The Witcher is Here

The ‘Witcher’ is here


Our next story is on the greatest stock you've never heard of — one that has

outperformed in ways that you can never imagine. An oddball that is breaking the

mould. A company tucked away all the way in Poland — CD Projekt Red


As Poland slowly started breaking away from the Soviet Bloc, the country was

brimming with young entrepreneurs trying to forge a new path. It was at this time that

two young teenagers from Warsaw — Marcin Iwiński and Michał Kiciński saw an

opportunity. They started CD Projekt Red (CDPR) in 1993 and in the early years were

mostly restricted to game distribution — importing video games from outside and

selling them in Poland. But as pragmatism slowly gave way to ambition, CDPR wanted

to do more than just distribution. They set out to create a new video game of their own.

This despite the fact they had no experience making video games in the first place.

The game was based on the Witcher franchise— a series of fantasy novels and short

stories written by Polish author Andrzej Sapkowski.




Anyway, long story short, CDPR finally released their first game in 2007 to positive

reviews. The game wasn’t a runaway success but it did provide a platform for CDPR

to work on a sequel (Witcher 2-Assassins of Kings). The second game fared much

better. But it wasn’t until the release of Witcher 3, that CDPR truly broke out. The game

sold like hotcakes — 4 million copies in just two weeks. This despite the fact that it was

selling at $60 a pop. It was hailed by reviewers. The gaming community called it a

“masterpiece.” And CDPR became the most revered game development studio in a

matter of a few weeks.

But it’s not always this rosy.

Game development is an extremely uncertain endeavour. You have an entire

company throwing all their resources at one product for years on end whose outcome

is at best dicey. In the case of CD Projekt Red, these risks are amplified. Unlike other

game development companies, CDPR doesn’t exactly hedge its bets. Meaning they

have a very concentrated portfolio of games (1 or 2 games max) at any given moment.

They also take big risks often delving into territories that aren’t their stronghold. Their

latest title, Cyberpunk 2077 (a dystopian action-adventure game) is a departure from

everything that they have ever done in the past. Now one might argue that this isn’t

much to go on, considering they’ve only released 3 games (Witcher 1, Witcher 2 and

Witcher 3). But it still begs the question. Why not just commit to another Witcher and

keep printing money. Sequels offer a level of comfort that new titles (IPs) simply can’t

afford. Yet, CDPR has already pumped in close to 90 Million dollars towards the

development of Cyberpunk 2077 and they’ve been at it for the past 8 years. If this

game flops come April 2020, it might deal CDPR a death blow.


But for now, the Witcher games have firmly cemented CDPR as a darling of the gaming

community. And the roaring success has culminated in almost spectacular fashion

with the stock price making new highs every day. CDPR shares have

rallied 21,000% in the last decade. In 2018, the stock entered the Polish Benchmark

index — an elite group of 20 stocks that’s supposed to serve as a reference point for

prospective investors looking at the Polish stock market (Think Nifty 50). In fact, it’s

the hottest stock in all of Europe. Out of the 600 stocks listed in the Stoxx Europe

Index, CDPR has outperformed every single company over the last 10 years.


But there’s another story brewing here. Despite CDPR’s roaring success (primarily

built on the Witcher series), the author of the books made a paltry sum compared to

the hundreds of millions CDPR earned via the video game. In the author’s own words

“I was stupid enough to sell them the rights to the whole bunch [in 1997]. They offered

me a percentage of their profits. I said, ‘No, there will be no profit at all — give me all

my money right now! The whole amount.’ It was stupid. I was stupid enough to leave


everything in their hands because I didn’t believe in their success. But who could

foresee their success? I couldn’t.”

So yeah, he signed away the rights to CDPR for a pittance and eventually tried to sue

them when he found out they were making a fortune on the side. But since he agreed

to the licensing arrangement on his own volition, there was little he could do, but hope.

Until that is, Netflix came calling.

In 2017, Netflix announced plans to launch a new series built inside the Witcher

universe. Yes, CDPR owned the rights to make Witcher games. But Sapkowski (the

author) still owned everything else considering he was the original brainchild behind

the fantasy world. And since Netflix was walking in with a lot of money, Sapkowski

wasn’t going to let this opportunity slide. He had finally hit paydirt.


Meanwhile, CDPR was also itching to reach a settlement with Andrzej Sapkowski.

Granted he had no legal grounds to seek additional compensation, but this is a

company that’s primarily built on goodwill. They didn’t want to ruin it for a few million

dollars. So yeah, a couple of days back they finally settled with the author whilst also

retaining the rights to make more Witcher games in the future.


But wait. This story gets better. Witcher (the TV Series) finally premiered on Netflix

last week, and it has opened to generally positive reviews. Now this wouldn’t have

been a significant development if it weren’t for one tiny detail. With the series now

going mainstream, there’s a whole new crowd waiting to lap up the games. In fact, if

CDPR ever decides to make another game based on the Witcher franchise, the one

thing they won’t have to worry about is — Reach.


Yes, almost all of this optimism will go for a toss if CDPR’s next major release doesn’t

appeal to the wider audience. But until then, the company will continue to ride a purple

patch like no other.

So toss a coin to the Witcher, will you? I promise it’s worth it :)