This year Wargaming turned 25 years old. In 2022, WG experienced a large-scale crisis, abandoning both a huge audience and a significant share of its assets in Russia and Belarus. Then in one day the company lost more money than they earned in the entire previous year!
What did you do before Wargaming? Where did you work? These were gaming companies, did you come from a completely different industry?
— For about half of my career, before Wargaming, I was a management consultant. I was a partner at KPMG and Deloitte. He was involved in the creation of a new bank in the UK for the Scottish Widows and Life Insurance Company, and did a lot in trading in the markets. For example, I did the conceptual design of the trading system of the London Stock Exchange. He was involved in process integration and reengineering and devoted a lot of time to corporate strategies. This is about half of my life.
I spent the second half of my life in the financial services industry. He was the Chief Financial Officer of Deutsche Bank for the Asia-Pacific region and then the UK. I was also the Global COO of Barclays, their wealth management department and also oversaw the implementation of many technologies. In total, about half are in management consulting and another half in financial services in senior positions in different parts of the world.
So you are a super experienced person in finance?
– Hope so!
The main topic of our interview is the company’s exit from Russia and Belarus. First, I wonder if the company considered exiting these territories before February 24, 2022? Perhaps such a scenario was developed before the full-scale invasion; were there any estimates of how much it would cost the company?
“Before the invasion, we saw ourselves as a globally integrated company covering many markets around the world. After the invasion, we decided very quickly that we did not want to remain in these markets. But it should be understood that our enterprises were very integrated. Our technology was very embedded. Therefore, we made a decision and entered into agreements to transfer our business on March 31, 2022.
Less than five weeks after that, we started planning and working. The part was prepared earlier because it was realized that this could happen. This was partially done for the period from February 24 to March 31. We were ready to cut off all income, stop taking money from Russia or investing it there. The same with Belarus. We gave Russian assets to local authorities for next to nothing. In fact, we said that we don’t want to be here anymore, but you can take over this business. We felt this was important to protect our players. We also didn’t want our business or our games to be used for any propaganda purposes.
After March 31, money no longer arrived from Russia and Belarus. So everything happened in five weeks and we think that’s incredibly fast. Especially considering how much we had there, including the staff. Roughly speaking, when the war broke out, we had about a thousand employees in Russia, 1,800 in Belarus and about 530 more in Ukraine.
Can you share details of the process? How did it go? Did the company have any legal problems with this? What was the most difficult?
– I came toKyiv in October 2021. Part of my visit was to try to assess the risks on site. Before leaving, I agreed with Sergei Shumigora (Executive Director of Wargaming Kyiv) that we need to prepare for the worst. So we started preparing in October 2021, and in February, about ten days before the invasion, we prepared the location in Truskavets – sending forward personnel there to deploy the network and infrastructure.
We had buses parked outside the studio just a few hours after the first Russian troops crossed the border. We made sure that our premises in Kyiv are able to continue working under different conditions. Why am I stopping here? I just want to take this opportunity to applaud the incredible work that the team in Ukraine has done to protect our people.
As for the process of leaving Russia itself, for this it was necessary to contact the registrar. They do this physically with a change in ownership. We managed to do all this and close the process eight days before the Russian authorities began to prohibit foreign companies from selling their assets. At the same time, technically, the creation of a new server cluster and the migration of our players took six to nine months, because we wanted to make sure that our players outside of Russia and Belarus would be able to play.
We didn’t want to harm our players or audience, so we entered into a free business separation agreement. In general, most companies take much longer than it took us to spin off these businesses. But as you saw, many companies were not even able to exit. So within five weeks we closed all the legal processes, and then the rest was just technology and process fixes.
Many people in Ukraine do not believe that Wargaming received nothing for its assets.
“We didn’t get anything, nothing.” Did this upset us? Yes. Was it right? You’ve seen companies like beer makers stay there much longer and then finally sell out for the pound. Okay, for a dollar! We are not interested in making money from this exit and did so without hesitation.
How painful was this for the company financially?
– You know, I used to look like I was 21 years old!
We immediately found ourselves in a loss, since our profit for the previous year was approximately $200 million. In one day, we lost more money than we earned in the entire previous year. And after that we had to start quickly separating infrastructure and technology. We had an additional cost-cutting program that impacted the entire world, but we did everything we could to protect our colleagues in Ukraine. That is why, for example, they did not carry out layoffs in Ukraine. No one was fired. Although the situation hit the rest of the world hard. We had to get rid of the studio in Australia, which we didn’t want to do at all.
We also wanted to maintain the frequency of content updates so that players would not even notice all the problems. So, that’s a third of our monthly audience, a third of our revenue. I kept in touch with Sergei Shumigora every day, sometimes more than once a day. We had to make sure that our people were safe, that everything was working for us. At the same time, problems arose when people’s cards stopped working because the account was in the wrong bank, we made contributions to charitable organizations, and purchased equipment. A lot was happening at once.
All of this took a lot of personal toll. We understand that both in Ukraine and in other countries of the world this has affected our colleagues. Again, I want to say that we deeply appreciate everything our colleagues have done to help. We deeply appreciate the loyalty of our players during those times, because it was difficult. It was very, very difficult.
Did you have any agreements with the Lesta studio, to which the assets were transferred? How did you communicate with them?
— We knew our colleagues in Russia well and they had an incentive to try to create a fledgling business. We have developed a detailed roadmap with them to separate players and separate technologies. What they did is their responsibility. What we did was ours. In the weeks and months following the decision to exit, we came to a point where we could give our players a choice called Teleport. They came in and could make a choice where they wanted to play.
We have imposed serious restrictions. Lesta cannot own or operate the game outside of Russia and Belarus. And none of their players can use payment systems there. We’ve stopped working and they can’t actually pay in our games in the European region. Players who are outside of these countries came with us. Again, no royalties or anything else is paid.
Was it difficult to balance the loss of such an audience and such a part of the assets? Can you tell us exactly how the company overcame these challenges?
— Our team includes people with extensive experience (for example, me and my deputy), who have worked with large global companies, carrying out very large-scale transformation programs. We were lucky during COVID, for example, with the experience that I already had in Asia in sales. We were ready.
So, when it came to implementation, we had a certain level of pre-planning, good experience in executing large complex programs, and the ongoing support of colleagues in Ukraine (which was critical to delivering content). So, we are talking about organizing a very complex set of operations. This is on the one hand. On the other hand, all this had to be done by means of releasing people in other parts of the world. Close or sell the studios, like we did with the Sydney cell.
So, it was all a lot of hard work. Plus the good will of our people. Even though they weren’t sure if they would stay after this. Overall, we pulled it off thanks to good planning and flawless execution. But again, this is not the experience that many companies have. But we were lucky.
What other things were there that you had to give up? For example, did this affect the agreement between Riot Games and Wargaming?
“One of the tasks was to look at our product portfolio: what we already had, what we didn’t have time to finish, and what we could afford over the next one to three years. We checked how close certain products were to the market. In the case of some, we closed them completely. For example, many jobs were lost in the USA, we had to reduce cooperation with third parties in Ukraine. But one of the main guiding principles was no layoffs, no job losses in Kyiv.
Regarding Riot. We had about 150 people in Australia doing a lot of the important work. In particular, they supported the game we were developing in the UK, as well as our Big world platform and engine. We explained the situation to local management inAustralia, went through the proper processes for them and helped them find the best partner. And we worked on this transition with them and Riot Games. In the end, most of the people stayed there and Riot got a cool studio with outstanding engineering capabilities that we didn’t want to lose. But on the other hand, there are times when difficult decisions have to be made. We made these difficult decisions.
In general, if you look at the latest news, it looks like Wargaming has coped with this crisis. Let’s talk about the solutions that allowed you to “swim out” of the crisis.
“One of the key things that has been present throughout our history is to listen to the community, adapt our games, localize them around the world, translate them into as many languages as possible. For example, we continue to expand Twitch and YouTube channels, which are local languages, including in Ukrainian.
We feel there is a big commitment to our players now and we want them to be happy. So we had a determined group of people who said: don’t let our operations stop, don’t stop us from making content and collaborating; let’s give the players what they want. At the heart of this is our business. For 25 years, the players have been the most important people for us. So when we looked at reformatting operations, we wanted to give them a choice of where they played. As I said, we didn’t want to turn them off. However, the good thing is that we were able to continue innovating to introduce new gaming events. And that within this approach the future looks beautiful.
As a CFO, I can say that we prioritize players over profits. In my opinion, there should be no doubt about this. What matters in the long term is the loyalty of players who know they are being listened to. This is what keeps them going. Obviously, games are supposed to be fun. You have to want to play it a thousand times.
Our track record, our history shows that, and I believe that creates tremendous player loyalty, even when we make mistakes. Again, it’s about being one with the community. Why is it important? When you get into a crisis, everyone already knows that the most important thing is to continue the show, to release content for the players.
Finally, I would like to know what are the company’s development plans for the future? Are you planning to open new offices? Maybe there are plans to further develop studios inSerbia and Poland? What are the global goals for Wargaming now? How would you formulate the company’s mission today?
“I was a little late for the interview precisely because I was communicating with our executive team and helping to formulate the future strategy. This is what is happening now. We went through the period from February 2022 to August 2022, which I called the stabilization phase. We have stabilized the business. In August, we managed to overcome losses, so that although we were not very profitable, we covered our expenses. Only then did they begin to work on a development plan.
“Slow vehicular combat” (slow vehicular combat, literally, approx. WOT Express) is what we really know how to do, what our players love us for. Over the years, we have conducted all sorts of experiments, making first-person shooters, some casual games, etc. But this is not our DNA! What we want to give our players is slow vehicular combat. Therefore, we are focusing on our existing portfolio, a lot of investments are going into World of Tanks PC, WoT Blitz, WoT: Modern Armor on PlayStaion and Xbox. We plan to improve the core technology, improve the content update speed, improve the maps, improve everything about the games that we have. We have also combined our games into franchises. There is a World of Tanks franchise, structurally organized, with three pillars: WoT Blitz, Modern Armor (console), PC.
The second part is to look for additional options around slow vehicular combat. This includes expanding the types of tanks and the settings of the future. These are the things we started working on. But given what we’re really good at, I would expect big updates to existing products over the next two years and new games to come out over the next two to three years.