Witcher with Warner, writer wants a wadge

A perfect storm of royalty battles, bearish market conditions and profit taking stifle news of Polish makers of the Witcher computer game teaming up with Warner for distribution of new release.

Over the last couple of weeks, despite a significant deal with global media giant Warner for the distribution of its full launch of the game Cyberpunk, which will give it excellent positioning on several platforms, including playstation and Xbox, the stock market valuation of the company, which was founded in Kraków in the south of Poland has fallen significantly.

A writer’s costly curse

Part of the problem is the demands of Andrzej Sapkowski, the writer of the cult Witcher series of fantasy novels that the games are based upon, for higher royalties from the company than he has received. Mr Sapkowski sold the rights to the the Witcher books to be made into video games in 1997 for a paltry sum. He has now demanded six percent of the profits of the games series, which would add up to EUR 14 mln.

Bearing in mind the the company is among the top 20 largest companies on the Warsaw Stock Exchange, known as the WIG 20, even if the management acceded fully to Mr Sapkowski’s demands, such an amount would not hurt the company significantly. Some analysts say that CD Projekt’s financial director’s initial outright refusal to discuss the royalties with the writer may have lost the company some goodwill among gamers. Efforts have been made since then to assure that the company is in talks with the the writer’s lawyers.

Warlock’s hex vs FTSE Russell profit taking

Before concluding that a warlock’s curse is plaguing the company financials, it is worth noting that the company’s share price is up 60 percent on the year and has become a blue chip on the Polish stock market, bucking the trend of plunging markets. CD Projekt has been chosen as one of 37 Polish companies, which are now included in the FTSE Russell index of global companies. As this move inevitably stirred significant buying interest from investors worldwide following the index, the entry onto the index was preceded by a period of speculative buying of CD Projekt shares.

Buy in spring and go away in fall

One explanation of the current drop is that investors are cashing out on healthy profits made on the company's shares already this year, in line with the old market adage about selling in the autumn. Before the launch of Cyberpunk it is difficult to say which way sales will go. There is still time for companies to jump back into to race in the runup towards Christmas.

A note on the company’s website about the size of the Warner deal for CD Projekt makes clear how high the stakes are for the company: “the Agreement is regarded as significant due to the fact that the estimated value of liabilities covered by the Agreement exceeds 10% of the consolidated assets of the Capital Group.” In the games world, the victor in a challenge is loaded with coins. In the financial world the same thing happens too.