West Auckland’s Grinding Gear Games clocks huge profit amid pandemic

West Auckland-based, China-owned Grinding Gear Games has seen another big jump in revenue and profit amid global lockdowns.

The Henderson-based company booked $113.4 million revenue for the 12 months to September 30, 2020 – versus the $99.2m it booked in 2019 and its 2018 receipts of $73.3m.

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Pre-tax profit was $77.4m, after-tax profit $51.9m (vs $48.6m in 2019 and $33.4m) in 2018).

Chinese social media and gaming giant Tencent bought an 87.7 per cent stake in Grinding Gear Games in 2018 for an amount that was undisclosed but north of the Overseas Investment Office threshold of $100m.

The deal left co-founders chief executive Chris Wilson (8.8 per cent), technical director Jonathan Rogers (2.3 per cent) and creative director Eric Olofsson (2.3 per cent) with minority stakes but still in day-to-day control of the multiplayer online fantasy game they founded.

Wilson – who is also a director – said at the time of the deal that keeping jobs in his hometown was a bottom line.

Today, he confirmed that Grinding Gear Games is still in the same West Auckland office, and that staff numbers have swelled from 114 at the time of the deal to 155 – and it’s still in hiring mode with customer support, visual effects and web developer roles open.

Most pundits have put a worldwide boom in video game industry profits down to pandemic lockdowns, and the local sector has prospered during the time of coronavirus – a time that has seen one of Grinding Gear Games’ peers, RocketWerkz, take the top two floors of central Auckland’s newest, most expensive office tower for a “space ship”-themed fitout.

Wilson, however, was loath to ascribe the 2020 growth to any one factor, including Covid-19.

He did not want to comment on his company’s latest financials, but did offer, “Each year we’re making a larger and larger financial investment in our Path of Exile 2 sequel which is still a year or two away from commercialisation.”

The company remains tightly focused on its sole title, which its trio of co-founders first conceived in 2006 during an online discussion about creating their dream multiplayer title. A 2012 Kickstarter campaign raised US$200,000 for the title. A follow-up crowdfunding campaign in 2014 some US$2.5m as Exile started to gain a serious global following. At the time, there were 3m registered users (the game is free to join, but you can make micro-purchases of gear during your travels, saving yourself the grind of earning it).

Exile began as a PC title but has expanded to Playstation and Xbox in 2017.

In April last year, it eclipsed the likes of Fortnite to win “Best Evolving Game” at the 2020 Bafta Games Awards – a spin-off from the movie and TV awards of the same name (see video above).

How many players does it have today? Short answer: a lot. Wilson’s longer answer: “Many games quote an ever-increasing number of people who have historically played, but we stopped tracking this about eight years ago – when it was in the tens of millions – as the metric becomes meaningless after a while.

‘We prefer to track monthly active users – the number of people who have played that month. It’s a few million per month, varying depending on when our most recent release was.”

The self-effacing Wilson generally likes to keep his head down and let his achievements do the talking.

For a time last year, that strategy looked slightly hairy as then US President Donald Trump took aim at Tencent (best known for its WeChat social media and payments app), threatening action against any company it dealt with. At the time, Wilson noted Grinding Gear Games had a purely investment relationship with the Chinese company. In any case, the threat seems to be wilting, with the Biden administration announcing on February 12 that it would review Trump’s WeChat ban (and “pause” pressure on another Chinese app-maker, TikTok owner Byte Dance, to sell its US operation).

A recent NZ Game Developers Association survey said the sector had total revenue that leapt 60 per cent to $323.9m in 2020 – a headline figure that indicates Grinding Gear Games accounts for more than a third of the local industry.

With Path of Exile’s sequel on the way, and RocketWerkz yet to release its blockbuster-in-the-making Icarus, growth should continue. The NZGDA is predicting $1b revenue by the end of the decade.

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