Cyberpunk 2077 glitches spook CD Projekt investors

CD Projekt, best known for the phenomenon The Witcher, has seen $1 billion wiped off its market value in the past week. Now Sony is pulling the firm’s new game, Cyberpunk 2077, from its stores after technical glitches.

Japanese tech giant Sony Corporation said on Friday it was pulling CD Projekt’s Cyberpunk 2077 from its PlayStation Store and offering 100% refunds after reports by users and analysts of hard crashes, bugs and poor performance.

PlayStation represents two-thirds of the console market and the move could cut estimates for Cyberpunk console sales by 30% to 40%, one analyst told the Bloomberg news agency. It is not known if Microsoft — the other major console provider for the game — will take a similar step.

CD Projekt’s CEO Adam Kicinski was cited by PAP news agency as saying the company isn’t currently holding talks with Microsoft about removing Cyberpunk from its Xbox store, although the Warsaw bourse-listed company reportedly did not pre-clear its offer of a refund with Sony or Microsoft.

The Warsaw-based developer is best known for 2015’s The Witcher 3, part of a franchise that was turned into a Netflix series. The new game is set in the future in a fictional city (Night City) and features Keanu Reeves as an in-game character.

On December 10, after three missed release dates, Cyberpunk 2077 premiered globally. Analysts then estimated that CD Projekt could sell 18.5 million units of the game this year at around $50 (€45) a unit. CD Projekt’s investor relations said on Twitter that the game had been pre-ordered eight million times. The Witcher 3 achieved 1.5 million before its launch, thus making Cyberpunk 2077 the firm’s biggest launch of all time.

The first reviews of the game were positive on December 7, with an average Metacritic score of 91/100. But reviews online and in the trade press have since switched to largely negative and the company was obliged to issue a public apology this week. It said in a statement it was “working hard” to bring its game back to the PlayStation store and that it had had discussions with Sony regarding a full refund for gamers who wanted one.

Blow to reputation

The developer admitted in a video press conference that Cyberpunk 2077’s launch has caused “the loss of gamers’ trust and its reputation.” It said it intended to “fix the game,” though a timeline remained unclear. Analysts at MBank and VTB Capital told Bloomberg news agency they expected the game to be restored to PlayStation’s store after larger fixes in early 2021.

CD Projekt CFO Piotr Nielubowicz said: “So there’s no question – we definitely want to fix the game; we made a promise to gamers and we’ll be doing everything to stick with it.”

The firm’s share price sank 29% to 313.9 zlotys (€70, $86) on December 17 from 443 zlotys on December 4. According to a report by Bloomberg, CD Projekt’s founders have lost $1 billion over the past six days. Bloomberg reports that the value of the 34% stake the original four founders owned is down to $3 billion combined.

Last year, the company’s shares rose by 61% valuing the firm at 43 billion zlotys — the second-highest among Warsaw bourse-listed companies, only behind the IPO hit of 2020, Allegro. Now three state-owned companies have a higher market capitalization than CD Projekt: bank PKO BP, as well as PGNiG and KGHM.

Analysts and investors are now skeptical about the future of the company’s share price. Erste Group cut its recommendation on the firm’s shares to “reduce” from “buy” and set a target price of 280.5 zlotys.

“It turned out that the expectations of players and investors were too high,” Leszek Baj, head of the business desk at Warsaw-based think tank Polityka Insight told DW. “But it turned out to be underdeveloped for older generation PS4 and Xbox consoles,” Baj says.

Releasing an unfinished game is clearly a major hit to the image of CD Projekt. “In the short term, it will cause a strong sell-off in CD Projekt shares on the stock exchange and its sales will probably be lower than previously expected and will largely depend on how the company improves the quality of the game in the coming weeks,” Baj said, although the current crisis is not a threat to CD Projekt’s financial stability. “The biggest problem for CD Projekt in the future may be image-related issues,” he added.

The company’s business model is based on releasing large and high-budget games every few years. “Players will surely remember the Cyberpunk problems and might be more skeptical about CD Projekt’s promises regarding new titles. This may, in the future, translate into lower presale of CD Projekt games,” Baj said.

Why a big deal?

CD Projekt wants to enter the world’s highest gaming league. According to its own analysis, Cyberpunk 2077 was likely to become the tenth biggest selling game of all time selling 29.7 million units, overtaking The Witcher 3 at 28 million. In terms of revenues, the company still lags behind the world’s gaming behemoths. Its highest annual revenues (798 million zlotys) were generated in 2015 when it released The Witcher 3: Wild Hunt. Meanwhile, Activision Blizzard’s revenue in 2019 was €5.2 billion and Ubisoft’s €1.7 billion.

Revenues come not only from the game itself and planned expansion packs but also after the introduction of a multiplayer mode in a separate production. The firm could also earn from the Cyberpunk-related craze and the sale of gadgets and merchandise.

The hope of Polish gaming industry

The game’s success was also seen as a positive impetus for the Polish gaming industry, encouraging investors to fund more developers. According to the Polish Agency for Enterprise Development, there are about 440 game development firms in Poland, employing 10,000 and generating an annual revenue of 2 billion zlotys. The global video game market in 2020 is estimated at nearly $160 billion.

There were hopes that the experience gained by people working at Cyberpunk would also be used by other companies, although Cyberpunk’s developers have reportedly faced intense pressure to get the game out this year. This has led in some cases to death threats, as Senior Game Designer Andrzej Zawadzki tweeted in October. CD Projekt bosses have said the company would avoid imposing a crunch to hurry the process, but reports indicate some tensions on the production floor.