Translation: Original comment published in Finnish on 5/7/2024 at 12:39 pm EEST.

Remedy announced on Tuesday that it has decided to end its game project with Tencent, codenamed Kestrel. Kestrel had a small team working on the early conceptualization stage of the premium co-op multiplayer. The game was co-funded and to be co-published with Tencent. The project began in November 2023 as a relaunch of the previous Vanguard project.

According to Remedy, the decision to exit Kestrel will allow the company to focus more on other games in its portfolio, where experienced developers will now be transferred from Kestrel. In addition, the planned investments for Kestrel will be eliminated and Remedy's overall hiring needs will be reduced.

The future is increasingly built around Alan Wake and Control

We welcome Remedy's decision, as Kestrel (and previously Vanguard) were projects that were outside the company's core competencies. The company can now focus on growing the game brands it owns (Alan Wake and Control), where we see much better long-term potential from a risk/reward perspective. At the same time, the Max Payne subcontracting project balances the risks and develops Remedy's capabilities to create similar action games. A more limited number of game projects should also make it easier to move them forward on time and with the highest quality.

In our view, Kestrel's discontinuation may also indicate that the company is working toward self-publishing Condor and/or Control 2, which would require significant investment and additional funding in the coming years. Nor would we be surprised if Tencent, which just increased its stake in Remedy to 14.8%, was willing to fund these projects instead of Kestrel.

Our forecasts will change once the decisions on the Control games have been taken

As we stated in our update following the Q1 report, Remedy's decision to self-publish or choose a publishing partner for Control games will result in changes to our current forecasts. Killing off Kestrel will lower our development fee assumptions in the medium term and our projections also assumed small royalties from the game from 2029 onwards. At this point, the 2030 royalty rate is very low, of course, but a key factor in expectations will be whether Remedy decides to go the self-publishing route for Control games. As for Alan Wake, the fate of future games is still entirely in the hands of the company, as the publishing deal with Epic only covered Alan Wake 2 and Alan Wake Remastered.