Paradox’s Grand Strategy
APRIL 14, 2015 • Many major game publishers have withdrawn from genres that used to be staples for the PC platform – the kinds of deep strategy and RPG titles that once defined computer games. It was not a factor of these titles not selling but how much money was available to be made in publishing them compared to a Call of Duty or Grand Theft Auto installment.
DFC has pegged the strategy category as having major growth potential as the number of older gamers grows. Combine this with the return of real-time strategy games via multiplayer online battle arenas (MOBA) and just the overall growing number of gamers globally and you have a scenario where the audience for complex strategic games is growing substantially.
Northern and Eastern Europe have always been a hotbed for deep strategy and many of the best games come from that region. A leader in the space is Paradox Interactive, which got its start in the late 1990s in Stockholm, Sweden. Paradox publishes what it calls grand strategy games, many with a historical background and complex mechanics. These include the Europa Universalis series, the Crusader Kings series, the Magicka and several others. The company has been almost exclusively PC based with some minor ventures into console and mobile platforms.
Paradox originally developed its own titles but more recently has been publishing products from other developers. In the last few years, crowd funding has been a way for small developers to get a start on a project that a company like Paradox can come along and take to market. A good case in point is Obsidian Entertainment’s Pillars of Eternity, a nostalgic RPG in the vein of Planescape: Torment and Baldur’s Gate. Although the title got its start via Kickstarter, Pillars of Eternity is being marketed and published by Paradox.
Historically Europe has always been a market more welcoming of board games and in-depth PC platform titles, but DFC believes there is a much larger global market to be tapped and Paradox seems a company primed to capitalize on that opportunity. To find out how Paradox is performing on a global basis with its products and how Paradox is making headway with genres its larger competitors shy away from, DFC spoke with Paradox’s chief executive, Fredrik Wester, who joined the company in 2003 to build the publishing business and rose to lead the firm in 2009.
DFC: Please give us the full picture of what Paradox Interactive is today. What are your major in-house franchises, where are your development studios located and how many people work for the company?
Fredrik: We are a total of 180 employees across three gaming studios, publishing department and corporate services (finance, legal etc) and we have another 8 studios who make games for us on contract. Our in-house offices are based in Stockholm, Skövde and Umeå, all of them Swedish cities. Our development partners are from all over the world, including Los Angeles, Rio de Janeiro, Tampere (Finland) and Dundee (UK.). Our most renowned franchises are Cities: Skylines, Magicka, Europa Universalis, Crusader Kings and Hearts of Iron.
DFC: How did Paradox Interactive get to where it is today? The company has it roots in Target Games, which was known for board games. How did the transition to computer titles happen?
Fredrik: In the late 1990s, Target Games started focusing more on computer games including the Sweden-focused Svea Rike (old Swedish for The Kingdom of Sweden) which later led to the strategy game Europa Universalis. During this process a management buy-out led to the computer games and IP development divisions being bought by the former CEO and a group of investors. The computer games division started focusing only on strategy games such as Europa Universalis, Crusader Kings and Hearts of Iron. In 2004, the Board of Directors wanted to sell off the 12-man strong computer games division. From 2004 to 2009 the company grew 200% on revenue and counted 25 people in total. From 2009 and forward, the growth started to really take off with the release of a few successful external brands (Mount & Blade Warband 2010 and Magicka 2011) and Paradox earned a reputation as a solid publisher. With the releases of Cities: Skylines and Pillars of Eternity in March 2015, Paradox has really established itself as a contender to the big International Publishers.
DFC: Target Games was shut down in 1999 with its intellectual property transferred to Paradox Entertainment. Paradox Interactive was a division until 2004 when it became a separate company. What is Paradox Entertainment’s business model today, and what is the ongoing relationship to Paradox Interactive, if any?
Fredrik: Paradox Entertainment and Paradox Interactive separated in 2004 and since then we have had separate Ownership, Management Teams and Board of Directors. The only relationships that are still ongoing between the companies are on a personal level.
DFC: How is Paradox Interactive Studio operated? How many titles are produced a year and what are the long-term content goals? What kinds of game and platforms are being targeted?
Fredrik: We are currently focusing mostly on the PC platform, with some recent titles also being announced for the Playstation 4. The number of titles per year vary depending on timing and how many “live” projects we have at the same time. We are currently supporting Europa Universalis IV, Crusader Kings 2 and Magicka Wizard Wars with ongoing content and these games are being joined by Magicka 2 and Hearts of Iron IV, both scheduled to release later this year.
DFC: What is your model for publishing independently developed titles? What do you look for in content? Who do you like to work with and why?
Fredrik: We have a core framework of things we look for in a game, of which the most important thing is replayability; currently we have been looking mostly for strategy, management and role-playing Games. We are open to all types of games that have a lot of replayability. The studios we work for are normally driven by their passion to create great games. They are normally small five to 30 person teams where everyone has a lot of responsibility.
DFC: How do you define Grand Strategy? How does the term differ in execution with regular strategy games?
Fredrik: Grand Strategy are games played on a country level on a big map, whereas RTS games are tactically oriented and on a smaller scale.
DFC: Why have such deep strategy and RPG titles been so successful for Paradox?
Fredrik: The main reason is that people come back to play our games and by that we can also sell expansions and continuous improvements to the game. Our games work a lot like MMOs, however without charging a subscription. People pay for extra content, and even if they don’t pay for a new expansion they will get a big update for free. So far it has proven to be a winning strategy.
DFC: Is this a factor of being based in the European market? Which European markets are strongest for your games? How well do your games travel to North and South America, plus Asia?
Fredrik: Our biggest market is the United States (around 40%) with the United Kingdom, Germany and France coming in second, third and fourth. In total Western Europe is around 40% of the sales and the rest is divided in between Eastern Europe, Japan, Australia and South America. Our fastest growing markets in the past two years have been Brazil and Russia.
DFC: Given that Paradox operates in what is considered a niche segment, have you developed specific efficiencies that make it easier to succeed with lower volumes?
Fredrik: We work in small teams with very clear focus. With our strategy games we do all tech development centrally so all of the live teams can take advantage to any new tool or tech coming from other teams.
DFC: Tell us more about what it takes to market Grand Strategy titles: who is your target audience, what platforms do you use to reach them, how much money do you have to spend to reach them?
Fredrik: Our target market is on the PC; currently we’re experimenting with tablets and consoles but nothing is 100% done yet on these platforms. Our target audience for the Grand Strategy games are 35-plus males, and nowadays we reach them to a large extent through our own channels, focusing more marketing money on community support and customer retention than traditional acquisition.
DFC: How many units must you sell to consider a game is successful?
Fredrik: Depends on the genre and game, but sometimes as low as 150,000 units can still be a successful game for us.
DFC: Where do you see your largest potential growth area in coming years?
Fredrik: We are looking at new markets such as China and South America, as well as new platforms like tablets and consoles, plus new business models in free-to-play and sales of user generated content. But right now the most important thing is to focus on what makes the most sense.
DFC: Despite being considered a PC publisher and developer, Paradox is working with Sony to bring Magicka 2, Runemaster and Hollowpoint to the PlayStation 4. What led you to dip into the current generation console waters and why these titles?
Fredrik: From our perspective, the Playstation 4 had a more hardcore focus than previous console generations and that was a key selling point for us. Sony were also eager to work with us which of course also played a role in us developing games for their platform.
DFC: As we understand it, Sony made some changes in how it works with developers that helped you decide to publish on the PlayStation 4. What were those changes and why were they important?
Fredrik: First of all it is now easier to work with Sony since it’s done from one location. They are also more focused on independent game development and digital download as a major driver for change.
DFC: You have been concentrating on the PlayStation 4 exclusively. Why is that? Why not the Xbox One… or why not now?
Fredrik: We wanted to start with one console at a time, hopefully we will be developing for the Xbox One in the future.
DFC: What is Paradox’s long-term goal for publishing on console? How many titles and what kind? Will Grand Strategy work on video game systems?
Fredrik: First of all we want to get some positive feedback on the games we plan to publish in the near future. If Magicka 2 does great there is no limit to what we can do on consoles, but we think we’re still far away from a grand strategy game being published on a console.
DFC: There are two titles from the Knights of Pen & Paper franchise available for Android and iOS. What have these titles taught you about the mobile market?
Fredrik: We have learnt a few things from these titles. First of all that gaming sessions are shorter on tablets and phones and second that our traditional PC publishing business model can work really well on mobile devices.
DFC: Are there opportunities for Paradox in mobile content much like Hearthstone: Heroes of Warcraft has provided an opportunity for Blizzard Entertainment?
Fredrik: We have looked at a number of different gaming concepts that would work really well on a mobile but nothing we have announced yet.
DFC: Given that you do sell DLC unit packs what do you think of the virtual item model that seems to dominate on mobile? Can a full freemium game work for your type of content or given the relatively small size of your audience do you need to make sure to monetize them upfront?
Fredrik: I think premium games work really well with extra content being sold, too. As we have seen with Knights of Pen & Paper, our traditional PC games business model can work also on mobile devices. We are still far from the advanced analytics that free-to-play companies have at hand so we’ll need more time and data before making any definitive statements.
DFC: In the mobile market do you think there is an ability to get consumers to pay upfront or do you need to give the initial game away for free?
Fredrik: I believe there is a potential to get people to pay for quality content. This has been shown by games like X-Com and Civilization. However, giving games away for free is a great way to get a big install base so a combination of the two business models maybe makes sense.
DFC: Where does mobile fit in for Paradox during the next few years?
Fredrik: I think it will be a part of our portfolio, maybe up to 15% by 2018.
DFC: Paradox has a substantial number of titles playable on Linux. Please tell us more about the Linux market and the Linux gamer. How are they similar and how are they different? What do these consumers want to play more… and less?
Fredrik: The Linux market is around 1% of the total PC Games market. It is a tech savvy and vocal group of people that fit very well with the Paradox target audience.
DFC: What is different about the business of publishing games on Linux from the standpoint of discovery, distribution, Linux distribution support and sales? What qualifies as a success on Linux in units sold?
Fredrik: We haven’t really defined that yet since it’s only around 1% of the market. Most Linux users can be found on Steam as well, so the distribution and discoverability isn’t that much different.
DFC: How big a percentage of your Linux business is via Steam and is digital distribution making Linux more palatable to service?
Fredrik: Most of our Linux sales happen via Steam, and of course digital distribution has made it possible for us to support Linux. If we would still have to sell games through physical retailers we would not find any financial reasons to support Linux games.
DFC: You have a book and merchandise division. Do you find a significant percentage of your consumers are that involved with the subject matter that they buy these non-game products?
Fredrik: So far it is under 1% of our total revenue, but we are experimenting with new business models to increase sales of ancillary products.