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Reports point to GOG being in poor financial health - but why would CD Projekt's storefront be in trouble?

Reports point to GOG being in poor financial health - but why would CD Projekt's storefront be in trouble?

Another day, another round of video game company layoffs - this time from DRM-free marketplace GOG.com.

Kotaku reports that the CD Projekt owned games marketplace has laid off in the region of a dozen staff and officially has given no concrete reason for this round of cuts, but said that changes have been taking place at the company since the end of last year.

“Letting people go is never easy,” GOG said in a statement.

“We have been rearranging certain teams since October 2018, effecting in closing around a dozen of positions last week. At the same time, since the process started we have welcomed nearly twice as many new team members, and currently hold 20 open positions.”

The fact that GOG.com is still hiring in excess of jobs lost suggests that the company is just changing what is a priority for its storefront.

But staff at the Polish-based PC storefront have said why they think this has taken place, telling Kotaku that GOG isn't in the best financial health.

“We were told it’s a financial decision,” one former employee said.

“GOG’s revenue couldn’t keep up with growth, the fact that we’re dangerously close to being in the red has come up in the past few months, and the market’s move towards higher [developer] revenue shares has, or will, affect the bottom line as well. I mean, it’s just an odd situation, like things got really desperate really fast. I know that February was a really bad month, but January on the other hand was excellent. We were in the middle of a general restructuring, moving some teams around, not unprecedented. But layoffs that big have never happened before.”

There are a number of reasons why GOG is feeling the heat. For one, Gwent hasn't performed as well as CD Projekt was hoping. The Witcher collectable card game was initially exclusive to its owned GOG platform, before coming to Steam later in the day. Were we to bet, we'd presume that CD Projekt was hoping that this title would drive consumers to its platform, much like Fortnite has for Epic.

Plus there is renewed competition in the marketplace. Where before GOG held a respectable silver medal to Valve's market dominance - telling PCGamesInsider.biz last year that the firm sees itself as the only alternative to Steam - in 2018 a number of new players entered this sector. These included Epic Games, Discord and Kongregate, with the Fortnite firm shattering the industry norm 70/30 revenue split and communications app-turned-storefront one-upping this offering

GOG still operates with a 70/30 share. 

This is a very recent change - and unlikely to have affected the company's bottom line this quickly - but looking to the future, GOG is going to have to change in order to survive in a more aggressive market.

In the past, GOG has refused to share its userbase and up-to-date information about how many consumers are signed up to its platform are not available publicly, which suggests it is nowhere near what the company wants it to be or that it isn't growing as fast as CD Projekt needs it to.

In the past, GOG has traded on the fact that it is DRM-free and offers value to consumers in order to have them part with their cash. This renewed competition will be a true litmus test of whether users actually care about their games being free of digital rights management tech or if they are drawn by the lowest price or to where their friends are.

Either way, we wouldn't be surprised to see GOG make some big changes in the coming years in order to bring more developers - and therefore more users - to its platform. The reality is that CD Projekt will likely be bringing its wildly anticipated Cyberpunk 2077 to GOG when it launches on PC and that will rapidly accelerate the platform's growth.

In the meantime, it just needs to make this business as profitable so that it can sustain it - because CD Projekt RED's forthcoming dystopian sci-fi RPG will draw an insane amount of users to GOG.


Editor - PC Games Insider

Alex Calvin launched PCGamesInsider.biz in August 2017 and has been its editor since. Prior to this, he was deputy editor at UK based games trade paper MCV and content editor for marketing and events for London Games Festival 2017. His work has also appeared in Eurogamer, The Observer, Kotaku UK, Esquire UK and Develop.

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