Translation: Original comment published in Finnish on 8/30/2024 at 7:17 am EEST.

Remedy announced on Thursday a strategic partnership agreement with Annapurna Pictures for Control 2. Remedy will self-publish the game, but Annapurna will fund 50% of the game and have the rights to extend the Control and Alan Wake brands into film and television. In our projections, we had assumed that Remedy would fund Control 2 entirely on its own and raise additional funds to do so. The current agreement is more balanced from a risk perspective and eliminates the need for additional funding that we had anticipated. At the same time, the deal offers good royalty potential and a low-risk opportunity to reach new audiences through movies and TV series. Overall, we view the deal as good for Remedy and will update our forecasts accordingly in the near future.

The deal appears to offer a balanced risk/reward for Remedy

Under the terms of the agreement, Annapurna will fund 50% of the development budget for Control 2 and will have the rights to extend the Control and Alan Wake franchises into film and television. We expect the budget for the game to remain as previously announced (50 MEUR).

Remedy and Annapurna will split the game's revenue equally until the game's production budget is recouped. Remedy will then receive a larger share of game sales, since as the publisher of the game, the company is also responsible for marketing costs (at least 10-30% of the production budget for a typical AAA game). Thus, Remedy's share after recouping the development budget could be estimated at around 60-75% of sales revenues. In return, Annapurna will receive a greater share of audiovisual productions in which Remedy does not have to invest capital.

As part of the agreement, Annapurna will acquire an option to the television and film rights to Control and Alan Wake, as well as selected audiovisual licensing rights and related ancillary products. Remedy retains all intellectual property rights to Control and Alan Wake. As a result, Remedy has complete freedom to decide the fate of a potential Control 3 game project. Annapurna seems to be a quality producer of movies and TV series, so Remedy's game brands seem to be in good hands from that perspective.

Presumably, the signing of the contract will result in a higher volume of development fees for Q3 in proportion to the development done so far on Control 2. Considering this and future development fees, Remedy's cash position (Q2'24: 26.1 MEUR) appears to be sufficient to finance the next projects and to pay the two remaining installments for the Control rights to 505 Games.

Condor will apparently also be self-published

Based on the wording of the press release "self-publishing selected titles", Remedy will also self-publish Condor. We had expected Remedy to co-publish the project with a partner. In light of the Annapurna agreement, we continue to see the possibility that Condor will also bring in a partner in some form to share the financial risk. An interesting option, we think, would be to work with Sony or Microsoft. In this case, Condor could be immediately introduced to the masses on subscription services for these platforms (PlayStation Plus / Game Pass), Remedy would receive some compensation for this and Condor would potentially get a flying start in terms of player numbers.