattias, Johan and Marine, come join us for the final Q&A session, wrapping up this final and third chapter of the day.

So first one here. how have the different trials of subscriptions been working out? Will subscription services be a part of launching games in the future.

I can take that one. As we were talking a little bit about earlier, as Mattias said, we see that the subscription services are additive. They complement each other. Some are better for reaching new audiences that we necessarily wouldn't have reached otherwise, and some are keeping more to the core audience. And whether we'll see more games with some subscriptions, I'm sure we will. We have announced a couple already. So [indiscernible] 2 is going to join Game Pass winning releases and also The Lamplighters League. So yes, I think we will see more subscriptions as well.

All right. Next question. How important is smaller store fronts for Paradox like Amazon and Windows Store? Could you share some color on the smaller or fronts future in the marketplace, both for Paradox but also in general?

Yes, I mean, we work with many partners, and many partners want to work with us as well. So we have some partners that are very big and established like Valve, where we sell on Steam, but we also work with a lot of smaller partners as well. And I think smaller partners is good way for us when we expand into new markets and new geographies that they can help us to support that growth, basically, together with the big companies as well, of course.

All right. And how do you view or balance risk vis-a-vis larger development budgets?

Well, we did a big change back in -- now it's almost 2 years ago, when we divided the business or the project into 2, the first thing we do is that we look at whether we think the game project is a high-risk or low-risk project. If it's a low-risk project, which are normally sequels our existing strong franchises or -- but it doesn't have to be, but those are probably the most likely low-risk projects. Then we are fine to go in with high development costs from the start because then we're happy to prioritize time, time to market and quality from the start because we are confident that these games are going to be released and do quite well. But if we do the judgment call that these are high-risk projects, then we let the game develop through this new games team, as Fred went through, and we invest much less during the early high-risk stages. And for example, on capitalize those costs until we have passed the most high-risk stages.

Cool. We have time for 1 question from the audience.

On pricing in the industry, when you look at your competitors games and strategy games, et cetera, what do you think they have been pricing up their games in the last 3, 4 years? Has it been accelerating with the sort of recent years with inflation, et cetera?

Yes, I think if you look at the base games, big AAA games, I think $70 has been more established recently, I would think. But for us, like we said before, I mean, when we release the game, that's just a start for us, and then we will release content over a long period of time. So of course, the base game price is important for us, but we need to look at a long lifetime of our games. But yes, I think new AAA pricing is at $70 now, and it was $60 before.

And do you think your -- you said recently, you have been starting to look at this more, and we understand from the outside, some regions have been maybe mispriced due to different reasons. But are there any other -- besides China, Turkey and these type of countries, what are the other 2, 3 avenues where you see the biggest discrepancies where you want to be in 2, 3 years, if you can?

Yes, I think we have done a lot of work on our regional pricing, and that has been based on a lot of benchmarking to other publishers and how they price games in different regions. And we have increased pricing basically across all markets, I would say, except for like U.S. and the euro and GBP. So yes, we have been very active on our regional pricing. And in some markets, the increases has been quite substantial as well. And we have not seen a big pushback from the players. So I think they have accepted the price increases that we have done. And now these levels has been established at a higher level than it was before. And that we will have with us also going forward.

All right. And if your questions have not been answered during the Q&A sessions, if we have not had time to go through your question, we're going to follow up with a separate e-mail replying back to you. But that's it for this time. We covered a lot today, everything from strategy to development and sales. And we hope that you enjoyed this exclusive peak under the hood with us and got a deeper understanding of Paradox and what we are all about. And we're planning to host more events like this in the future. We have more content, we would like to share with you. So please keep your eyes open for that, too. But that's a wrap, for this time around. Thank you for joining.