CD Projekt (CDR): Lost Cause? Or The Metaverse For Adults?

CD Projekt (“CDPR” for short) is Poland’s leading video game developer that created the Witcher Series and Cyberpunk 2077, among other games.

What’s the opportunity: The bear argument is straightforward. Bears believe that the Cyberpunk fumble permanently damaged CDPR’s reputation with old/new gamers. This dwindling reputation will lead to fewer sales over time, less popular titles, and a substantially reduced IP value.

With its stock down 60%+ from its highs, the bar has never been lower for CDPR to impress gamers and recapture the community’s trust and affirmation.

All the company needs to do is correct its Cyberpunk mistakes (low-hanging fruit) and focus on making great content.

Anything along those lines will revert expectations upwards, and subsequently, the company’s share price.

The CDPR story follows a chronological three-part plot:

  • The Hype
  • The Crash
  • The Rebuild

We’ll dissect each part during this essay and hypothesize a future where Cyberpunk becomes the adult version of the metaverse.

The Hype: Setting The Bar With The Witcher Series

In 2002, CDPR laid the groundwork for arguably the greatest single-player RPG in video game history, the Witcher Series.

For the non-gamers out there, the Witcher is a fantasy role-playing game (RPG) based on Andrzej Sapkowski’s famous book series (same name). The game follows the life of Geralt of Rivia — a monster hunter — as he struggles to keep his morality in a world where poverty, violence, and darkness lay siege.

The company bought the Witcher IP rights in 2002 after pivoting from its previous (and flailing) local video game distribution business. Developers took five years to create Witcher 1, and in 2015 released the critically acclaimed The Witcher 3: Wild Hunt.

By May 2020, The Witcher series had eclipsed 50M copies sold and became one of the most popular games in the industry.

There are a couple of remarkable statistics worth sharing. First, Witcher 3 generated 45M of the 50M copies sold in seven years. CDPR saw its second-best sales year for the Witcher series in 2020, five years after its initial release. You can check out various review ratings for Witcher 3 below.

Witcher’s success brought tons of casha powerful brand name, and ridiculously high expectations.

Releasing a follow-up game equivalent (or better) than Witcher 3 is akin to an MLB pitcher throwing a perfect game after just pitching a no-hitter.

And boy, did CDPR want that perfect game.

The Crash: Cyberpunk 2077 & All Its Failures

Cyberpunk 2077 was CDPR’s perfect game. The game takes place in Night City, an open-world metropolis controlled by quasi anarchist corporations outside traditional country and state law jurisdictions.

Gamers play as “V,” a mercenary who assumes one of three paths (Nomad, StreetKid, or Corpo).

The company first released its plans for the new franchise in 2012, following trailer releases in 2013, 2018, and 2019.

If Witcher was one of the most successful games, Cyberpunk 2077 was one of the most hyped. Unfortunately, the game flopped severely.

The company released the unfinished product loaded with bugs, glitches, and non-playable content. It was nothing like what CDPR promised during its roadshows and Keanu Reeves hype videos.

Gamers took the flop personally by scouring negative reviews online about the game and flooding subreddits with criticism. In fact, the game was so bad that Sony removed it from its Play Store (it’s now back).

But that’s not the worst part. Andrzej Zawadzki, Cyberpunk’s lead gameplay designer, left the company shortly after the game’s release.

Then a month later, CDPR’s Studio Head Konrad Tomaszkiewicz left the company citing internal bullying issues (probably due to Cyberpunk’s aggressive release date).

There were even stories of Cyberpunk developers taking bets and making memes based on the number of future delays the game would “inevitably” encounter post-release.

With one faulty game release, CDPR went from the industry’s darling to the scum of the Earth. That sentiment is also reflected in the company’s stock price, which has declined 60%+ since Cyberpunk’s release.

Cyberpunk 2077 Was Not Made For Old-Gen Consoles

Despite the negative emotional sentiment, there were some bright spots in the game.

First, Cyberpunk utilized the latest graphics and processing technology to create its epic cityscapes and Night City experiences. NVDA even used the game’s enhanced graphics requirements to beta test its new RTX 3090 card.

Second, advanced graphics requirements meant that gamers needed next-generation consoles like the Xbox Series S/PS5 or gaming PCs to truly appreciate Cyberpunk‘s offering.

In fact, most of the glitches and bugs came from gamers playing on the old-gen (Xbox One & PS4) consoles.

The conclusion? Those with next-gen consoles enjoyed the game and logged loads of hours. Those that didn’t complain online.

So one year later, and where do we stand? Will the company regain its Witcher glory and recapture the hearts of gamers? Or will it drift away and become another one-hit-wonder developer?

The Rebuild: Low-Hanging Fruit & Developing An Adult Metaverse

CD Projekt has big plans for 2022, including massive updates in Cyberpunk and hints of a new Witcher game. But let’s start with changes in CDPR’s internal operations.

Starting in 2022, the company will deploy Parallel AAA Game Development. This will allow the company to operate as two small teams, one for Cyberpunk and Witcher. Both of which will leverage CDPR’s REDengine game development software.

Next, the company’s taking a more conservative stance on marketing and PR. Instead of years in advance, PR campaigns will start closer to a game’s actual launch date. These campaigns will focus more on in-game playable content and demos.

Finally, CDPR will offer gamers an online experience for Witcher and (eventually) Cyberpunk. This is a big deal as CDPR historically shied away from online gameplay, focusing solely on world-class single-player story modes.

So why pivot into online experiences? In short, CDPR is taking a page from Rockstar Game’s Grand Theft Auto (or GTA) franchise. Rockstar released its famous GTA 5 franchise in 2013. Since then, the game’s minted money. For example, in 2020, GTA 5 generated $911M in revenue or $2.5M per day.

I’m not implying that Cyberpunk will experience similar success. But it’s a start.

The other benefit of an online experience is that it allows CDPR to build on top of the existing Cyberpunk sandbox. They can add new maps, expand into broader entertainment content (like TV series, music, and merchandise). These ideas naturally lead to one of the hottest buzzwords in investing: the metaverse.

Cyberpunk 2077: The Adult Metaverse?

Roblox dominates the metaverse sandbox for kids of all ages. However, the adult version of the metaverse has yet to crown a winner. That winner might be Cyberpunk.

The game (despite its flaws mentioned above) has all the ingredients necessary for a complex yet beautiful metaverse experience. You can customize almost everything about your character’s physical appearance. But what if the game offered greater customization and the ability to purchase goods on the blockchain?

Soon, you develop an immersive experience where you buy furniture for your virtual apartment, oars to race down virtual roads, and even weapons to eliminate enemies. Moreover, you can then imagine an in-game marketplace where users buy, sell, and trade virtual goods for in-game currency.

That’s all conjecture today. But given increased fund flows into metaverse-type names, it’s reasonable to assume that CDPR eventually lands in a META-like index.

Concluding Thoughts: The Bar Has Never Been Lower

Last year, CDPR had the highest expectations of any video game developer. Today, the bar is lower than its stock price. Here’s why you should care. There is a clear bifurcation in CDPR’s stock price/public sentiment versus what gamers actually do.

Gamers have played Cyberpunk at the highest levels since March 2021 according to SteamCharts.

November saw a 30% growth in average players and a 38% gain over the last 30 days (as of this writing). The game’s also seen 30K+ peak players in the previous 30 days, the highest since February 2021.

That said, CDPR remains on our watchlist as there are a few things we’re looking to confirm before allocating capital, most notably:

  • Improvement in Cyberpunk 2077 gameplay
  • Strong start to online/multiplayer experience (positive gamer reviews)
  • Continued growth in Cyberpunk 2077 users
  • A clear trend in creating a metaverse-like experience inside Witcher and/or Cyberpunk 2077 through in-game purchasing, marketplaces, or NFT products

2022 should be a busy year for CDPR with the potential release of a new Witcher and a fully revamped Cyberpunk 2077 experience.

The company has the chance to overdeliver at the exact moment when sentiment and expectations are at their lowest — which is usually a recipe for higher share prices.

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Brandon Beylo

Value Investor

Brandon has been a professional investor focusing on value for over 13 years, spending his time in small to micro-cap companies, spin-offs, SPACs, and deep value liquidation situations. Over time, he’s developed a deeper understanding for what deep-value investing actually means, and refined his philosophy to include any business trading at a wild discount to what he thinks its worth in 3-5 years.

Brandon has a tenacious passion for investing, broad-based learning, and business. He previously worked for several leading investment firms before joining the team at Macro Ops. He lives by the famous Munger mantra of trying to get a little smarter each day.


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AK is the founder of Macro Ops and the host of Fallible.

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