Starbreeze Studios Reviewing Costs After Overkill’s The Walking Dead Sells Poorly

Starbreeze Studios Reviewing Costs After Overkill’s The Walking Dead Sells Poorly

Starbreeze has put plans into place to help reduce costs after Overkill's The Walking Dead for PC underperformed.

Starbreeze’s board of directors has given management a mandate to review their cost of operations and a program to help reduce costs and sharpen the focus on core business according to a press release issued today from the publisher.

It has been detailed that a license fee of $10 million from publisher 505 Games for the console editions of Overkill’s The Walking Dead is not going to be recognized as revenue until after the end of the current quarter. With the fourth quarter on the way, this will lead to a negative impact on Starbreeze Studios’ earnings. Despite this, Starbreeze’s CFO Sebastian Ahlskog states that their target of positive EBITDA for Q4 still stands.

Overkill’s The Walking Dead’s sales revenue has been lower than originally expected. According to the press release, this is due to the share of sales in low-price countries such as Russia and China have actually been significantly higher than expected. Basically, the game performed much better in areas where it was available at a cheaper price and sold disappointingly in areas where it was more expensive.

Originally Starbreeze was hopeful for Overkill’s The Walking Dead to do well at launch and proudly stated to investors that their “expectations are high” during their interim financial report. Starbreeze Studios’ Chairman Michael Hjorth commented on this lackluster performance:

This is disappointing, of course, but we have a base to work with in regards to the number of games sold. We have a pulse of concurrent players, which is essential to future performance within the framework of our Games as a Service concept. The team is working at full capacity to deliver improvements to the game and new content, and Season 2 will be starting soon.

Starbreeze has now commenced a project that will look into reviewing their operations, looking at reducing costs, and focusing on core business for internal and external development. The project is expected to “generate significant cost savings during the full year 2019 compared to 2018.” Sebastian Ahlskogh had the following to say about this project:

We have initiated a review of our costs to ensure better alignment with our revenues. We are designing a program towards that end, naturally while keeping a careful eye on revenue development. We must focus on our core business and ensure delivery of the company’s important games.

If you want to find out what Overkill’s The Walking Dead is like, I ran a review during its launch week and came away with quite mixed feelings. The game launched with season one of the story with season two planned to arrive later this month. It’s currently available on PC and due to launch onto PS4 and Xbox One next year.