From a risk reward standpoint Remedy’s current operations can be divided into three categories: subcontracting, own-IP projects with a publishing partner and co-publishing projects.
In subcontracting projects Remedy’s partner funds the development and Remedy develops the game to an agreed specification. Remedy receives milestone payments, with a margin, according to performed development work. Remedy or the partner originates the game concept, retains control of the intellectual property rights to the game and publishes, distributes, and markets the game. The project can include a royalty opportunity for Remedy that is tied to the game’s success. Subcontracting projects carry low financial risk for Remedy but participation to the game’s success is also limited.
In own-IP projects Remedy’s partner funds the development, partially or in full. Remedy creates and retains intellectual property rights of the game and is responsible for the development of the game. The partner publishes, distributes and markets the game. During project development Remedy receives milestone payments for development work as it is performed. These milestone payments are typically without margin as they are intended to cover Remedy’s development expenses. Once the game is launched, the milestone payments, partner’s marketing budget and other costs may be recoupable against game sales. After the game is released and possible recoupment is full, Remedy receives a share of revenue from game sales. Own-IP projects carry a higher financial risk, but also a greater royalty potential for Remedy.
In co-publishing projects Remedy and the partner co-fund the development of the game. Remedy carries the main responsibility for the development while publishing, distributing and marketing responsibilities are distributed between the two companies as per agreed terms. For Remedy, co-publishing projects carry a relatively high financial risk, but also a greater royalty potential, with Remedy being more involved in the commercialization of the game. Usually the royalty potential reflects the split in the project financing.
Self-publishing is a potential future publishing model for Remedy and it has the highest finacial risk, but also the greatest revenue potential through game royalties. In these projects Remedy fully funds the game development and marketing. As Remedy also acts as the game publisher, all royalties can directly be realized as revenues after deducting fees related to e.g. store fees, value added taxes, quality assurance and localization. At the end of 2021 Remedy did not have self-publishing projects in development.
Remedy games can be categorized into three groups by business model: premium fixed price games with additional payable downloadable content; service-based fixed price games with additional payable downloadable content; and service-based free to play games with live operations.
Premium fixed price games with additional payable downloadable content form the majority of Remedy’s existing games. Games such as Control, as well as part of the games in pipeline, such as Alan Wake 2 are these types of games. These games are AAA titles and are typically published and distributed by a publisher that Remedy teams up with during the development of a game.
Remedy is, however, in a strategic transition to expand into new business models that will complement its game development business. An example of this transition is service-based fixed price games with additional payable downloadable content, such as codename Condor, a multiplayer spin-off game of Control, designed to be developed and played for years. These are premium games with a lower initial price point but with a long tail of revenues from expansions.
Another form of this transition is service based free to play games with live operations, such as codename Vanguard. These are games in which a heavy emphasis is placed on the post launch live operations phase. These games are very long-lasting experiences where monetization is based typically on microtransactions or subscriptions and players are kept engaged by providing new expansions and updates on a regular basis.