The most recent CD Projekt financial report revealed that, while overall the company continues to make lots of money, its digital storefront GOG has been losing it. GOG lost 4.8 million Polish PLN ($1.15million) in the third quarter of 2021 and 9.2 million Polish PLN ($2.2million) during the first nine months. CD Projekt believes it is time to make changes, as Epic and Steam are increasingly competitive.
“Regarding GOG, its performance does present challenges, and recently we have taken measures to improve its financial standing,” Piotr Nielubowicz, chief financial officer at CD Projekt, stated in an investor call. (transcript). “First and foremost, GOG should be more focused on its core business activity. This means that GOG will offer a hand-picked selection of games with its unique DRM-free philosophy.
It is interesting to see CD Projekt adopt a “return-to-its roots” approach in changing GOG’s direction. The storefront was initially launched as Good Old Games in 2008. It was a niche platform that focused on retro PC games. There was no digital rights management. Instead of Steam, GOG users could download full games directly to their computer and then do what they want without needing an internet connection or external launcher. GOG Galaxy 2.0, an optional launcher, was released in 2015. Its greater ambitions were made evident by the addition of GOG Galaxy 2.0, which launched in 2019. The updated GOG Galaxy 2.0 is now in “open beta” and focuses more on new game releases.
GOG fans weren’t all thrilled about this shift in focus. However, their discontent boiled over when the Hitman Game of the Year edition was released on September 1. It was a huge success and widely discounted. However, many GOG fans were furious at its online requirements. Many felt it violated GOG’s “no DRM” pledge. GOG was forced to remove the game from sale after intense backlash and later apologized.
GOG was always the (very) minor brother to Steam. It was the first company to make old games work on current systems and release them cheaply without copy protection. It seems to be squeezed between Steam’s massive empire and the weekly freebies and an increasing number of Epic Store exclusives. This means it is no longer a scrappy alternative but a store that struggles to get foot traffic.
GOG’s financial losses sound structural. This explains why GOG has made internal changes. GOG won’t be responsible for the expenses incurred by the service. It also won’t receive its share of the revenue. However, it doesn’t seem to justify the cost. This is also true for CD Projekt Red’s online services. GOG’s external support operations are causing losses, and they are being reduced.
Nielubowicz later clarified that the changes are mainly behind the scenes and will not affect GOG sales of games made by CD Projekt or other studios. But the promise of increased curation and re-commitment to absolutely, positively no DRM is a consumer-focused commitment–practically a plea to its existing fanbase–, and that’s bound to have an impact on what ends up on its storefront in the future. GOG will need this if it hopes to be more than a boutique storefront for CD Projekt’s games. I have reached out to GOG to get more information about its plans and update this post if I hear back.