Goodgame Studios quietly becomes one of Germany’s biggest game companies

Chances are you haven’t heard of Goodgame Studios. But the game studio in Hamburg has become one of Germany’s biggest game companies, with more than €202 million, or $220 million, in revenues 2014. The company has more than 245 million users for its online and mobile games like Goodgame Empire. It closed 2014 with 1,168 employees, up 92 percent from a year earlier, and now its numbers are past 1,200.

Now the company hopes to become a bigger player on the global stage of the free-to-play mobile gaming business.

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Goodgame is a privately held company started by two brothers (and Fabian Ritter) who both had doctorates but got bored with their respective professions. Chief executive Kai Wawrzinek has a PhD. in law, while his brother Christian, chief operating officer, has a doctorate in orthodontics. In 2009, they both decided that gaming was more fun, much like the medical doctors Ray Muzyka and Greg Zeschuk, who founded game studio BioWare in 1995 (BioWare is now part of EA, and the doctors have retired). As it seemed like gaming needed some new doctors, they formed their own company to build free-to-play titles like online poker. They started with €500,000 in seed money.

“We are a German game company, but we’re really competing with everyone across the globe,” said Kai Wawrzinek, in an exclusive interview with GamesBeat. “We aren’t just competing with Kabam and Supercell. We’re also competing with Activision and Ubisoft. We want to be one of the top gaming companies by the end of the decade.”

The revenues from 2014 were up 97 percent from €102.6 million, or $116.51 million in 2013. Earnings before interest, taxes, depreciation, and amortization (EBITDA) were €34.8 million, or $37.9 million, in 2014, compared to €13.4 million, or $14.6 million, in 2013.

The growth is happening fast enough for Goodgame Studios, which operates under the legal name Altigi GmbH, to anticipate adding 400 new employees in 2015, said Kai Wawrzinek. About a third of the employees are women, a higher ratio for women than most other game companies.

Goodgame is focused on launching new products and international expansion in 2015. But it has already some big successes like the mobile game Empire: Four Kingdoms, which is the world’s highest-grossing app by a German company. During the past year, the number of registered players across Goodgame’s 11 games in the market rose from 170 million in 2013 to 245 million in 2014.

“The fact that our revenue and earnings are developing so positively demonstrate that our business model enables sustainable growth. In the development and marketing of our games, we pursue a data-based approach which allows for constant optimization and scalable operational processes,” said Kai Wawrzinek​

Christian Wawrzinek, chief operating officer of Goodgame, said in an interview that the company’s emphasis on hiring the best talent is the key to its success. Only about 2 percent of the people who apply for jobs get hired. That’s a tougher application process than Harvard’s.

The company has set up in-house production studios that focus on different genres. The in-house production will help the company develop new titles more quickly and efficiently, and it will also enable it to make more sophisticated core gaming projects for various platforms, Christian Wawrzinek said.

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“As per our strategic and long term goals, we want to offer the most comprehensive product portfolio to our users which will cater to a wide variety of gamer preferences across the globe,” Christian Wawrzinek said. “At the same time, we’re going to remain true to our disruptive free-to-play principle and continue to perfect it. We believe that free-to-play games have by far the largest market potential in the rapidly changing gaming industry.”

Goodgame has expanded into Asia with smaller game studios in Tokyo and Seoul. This year, Goodgame Studios plans to further hire people to expand its presence in Asia. Goodgame tried to succeed in China with online games, but the market proved too difficult. Goodgame partnered in China with Qihoo 360.

“By nature, these markets are very different and it is hard to understand them,” Kai Wawrzinek said. “You have to move closer to them.”

Among its hot games are Goodgame Empire and Empire: Four Kingdoms. The latter has 40 million registered users.

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Kai Wawrzinek and his brother have been developing and acquiring websites since 2002. In 2003 he founded his first merger and acquisition enterprise for websites.

In starting the company, Kai and Christian met for beers once a week, usually to discuss crazy ideas. Kai did the programming on the first games, while Christian did the art. They assembled a team of 10 people, and they launched their first online poker game at the end of 2009.

“We took some risks, but not too many,” Kai Wawrzinek said. “We tried to stay cash flow even.”

In 2010, they bought a small company with eight employees to get access to more talent. In 2011, they raised a round of funding. By 2012, they had €30 million in revenues and €100 million by 2013. Last year, about 46 percent of revenue came from mobile games, and that is the major focus going forward.

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Now its rivals include the makers of mega-hits like Supercell, creator of Clash of Clans; King, creator of Candy Crush Saga; and Machine Zone, creator of Game of War: Fire Age. Along the way, Goodgame grew strong in Germany, central Europe, and the U.S.

“Our philosophy is different,” Kai Wawrzinek said. “You can’t depend on one hit. You have to spread your resources. We believe that, in the long run, it will even out. I believe it will be impossible to make 20 times as much revenue as your competitor.”

The 1,200 employees are now divided into numerous game studios. Teams operate with about 10 to 15 people. Some are focused on casual titles, but others are using the Unreal Engine 4 game engine to build high-end titles for mobile. Goodgame is spreading out across a variety of game genres. Kristian Wawrzinek said that it’s important not to stretch the teams too thin and take on too many projects. He wants to build something for the long-term.

“We like to see what is working and what is not,” said Christian Wawrzinek said. “The free-to-play economy looks easy from the outset. But it’s very complex, like the real-world economy. We think most people underestimate the complexity.”

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