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'Record high' investments see profits fall at Paradox

Revenues and profits are down at Paradox Interactive for the first quarter ended March 31, 2019, but that's largely because of the company's ongoing investment efforts.

Revenues and profits are down at Paradox Interactive for the first quarter ended March 31, 2019, but the company claims that downturn in profits is because investments are currently at a "record high."

The Stellaris and Hearts of Iron developer saw revenues fall by 11 percent year-on-year to SEK 238.3 million ($24.8 million), while profits decreased by 55 percent to SEK 62.7 million ($6.5 million) over the same period.

The Swedish developer-publisher said the bulk of that revenue came from titles such as Hearts of Iron IV, Cities: Skylines, Europa Universalis IV, and Crusader Kings II, and went on to explain exactly how its recent investment and expansion plans affected its Q1 performance.

"During the quarter, we invested more in both game development and marketing than we did in any previous quarter," said company CEO Ebba Ljungerud. "Among other things, we carried out our largest marketing campaign ever when we announced the game Vampire: the Masquerade - Bloodlines 2

"We have also gradually invested in building an organization that will be able to develop and publish our growing game portfolio. These investments in development, marketing and organization need to be done well in advance of the games being released and thus before we get a return on these investments. 

"This means that our margins are lower when we are in a strong development phase, an effect that will be very noticeable when we simultaneously have a quarter with fewer major game releases."

Looking forward, Paradox said it's enthusiastic about the rest of the fiscal year, and is optimistic that upcoming titles and expansions including Surviving Mars: Green Planet, Battletech: Urban Warfare, and Age of Wonders: Planetfall can help build momentum.

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