Games are Russified – Newspaper Kommersant No. 7 (7452) dated 01/17/2023

Against the backdrop of large-scale changes in the domestic video game development market, which began in 2022, 1C transferred its game distribution structures to Russian jurisdiction. So the company simplifies asset management, which has become much more complicated due to sanctions. This will allow 1C to actively engage in the development and distribution of games in the country, competing with VK, experts suggest.

Kommersant found in the SPARK-Interfax database that 1C acquired from the Cypriot DM Investments Multi Ventures Inc. Ltd 100% stake in Soft Club Company LLC and 1C-Softclub LLC. The restructuring took place at the end of November 2022. Both companies are engaged in the distribution and publishing of video games, their total revenue in 2021 amounted to 11.5 billion rubles. with a net profit of 89.2 million rubles. They already belonged to 1C through the Cyprus offshore, but now the company has transferred them to direct ownership.

The restructuring is aimed at simplifying the management of a group of companies, 1C explained to Kommersant: “The intermediate subholding is being removed, while the main business processes and beneficial ownership of property do not change.” The representative of the company added that 1C is developing “in accordance with plans”: in addition to expanding the existing line of “IL-2 Sturmovik” and supporting the online shooter “Caliber” (they are being developed by 1C Game Studios), the company intends to develop new games, the recruitment is already underway employees for these projects.

In 2022, the Russian video game market underwent significant changes: with the start of the military operation in Ukraine, large developers began to leave Russia, the situation was aggravated by the beginning of partial mobilization in September (see Kommersant on September 26). In addition, VK sold its gaming division My.Games (which owns shares in a number of development studios) to Leta Capital’s managing partner Alexander Chachava, launched its own game store and plans to start investing in video game studios again (see Kommersant on January 11). A similar restructuring took place in the Wargamming studio (WG, releases World of Tanks, World of Warships) (see Kommersant dated November 16, 2022).

Against the background of these events, the state in 2022 began to show great interest in the development of the industry, for example, the Ministry of Digital Development is discussing with market participants the prospect of launching a new federal project to support the Russian gaming industry (see Kommersant dated December 19, 2022).

Now asset management through the Cypriot layer is complicated due to sanctions and, as a result, difficulties in building relationships with banks, auditors, as well as conducting any corporate process, for example, appointing top managers or conducting any transactions, explains a partner at the Pen & Paper Bar Association Stanislav Danilov: “In this case, eliminating the extra link in the asset management structure is an absolutely logical decision that will significantly simplify the management of companies.” The presence of an intermediate link in the current conditions creates difficulties both in Cyprus itself and in Russia, agrees Moscow Digital School expert Vladislav Chukanov.

The interlocutor of Kommersant in the game development market explains that 1C Softclub distributes physical, not digital copies of games. In his opinion, the company plans to engage in digital distribution of games in Russia through its own platform: “This is necessary in order not to depend on competitors, such as VK. But the development of 1C requires cooperation with another strong player with a similar audience and strong expertise, such as Lesta.”

An employee of a large Russian-speaking gaming studio suggests that the withdrawal of 1C gaming assets from the offshore will subsequently help the company receive state support.

The founder of the rawg.io portal, Gadzhi Makhtiev, believes that 1C is trying to consolidate gaming assets in order to realize the possibility of increasing its share in the Russian market: “In 2022, the market has become freer, including from foreign players, in addition, the purchase of foreign games, as in-game services is complicated, and the demand has not gone away. Against this background, Russian publishers and developers see an opportunity to take their audience.”

Nikita Korolev