Paradox says no to games with “high risks and high costs” like Life by You after posting 90% drop in Q2 profit

Life by You

Financial highlights

• According to its new interim report, Paradox Interactive reached SEK 575.8 million ($53.2 million) in revenue in the second quarter, down 22% year-over-year.
• Age of Wonders 4, Crusader Kings III, Hearts of Iron IV, Stellaris, and Victoria 3 were the main revenue drivers in the three-month period.
• Operating profit fell 90% year-over-year to SEK 28.9 million ($2.67 million), while profit after tax fell 88.5% to SEK 27.3 ($2.5 million).

• Cost of goods sold in Q2 amounted to SEK 455.8 million ($42.1 million). This includes game development, support and operation of existing projects, royalties, and revenue-based payments to studios.
• Paradox wrote down SEK 208 million ($19.2 million) last quarter, representing total capitalized development costs of the now-canceled game Life by You.

Paradox’s quarterly write-downs

• The US accounted for 87% of Paradox’s total revenue in the quarter. The share of domestic sales (Sweden) was 2.7%, while the rest of Europe accounted for 8% of the total.
• PC remained the main platform by revenue, accounting for 87% of the total. It is followed by console (9.7%) and mobile (2.3%).

Paradox’s revenue by platforms

• “We end the second quarter of the year with mixed feelings,” Paradox CEO Fredrik Wester said in a statement. “On the one hand, our core business has performed very well, but on the other hand, we made the difficult decision to cancel the release of Life by You, as the game would not be able to meet our expectations.”
• After canceling Life by You and closing its developer Paradox Tectonic last month, he noted that the company performed poorly in recent releases and that “we have to evaluate how we manage projects and how we organize, for we will and must get better.”
• Commenting on the Q2 results, Wester said the publisher’s underperformance was due to the “wrong calls” made in several projects, including Life by You and The Lamplighters League. The latter turned out a commercial failure, with Paradox calling its sales “too weak” and later parting ways with developer Harebrained Schemes.
• As part of its strategy to focus on its core genres, unlike the games mentioned above, the company says it needs to improve in areas such as “production, [game] quality, and risk assessment.”

In 2021, we made major changes to how we invest in riskier projects, which means that we have not started new projects with the same combination of high risk and high costs as Life by You. We have taken steps forward in those efforts. Recently, much of our focus is on achieving the right quality and taking the right risk in all types of projects. But more needs to be done. No change for the better can be too small or too big, even if it is work that will take time.'

Fredrik Wester

CEO of Paradox Interactive

• Paradox didn’t mention 4X strategy game Millennia, which still sits at “Mixed” reviews on Steam after launching in March 2024. In its Q1 report, the company noted that it plans to gain a foothold in the niche and create a “base from which we can continue to evolve in the genre.” However, the commercial performance of Millennia remains undisclosed.
• As for Cities: Skylines II, another project with mixed reception, Wester said the game “has picked up momentum” following the latest updates. He added that “it’s far too early to claim victory, but these are several steps in the right direction.”