Business Management

Internal Assessment

Research Question: To what extent did the constant updates and release of more
content of Cyberpunk 2077 help to restore CD Projekt Red's reputation and financial
performance?

Key Concept: Creativity

Number of words:
Acknowledgement:

I want to thank to my entire family for giving me birth

and offer me their support the entire highway
- Bruno Córdova

1
Index:

1. INTRODUCTION.........................................................................................

1. 2 Objectives...................................................................................................................

1. 3 Theoretical

framework...................................................................................................................

1.2...................................................................................................................

1.3...................................................................................................................

Cap dos...................................................................................................................

2.1...................................................................................................................

2.2...................................................................................................................

Cap tres...................................................................................................................

3.1...................................................................................................................

3.2...................................................................................................................

3.3...................................................................................................................

CONCLUSION...................................................................................................................

BIBLIOGRAPHY...................................................................................................................

ANNEXES...................................................................................................................

2
Introduction:

Founded in 2002 and headquartered in Warsaw, Poland, CD Projekt RED is a

renowned video game developer with additional locations in Kraków and Wrocław. Beyond

Poland's borders, the company has made its presence known in Los Angeles and Vancouver

through a network spanning eight countries. With a talented team of over 1000 professionals

from diverse cultures, CD Projekt RED is respected for its commitment to crafting immersive

experiences that garner critical acclaim. Reaching audiences globally and building an

impressive legacy, the studio has left an indelible mark on the gaming industry.

However, this stellar reputation faced a considerable test with the 2020 release of

"Cyberpunk 2077". Anticipation surrounded the ambitious project, but its launch was marred

by technical glitches, bugs, and performance issues, especially on older-generation consoles.

This unexpected setback led to a substantial decline in the company's stock value and raised

concerns about CD Projekt RED's ability to meet customer and investors expectations. The

investigation will delve into the repercussions of the troubled and unethical"Cyberpunk

2077" launch, specifically focusing on the impact the constant creative updates and release of

more content of Cyberpunk 2077 had in restoring CD Projekt RED's reputation and boosting

its financial performance, specifically focusing on the impact on the studio's reputation and

financial performance using the following tools:

- PESTEL Analysis: In order to analyze the economic impact on sales, profitability, and

market share; assess the negative impact on brand reputation and customer loyalty;

and to consider any legal implications.

- Net Profit Margin: To compare the profits after the initial release of Cyberpunk 2077

(Q TAL DE TAL AÑO) and after the update 2.1 of the game (Q TAL DE TAL

AÑO).

3
 - SWOT Analysis: To identify the specific weaknesses and determine external threats

exacerbated by the launch of Cyberpunk 2077.

- 2023 Financial Statement: To interpret how much benefit CD Projekt RED obtained

from the release of the new content.

- Profit and loss accounts: To check for the actual condition in CD Projekt RED´s

finances and if it is recovering from the consequences of the disastrous launch of

Cyberpunk 2077.

- Financial ratios: To evaluate the financial health and performance of CD Projekt RED

after the release of new content and updates related to Cyberpunk 2077.

Among the supporting documents that are gonna be employed for this work, the most vital

are noted in Table 1:

Document Number Type Purpose

Supporting document #1 Article about Cyberpunk Article about the context of

2077 launch. the launch of Cyberpunk
2077 and the consequences.

Supporting document #2 Interview with CD Projekt's Interview with CD Projekt's

VP of PR and VP of PR and
communication. communication Michał
Platkow-Gilewski on the
rebuilding of the company
and its new goals towards
consumers and investors'
trust.

Supporting document #3 Article on the changes inside Article on the changes and
and outside the company. decisions of CD Projekt
RED in order to rebuild its
image and game.

Supporting document #4 CD Projekt RED Article on CD Projekt´s comments on

its Financial Statement - its wrap up of the third
Third Quarter of 2023. quarter of 2023.

Supporting document #5 CD Projekt RED Financial Document on its finances of

Statement - Third Quarter of the Third Quarter of 2023.

4
 2023

Table #1: Supporting Documents.

The employment of the Key Concept “Creativity” seems fitable in this work due to its

direct relation to the improvement of CD Projekt RED´s relationship with investors, clients

and workers; along with their profits and, in general, financial statement by the end of 2023.

As for to have accomplished this, the company needed new methods and innovative

marketing strategies to make, not only their reputation but also their financial health,

improve; such as their business venture with Netflix for the release and production of a

Cyberpunk-based serie, “Cyberpunk Edgerunners”, which would later prove to be the miracle

product they needed to stay in the market and make clients, as well as investors, give a

second opportunity to the original, now updated, game of Cyberpunk 2077 alongside its still-

on-production expansion.

5
Development and analysis:

PESTEL ANALYSIS

Figure #1: CD Projekt RED´s PESTEL analysis.

For the analysis of the disastrous launch of Cyberpunk 2077 and its dire consequences

in the company, it is going to be employed a PESTEL analysis in order to analyze the

economic impact on sales, profitability, and market share in CD Projekt RED after launch;

assess the negative impact on brand reputation and customer loyalty; and to consider any

legal implications.

6
 As it can be appreciated in the Figure #1 and the Supporting Document #1, the

implications for the CD Projekt RED in all areas were massive. However, the political area

was one of the most influential for their company, as it highlighted the need of new creative

ways of managing the company to keep it up-float and on the market without facing

bankruptcy or a shut-down due to political aspects, as the involvement and scrutiny of

regulatory bodies such as Poland’s Office of Competition and Consumer Protection that CD

Projekt RED went under after the launch of Cyberpunk 2077, from which an investigation

arose to ensure that the company would patch the game and manage refund processes

appropriately. Thus also highlighting the need for stricter industry standards and oversight

from distributors along with investors, not to mention within the company itself, to prevent

misleading marketing practices and ensure better consumer protection.

Another crucial aspect is in the area of economy, which was deeply affected by the

game's performance issues and unmet expectations. These led to a significant number of

refunds, negatively impacting CD Projekt RED’s revenue and profitability. Despite initial

strong sales driven by pre-release hype, the long-term economic impact was detrimental due

to widespread customer dissatisfaction and the subsequent financial strain from refunds and

patches. In addition, the company’s market share was also affected as its reputation took a hit,

causing a decline in investor confidence and a decrease in stock value. This incident

underscored the volatility of relying heavily on pre-release hype without delivering on

promises, and consequently, the need for safer and more creative ways in the company, along

the whole industry itself that more than often relies on these perilous methods, to promote

new products and goals.

7
 Subsequently, the same consequences can be observed in the social area, as the

negative reception and widespread media coverage of Cyberpunk 2077's issues severely

damaged CD Projekt RED's brand reputation, resulting in the term "broken promises

marketing" being associated with the company, highlighting the discrepancy between the

game's pre-release portrayal and its actual performance. Logically, this led to the erosion of

trust and loyalty among fans, customers and investors; thus emphasizing even more the need

for fresh ideas in the sake of less precarious-aggressive marketing plans in the advertising

methods of CD Projekt RED.

Moving on to the implications in the technological area, The launch highlighted

significant quality control and technological shortcomings, including game-breaking bugs

and performance issues, especially on older console generations and let in evidence the

crunch and pressure on developers to meet unrealistic deadlines, raising concerns about the

sustainability of such practice, as to implement new healthier ones, in the company and their

impact on product quality, as well as the percussion it had on CD Projekt´s employees, along

with the need for more rigorous testing and quality assurance processes before release.

On the side of the legal area, the company faced potential legal actions from both

consumers and investors. Lawsuits were filed alleging that CD Projekt RED misled

consumers and investors about the state of the game, leading to financial losses for both

groups; serving as a motive for the advertising and consumer protection laws to ensure that

future marketing campaigns accurately represent the product to avoid legal repercussions.

Finally, even though the Supporting Document #1 didn´t address the environmental

implications directly, it can be inferred a trend towards digital releases in the gaming

8
industry, thus reducing physical waste from unsold physical copies and associated logistics;

marking a creative way to decrease costs production and pollution.

In conclusion, the PESTEL Analysis has been proved as an efficient business tool to

assess the consequences and implications of the external marketing environment due to the

release of the incomplete Cyberpunk 2077 in CD Projekt RED and how it represented a

turning point, or intervention event, for the business to find new-healthier ways to manage

itself, its employees, and its marketing campaigns. However, the PESTEL Analysis presents a

limitation in the environmental area, as it does not mark nor involve greatly into the article

chosen or the research question.

9
SWOT ANALYSIS

Figure #2: CD Projekt RED´s SWOT Analysis.

To further deepen the study, the employment of the SWOT Analysis as a second

business tool is going to probe crucial due to its nature of insight concerning the strengths,

weaknesses, opportunities and threats of a company, granting notion of CD Projekt RED

capabilities to be creative and find an innovative way to recover the customers and investors

trust, increase profitability, market value, and improve the business´image.

10
Mi trabajo abordará las siguientes áreas del programa de estudio de Gestión Empresarial:

reflexión sobre mi KEY CONCEPT.

CREATIVITY

11
Supporting document 1: Broken Promises Marketing. Relations, Communication Strategies,
and Ethics of Video Game Journalists and Developers: The Case of Cyberpunk 2077. Talks
about the horrible launch of Cyberpunk 2077 and the consequences it had on the company.
Siuda, P., Reguła, D., Majewski, J., Kwapiszewska, A. (2023). Broken
Promises Marketing. Relations, Communication Strategies, and Ethics of Video Game
Journalists and Developers: The Case of Cyberpunk 2077, Games and Culture 0(0): 1-20.

Cyberpunk 2077’s negative reception stood in striking contrast to the pre-release hype around
the video game built by the producer’s marketing campaign and the gaming press. This study
examines a selection of gaming websites, to consider their prerelease Cyberpunk 2077
coverage and the discrepancies between these early reports and the released game.

Frelik et al. (2022) claim that prior “to its release, it was one of the most eagerly awaited

titles in a long time with expectations (…) shaped by the global success of CD Projekt Red’s

Witcher series (…)” (Frelik et al., 2022, p. 3). The Witcher (2007) was CDPR’s first big title,

popular mostly in Poland and neighboring countries. (Kosman, 2015, pp. 349–350). Before

Cyberpunk 2077, CDPR was valued not only because of high-quality games but it was also

perceived as gamer-friendly (see, e.g., Epps, 2020, Siuda & Troszynski, 2017), even to the

point where gamers and journalists were willing to tolerate to an extent accusations of

difficult working conditions for employees (see, e.g., Burton, 2022; Morris, 2017; Purchese,

2017). All of this meant CDPR’s next product – Cyberpunk 2077 – was highly anticipated.

Adding to the hype was the popularity of the Cyberpunk source material, especially

Cyberpunk 2020 (1990, R. Talsorian Games), which formed the base for the game’s

aesthetics and world (Attebery & Pearson, 2017). One of the examples that the developers

can get into trouble if players’ expectations (and emotions) are too high is No Man’s Sky

(2016, Hello Games). The game generated consumer complaints and negative reviews

because of misleading adverts and huge discrepancies between the final product and what

was promised in the trailer (Lu et al., 2020). The reaction went as far as engaging in so-called

12
review bombing (see, e.g., Moro & Birt, 2022) to lower the game’s rating. For Cyberpunk

2077, the hype was fueled by a large-scale marketing campaign. The 131 million USD spent

was equal to 45% of the whole game’s budget (Woldański, 2021), placing the game firmly in

the Triple-A market segment. In this segment, marketing strategies strongly influence gamer

reactions (see e.g., Şengün, 2018; Wawrowski & Otola, 2020; Zackariasson & Wilson, 2012)

which is essential not only for sales and the final success of the game but also for the

company’s reputation. It should be noted, when considering the success or failure of a given

marketing campaign, one must look beyond just the game’s revenue and player opinions.

There are other factors here, both external (e.g., general market situation) or internal (e.g., the

way a company functions, and its problems). These and other cultural and social factors are

also important but are outside this paper’s scope. Despite, and perhaps partially because of

high expectations, the game turned out to be “one of the most disastrously received titles,

primarily because of its dismal performance (…)” (Frelik et al., 2022, p. 3). Additionally,

there were “reports of intensive pre-release crunch and the developer’s less-than-transparent

informational PR campaigns and investor misinformation” (Frelik et al., 2022, p. 3; see also

Schreier, 2021).

We introduce the notion of “broken promises marketing,” defined as a gap between how the

game is positively portrayed pre-release and how it finally looks during its premiere. “Broken

promises marketing” is not only about developers’ promotion strategies, but also general

relations, and communication (culture) of both producers and game journalists. The latter

“are understood as actively engaged in producing and negotiating the value and meaning of

video games” (Carlson, 2009). All this is important considering both developers’ and

journalists’ communication practices are informative and persuasive at the same time (see,

e.g., Ball-Rokeach & DeFleur, 1976). While informing is neutral, without the intention of

influencing audiences, persuasion is the opposite, and the final goal here is to sell a given

13
game (at least a goal for producers). Broken promises are thus significant from the business

ethics perspective, and games that “offer inferior quality compared to what is being claimed

(…) are likely to be unethical” (Harviainen et al., 2020, p. 773). In this regard, researchers

often focus on micropayments and free-to-play games showing how misleading these can be

(Harviainen et al., 2020; Heimo et al., 2018). Here we instead focus on “broken promises

marketing”, which we see as highly unethical and harming the producers’ long-term interests.

Reports of crunch and the pressure that studio executives were putting on staff to release the

game in time soon escalated (see Schreier, 2021). In Poland, in January 2021, Cyberpunk

2077 was under the scrutiny of the Office of Competition and Consumer Protection, and an

investigation was launched on whether the CDPR will patch a game and make sure the

refunding procedures are going smoothly. The title’s negative reception and criticism of

CDPR itself were widely reported by video game journalists (e.g. Hall, 2020; Isaac &

Browning, 2020; Schreier, 2021). . In the case of Cyberpunk 2077, the final result was

doubtful, to say the least – the accumulated hype ended with a big disappointment for both

players and journalists, and a major crisis within the company, with its reputation

significantly damaged. It must be stressed, however, that even at the moment of release, some

journalists still seemed to be trapped in the positive narrative, initially rating the game very

highly before downgrading their reviews in light of the broader backlash.

Supporting document #2: Tells about some of the changes the company has gone through

after the disaster of cyberpunk 2077 and its wish to gain, again, the trust of investors and

clients.

Dring, C. (2023, June 27). CD Projekt: "We need to fix the relationship with our

players". GamesIndustry.biz. Retrieved January 31, 2024, from

14
https://www.gamesindustry.biz/cd-projekt-we-need-to-fix-the-relationship-with-our-

players

The story of Cyberpunk 2077 -- the real world story -- was a fairytale that turned into

a nightmare. CD Projekt was riding high on the success of The Witcher 3, and the

anticipation for its next title was at levels few games could dream of. It was the

headline act of numerous E3 events, culminating in the iconic 'You're Breathtaking'

moment from E3 2019, featuring the game's star Keanu Reeves. Arriving at the close

of the PS4 and Xbox One generation, comparisons were even being made with Grand

Theft Auto 5, one of the very biggest and most successful games of all time. But then

it came out. Completed under COVID conditions, the company had openly admitted

that it needed crunch to get it done. And when it was released, it simply wasn't ready.

The game had numerous performance issues, particularly on PS4 and Xbox One. The

media called it shambles and one of the biggest disasters in industry history. And the

worst was to come when PlayStation removed the game from its store. For a

developer with the scale and respect of CD Projekt Red, it was a public humiliation.

That was nearly three years ago. Since then, Cyberpunk 2077 is now (I'm told) pretty

good. And CD Projekt is back in front of the media to promote the game's big

expansion, Phantom Liberty. During Summer Games Fest last week, I had the chance

to speak to someone on the frontline of all that, CD Projekt's VP of PR and

communication Michał Platkow-Gilewski. And the first question I could think of

asking was simply... Are you ok?

"I'm good. Actually... I think I'm great, to be honest," he says.

15
“We're in a cool moment right now. Yes, the road was bumpy. When everything was

awesome and amazing, before the release of Cyberpunk... it was the time of my life,

but it was too good to be true. The game was shaping up to be amazing and we were

all super hyped. But this hype surrounding us was a big pressure. Then there was the

release and it was not a fairytale anymore.

"We knew that we had to work hard to come back. It was a tough moment for

everyone. We had to rebuild a lot of things inside of the company. We started with

pipelines on the dev side, we started to think should we tie our future with a different

engine or should we stay with our own? We made some decisions about how we

work, how we are structured. It was a big rebuilding.

"Before the release of Cyberpunk... it was the time of my life, but it was too good to

be true"

"At the same time as this, we knew we wanted to work on Cyberpunk and make not

just a great expansion, but also improve a lot of things in the base game. It was quite a

journey, but right now I am just excited to see what people will say when they start

playing." Platkow-Gilewski has been at CD Projekt for 12 years, joining back when it

was 120 people and he was part of a marketing team of six. Now the business is

around 1,200 employees and his team is close to 100. And for him, the real

disappointment around Cyberpunk 2077 is that it let down the studio's core fans.

"I was personally not happy with how things turned out. I was not expecting that. I

knew immediately that we had to come back. I liked the spot we were in. I'm not

16
talking about the peak of hype, but two years before that, we had our community, we

liked them, they liked us, it was awesome to work at CD Projekt RED.

"After the release it was tough, but I knew that we had the same people. The gamers

are the same… we just need to fix our relationship. The only thing we can truly do is

just deliver what we are capable of. I have a feeling that soon we will be able to do

that and hopefully that will be a new beginning for everyone."

"I want to rebuild the connection with gamers, because we had people following us

for years and they were disappointed"

"Cyberpunk took us a lot of time to deliver and we grew," says Platkow-Gilewski.

"We needed to rethink how we were working in bigger groups and make sure that

everyone listens to each other. And also make sure we empower teams to work on

their fragments of the game but, when you combine everything together, it runs

smoothly from all the sides. We need to empower new leadership as well. We want to

decentralise how we are working.

"The biggest thing was standing up and saying 'we have to do it'. Yes we were

expecting a different launch for Cyberpunk, but now we have another chance in front

of us. For me, as the person responsible for communication, I want to rebuild the

connection with gamers, because we had people following us for years and they were

disappointed. That's, for me, is the biggest thing. We have to make the game for

them."

17
Platkow-Gilewski says there is now an entire team dedicated to improving life within

the studio, and that includes putting an end to excessive working.

"Work-life [balance] is really important to us. It always has been but it was hard to

maintain the balance. I'm enjoying my private life now way more than I used to. We

are improving, rebuilding, reshaping the studio on so many levels that it's hard to say

precisely what's happening. But work-life balance, how we work together, how we

empower even smaller teams, what are the pipelines, how we speak with

management, all that... it's constantly changing.

"There are a group of people responsible only for transformation. They are not

responsible for the quality of what we are delivering, but what's going on in the

studio, including creating new spaces so it's way more comfortable to work. The

whole COVID situation hit us as well and we had to figure out how to work [with

people at home]. On the one hand, we are missing our colleagues because we don't

see them so often, but on the other hand we learnt how to work with digital tools to

make sure that everyone knows everything.

"All this mess started when we were still making Cyberpunk, but now we have the

time to work on these tools to develop them, to create best practices… it's an

interesting time."

The press previews for Cyberpunk's Phantom Liberty expansion have been positive.

Not just in terms of the story, but in how the base game has been fundamentally

18
changed. The developer is at pains to say how significant this update is, and that's part

of the reason it's cast Idris Elba (alongside Reeves) in it.

"For us, expansions are really important. Years ago... we started to think what is

DLC? Why is someone charging a couple of dollars for DLC that only gives you

something small, like a special sword or horse armour? We didn't like that approach.

So when we add content... we have DLC that is free because they don't involve a lot

of effort, and then we have people working on something more significant, for a

longer period, and there's a price for that. That's an expansion. "For us, an expansion

should be visibly big. In the base game, we have Keanu, so we said, if we're going to

do something else significant, we need an actor who can [represent that] and show

that this isn't some small side mission, but a big chunk of content that we care about.

"For Phantom Liberty, which is more of a spy thriller-themed story – it has a different

vibe to the base game – we needed someone who is a match for that. Idris is the next

James Bond to me. He has this Bond vibe. When we talk about the character,

Solomon Reed, we knew he'd be perfect for it."

Platkow-Gilewski insists CD Projekt is changing and has learnt lessons. But there are

understandable concerns about whether the company is still stretching itself too much.

Alongside Cyberpunk 2077 and the various licensed spin-offs – including comics,

books and Netflix shows – CD Projekt has announced a huge slate of games including

a new IP, three Witcher games and a Cyberpunk sequel.

19
"First of all, all these projects are at different stages," he defends. "It's not that we are

doing all that in the same moment at the same stage, because that would be a lot of

work. We are thinking about the strategy for the years to come. We really care about

our IPs, we want to develop them, we want to create games within them. But also, we

want to make sure we are focused all the time.

"We have a lot discussions, like what is most important right now? Where do we want

to go? What do we want to achieve? The discussions we're having are really healthy.

It's easy to spread the butter too thin, but we are constantly checking and talking, and

we think we know what to do."

Almost three years ago, CD Projekt achieved, in Platkow-Gilewski's words, 'a critical

mass of negativity'. Yet the reaction from the team, he says, wasn't to despair, but to

roll up its sleeve and get to fixing it. That process will always be on-going, he adds,

but that the launch of Phantom Liberty will, hopefully, be the first sign of a studio

that's desperate to right those wrongs.

"I actually believe Cyberpunk on launch was way better than it was received, and

even the first reviews were positive," he concludes. "Then it became a cool thing not

to like it. We went from hero to zero really fast. That was the tough moment. We

didn't know what was happening. We knew that the game is great, yes we can

improve it, yes we need to take time to do it, and we need to rebuild some stuff.

"That took us a lot of time, but I don't believe we were ever broken. We were always

like: Let's do this."

20
 Supporting document #3: Talks about Cyberpunk 2077 restorage, how it went from

being the most failed and disastrous project ever of the company, to a redemption on

taking its clients and investors' trust again.

Cyberpunks2077 PR Comeback. (2024, January 28). Crowley Media Group.

Retrieved January 31, 2024, from

https://crowleymediagroup.com/resources/cyberpunk-2077-pr-comeback-from-

controversy-to-redemption/

Cyberpunk 2077, the highly anticipated open-world RPC from CD Projekt Red, faced a

tumultuous journey from its initial release to redemption. With a notorious reputation for

technical issues and a PR crisis that shook the gaming industry, the game's future seemed

uncertain. However, through strategic planning, continuous updates, and community

engagement, Cyberpunk 2077 managed to make a remarkable comeback and regain the trust

of players.

Key Takeaways:

● The initial release of Cyberpunk 2077 was marred by technical issues and negative

reception.

● CD Projekt Red implemented a comprehensive strategy to address the game's flaws

and improve the gameplay experience.

● Transparency, open communication, and active community engagement played a

crucial role in rebuilding trust.

● Technical improvements, such as enhanced visuals and optimized performance,

contributed to the game's reputation management.

21
● Cyberpunk 2077's redemption serves as an example of the potential for successful

comebacks in the gaming industry.

Upon its release in 2020, Cyberpunk 2077 faced widespread criticism for its multitude

of technical problems, leading to a major PR crisis for CD Projekt Red, the game's

developer. The game's reputation suffered, and investors even filed a class-action

lawsuit. The company had to implement damage control measures and address the

issues to regain the trust of players and the gaming community.

The initial launch of Cyberpunk 2077 was marred by numerous performance issues,

especially on last gen consoles. Players encountered game-breaking bugs, graphical

glitches, and frequent crashes, which significantly impacted their overall experience.

CD Proiekt Red's failure to deliver a polished gaming experience resulted in severe

backlash from both critics and players. The controversy spread like wildfire across

social media platforms and gaming forums, tarnishing the reputation of the much

anticipated game.

"The launch of Cyberpunk 2077 was undoubtedly a disaster. The sheer number of

technical flaws and performance issues damaged the game's credibility and left a

negative impression on players. It was clear that immediate action was required to

salvage the situation and restore faith in the game and its developers." - Gaming

Industry Analyst.

The disastrous launch of Cyberpunk 2077 had significant consequences for CD

Projekt Red and its stakeholders:

22
● Loss of Trust: The PR crisis eroded the trust of players who had high expectations for

the game. The initial excitement and anticipation turned into disappointment and

frustration.

● Financial Consequences: The damage to the game's reputation resulted in a

considerable drop in sales and stock value. Shareholders registered their concerns,

leading to a class-action lawsuit against the company.

● Negative Publicity: The media attention surrounding the game's technical issues

further fueled the negative perception, making it a focal point of discussions about the

pitfalls of rushed game development.

To navigate the PR crisis, CD Projekt Red swiftly implemented measures to mitigate

the fallout and regain player trust:

● Open Communication: The developers acknowledged the issues and openly

communicated about their plans to address them. They released public apologies,

taking responsibility for the shortcomings.

● Immediate Updates: CD Projekt Red prioritized fixing the critical technical problems.

They released a series of patches and updates to rectify bugs and stability issues

reported by players.

● Professional Support: The company sought external assistance from industry

professionals and technical experts to expedite the process of bug fixing and

optimization.

● Earning Back Players CD Projekt Red started rebuilding trust through goodwill

gestures, such as offering refunds to dissatisfied customers and committing to further

improvements and free DLCs.

23
The developers' commitment to swift action and transparency marked their determination to

repair the damage caused by the tumultuous release of Cyberpunk 2077.

After the challenging launch of Cyberpunk 2077, CD Projekt Red swiftly recognized the need

for a robust strategy to restore the game's reputation and deliver on its initial promise. The

studio embarked on a comprehensive roadmap to redemption, focusing on addressing

technical flaws, enriching the gameplay experience, and rebuilding the brand through

strategic updates and expansions. The marketing campaign for Cyberpunk 2077's brand

recovery encompassed a series of updates and patches aimed at optimizing performance and

rectifying technical issues. CD Projekt Red diligently worked on improving the game's

stability, eliminating bugs, enhancing the visual presentation, and refining gameplay

mechanics. Through continuous community engagement and open communication, players

witnessed the studio's unwavering commitment to redeeming the Cyberpunk 2077

experience.

24
One notable expansion that played a crucial role in the game's recovery was “Phantom

Liberty'' . This immersive addition provided players with captivating storylines and fresh

content, reigniting their excitement and showcasing CD Projekt Red's determination to

deliver on their promises. By expanding the Cyberpunk 207"7 universe, the studio not only

provided a compelling narrative but also demonstrated that dedication towards fulfilling

player expectations.

As part of their PR comeback, CD Projekt Red made significant strides in enhancing the

technical aspects of Cyberpunk 2077 The game underwent extensive optimization for both

current-gen consoles and PCs, resulting in a smoother and more stable gameplay experience.

Bugs and glitches that plagued the initial release were diligently addressed and eliminated,

ensuring a more immersive and enjoyable journey through Night City. One ol the standout

features of these technical improvements is the introduction of ray tracing, a cutting-edge

rendering technique that allows for realistic lighting and reflections in the game world. This

visual enhancement brings Night City to life, creating stunningly realistic environments and

adding a new level of immersion for players.

What issues did Cyberpunk 2077 face upon its release?

Cyberpunk 2077 faced significant technical problems and bugs, particularly on last-gen

consoles, which led to widespread criticism and a major PR crisis.

How did CD Projekt Red address the issues with Cyberpunk 2077?

CD Projekt Red implemented damage control measures by releasing updates, patches, and

expansions to improve the game's technical flaws, gameplay experience, and overall

performance.

How did CD Projekt Red engage with the Cyberpunk 2077 community?

25
CD Projekt Red actively engaged with the community by listening to feedback and

addressing concerns. They communicated openly about their progress updates, and future

plans through social media, forums, and direct communication channels.

What enhancements did CD Projekt Red make to Cyberpunk 2077?

CD Projekt Red optimized the game for current-gen consoles and PCs, eliminating bugs and

glitches. They introduced enhancements like ray tracing and advanced Al, resulting in a

visually stunning game.

How has Cyberpunk 2077 managed to make a successful PR comeback?

By diligently addressing past issues delivering on promises, and continuously improving the

game, CD PProjeki Red has transformed Cyberpunk 2077 into a polished and immersive

experience.

Supporting document #4: Cd Projekt comments on its wrap up of the third quarter of 2023.

CD PROJEKT wraps up the third quarter of 2023 - CD PROJEKT. (2023, November 28). cd

projekt. Retrieved January 31, 2024, from https://www.cdprojekt.com/en/media/news/cd-

projekt-wraps-up-the-third-quarter-of-2023/

The third quarter of 2023 at CD PROJEKT was marked by preparations for the release of

Phantom Liberty. The large expansion for Cyberpunk 2077 was launched on September 26

to rave reviews from gamers and gaming media representatives alike. Within two months of

release the newest production from CD PROJEKT RED sold over 4.3 million copies.

– We are very pleased with the launch of Phantom Liberty. Successful release of the

expansion, along with Update 2.0 which introduces a slew of additional improvements,

elevates Night City gameplay to another level – in terms of quality. This is an important

26
achievement given our plans to further develop the franchise – says Adam Kiciński, CEO

and Board Member of CD PROJEKT.

At an event summarizing the release of Phantom Liberty, held on October 5, the Board of

CD PROJEKT announced collaboration with Anonymous Content – a global motion picture

and TV production company.

– As previously announced, we want to grow our franchises beyond the realm of video

gaming. A live-action project set in the Cyberpunk universe will enable us to reach an even

wider audience. We are happy to enlist the support of Anonymous Content – a highly

experienced and renowned partner – in pursuing our ambitions – remarks Michał

Nowakowski, CCO and Board Member of CD PROJEKT.

In the third quarter of 2023 the CD PROJEKT Group posted 443 million PLN in revenues.

The Group’s consolidated net profit reached 203 million PLN – over twice as much as the

year before.

– We had very solid earnings in the reporting period as a result of the successful launch of

Phantom Liberty and strong sales of the base edition of Cyberpunk 2077. The net

profitability of the CD PROJEKT RED segment exceeded 50%. For its part, GOG.COM also

posted an excellent quarter – with an over 90% year-on-year increase in revenues. All in all,

this was the best Q3 period in the entire history of the CD PROJEKT Group – summarizes

Piotr Nielubowicz, CFO and Board Member of CD PROJEKT.

Supporting document #5: Consolidated financial statement of the CD PROJEKT Group for

Q3 2023.

27
Untitled. (2023, November 28). cd projekt. Retrieved January 31, 2024, from

https://www.cdprojekt.com/en/wp-content/uploads-en/2023/11/consolidated-financial-

statement-of-the-cd-projekt-group-for-q3-2023.pdf

A significant increase, in terms of value, compared with the prior period in Sales revenue in

the third quarter of 2023 is the result of a successful launch of Phantom Liberty, the feature

expansion of Cyberpunk 2077. The launch, supported by a marketing and communication

campaign, took place on 26 September and in the period discussed, the Group recognized in

revenues the total value of sales under pre-orders received until the date of the launch and

sales in the first days after the launch. This translated into an increase in Sales of products in

the CD PROJEKT RED segment, where sales of the expansion represented more than a half

28
of the total sales of products, and almost 90% including sales of the main game. In addition,

in the item discussed, the CD PROJEKT RED segment recognized:

a) licence revenue from the sale of the game Witcher 3: Wild Hunt, including expansions:

Hearts of Stone and Blood and Wine;

b) revenue relating to the games GWENT: The Witcher Card Game, Witcher 2: Assassins of

Kings, Thronebreaker: The Witcher Tales and The Witcher;

c) licence revenue relating to the CD PROJEKT RED studio’s franchises.

In the period discussed, the Group recorded an increase in sales also in Sales of goods for

resale and materials, which comprised mainly revenue from digital distribution of games

from external suppliers to end customers executed via the GOG.COM platform.

The effective income tax rate recognized in the income statement for the third quarter of the

current year was 13.2% compared to 11.9% in the third quarter of 2022, and the increase is

mainly due to a change in the approach to recognition of non-deductible income tax collected

in other jurisdictions on royalties paid to the Group (withholding tax), which involves its

ongoing recognition on the basis of reliable estimates. This is a change from the previous

approach under which the recognition of non-deductible withholding tax only occurred upon

receiving documents confirming the settlement of the tax abroad, i.e. in the year following

the year of the actual withholding by the Company’s royalty payer.

The consolidated Net profit of the Group for the third quarter of 2023 amounted to PLN 202

864 thousand and was significantly higher than in the corresponding period of the prior year,

mainly as a result of the successful launch of the Phantom Liberty expansion.

29
The item Expenditure on development projects, in which the Group recognizes expenditure

on the development of new games, new technologies and other products of a similar nature,

incurred and deferred, had the largest share in the value of the Group’s Non-current assets as

at the end of the third quarter of 2023, as well as the greatest impact on the decrease in the

balance thereof. The decrease in the said item in the period discussed is due to the

commencement of the amortization of the Phantom Liberty expansion after its launch and

increased amortization rates on other assets relating to the main game Cyberpunk 2077.

Description of the Issuer’s major achievements or failures in the third quarter of 2023 by

operating segment

CD PROJEKT RED

Events relating to Cyberpunk 2077

30
On 29 September 2023, a track by Dawid Podsiadło composed especially for Phantom

Liberty was released. The newly-launched music video appeared in the game’s credits (the

so-called credit song). After the reporting period, on 5 October 2023, the CD PROJEKT

Investor Day took place. During the event, the Management Board of CD PROJEKT S.A.

summarized the release of Phantom Liberty and announced that by 3 October 2023 sales of

the expansion had exceeded 3 million copies. On the other hand, the basic version of the

game, Cyberpunk 2077, has sold more than 25 million copies. On that day, it was also

announced that CD PROJEKT had entered into collaboration with the production studio

Anonymous Content to jointly create a live-action project in the world of Cyberpunk. On 10

November 2023, Cyberpunk 2077: Phantom Liberty won awards for the best game expansion

and the best game trailer at the Golden Joystick 2023 gala.

The release of the Phantom Liberty expansion of Cyberpunk 2077 was a material event which

was not observed in the comparative period but which affected the net profit or loss, assets,

31
liabilities and cash flows of the CD PROJEKT Group in the third quarter of 2023, resulting

in:

● an increase in Net sales of products, services, goods for resale and materials in both

segments of the Group;

● a decrease in the balance of Expenditure on development projects and an increase in

Costs of products and services sold in the CD PROJEKT RED segment due to the

settlement and commencement of amortization of the expenditure on the production

of the expansion;

● an increase in Costs of products and services sold in the CD PROJEKT RED segment

due to a change in the amortization pattern of the basic Cyberpunk 2077 game;

● an increase in expenditure on promotion (Selling expenses) in the CD PROJEKT

RED segment;

● an increase in Trade Receivables as a consequence of the high sales associated with

the release of the Phantom Liberty expansion on 26 September this year, i.e. towards

the end of the reporting period;

● a decrease in the balance of Deferred income in the CD PROJEKT RED and

GOG.COM segments due to the settlement of pre-orders for the expansion.

32