By Gary Symons
TLL Editor in Chief
Many brands face difficult decisions over the war in Ukraine, but few have made more difficult decisions than video game developer Wargaming.
The producer of popular franchises World of Tanks and World of Warships, among others, Wargaming has fired one of its founders, moved its company headquarters out of Belarus, and has terminated its business in both Belarus and Russia.
“Over the past weeks, Wargaming has been conducting a strategic review of business operations worldwide,” the company said in a statement. “The company has decided it will not own or operate any businesses in Russia and Belarus and will leave both countries.
“Effective March 31 the company transferred its live games business in Russia and Belarus to local management of Lesta Studio that is no longer affiliated with Wargaming,” the company explained. “The company will not profit from this process either today or going forward. Much to the contrary we expect to suffer substantial losses as a direct result of this decision.”
Lesta Studio was acquired by Wargaming to handle its Russian gaming business, but as part of this severance of ties with Russia, Wargaming has cut Lesta Studio loose, while allowing it to continue managing Wargaming’s various games in Belarus and Russia. What is startling about that decision is that Wargaming also has not been compensated for the release of Lesta Studio, and nor will it receive any licensing revenue from games that Lesta manages in future.
Dumping the Russian market might not be a big deal for most video game developers, but for Wargaming, it’s an almost existential threat. World of Tanks in particular is hugely popular in Russia, which has by far the largest player base for the game in the world.
The popular World of Tanks commentator Will Frampton (better known as Quickybaby) pointed out that the Russian market actually has more active users than all of the games world markets combined. Frampton, who has 658,000 followers on YouTube and 450,000 followers on Twitch, calculated that 73% of the World of Tanks user base is in Russia, totalling 2.3 million players.
“Considering that after 10 years World of Tanks is still so popular and such a big breadwinner for Wargaming there would be some concern with the company or its shareholders about its decision to have to pull out of Russia and Belarus,” said Frampton. ” When we read things from Wargaming that they are transferring their live games business in Russia and Belarus to Lesta Studio instead, and that they clarified the company will not profit from this process either today or going forward, alarm bells must be ringing for shareholders considering how much of their breadwinning World of Tanks revenue has effectively been given to Lester Studio.”
Wargaming is not the only gaming company to pull out of the region, which is a hub for gaming development, but Wargaming is by far the largest local company to leave the region based on the Russian invasion of Ukraine. Wargaming was originally a Belarusian company, and until last month had hundreds of employees in its Minsk headquarters. Many of those workers are among its most experienced and skilled designers.
But it appears that both business and humanitarian goals forced Wargaming to confront the invasion head on. Wargaming also owns a large studio in the Ukrainian capital of Kyiv with more than 500 employees, and there are deep friendships within the company that made the invasion unacceptable.
In February, Wargaming fired its founder and creative director Sergey Burkatovskiy after he made a statement on Facebook supporting the Russian invasion, touching off a firestorm among both players and the global player base. Wargaming told PC Gamer that Burkatoskiy’s stance “categorically does not reflect the position of the company.”
Wargaming also paused all of its advertising shortly after the invasion, citing the sensitivity of the global situation, and on March 12 it removed two battlefield maps from World of Tanks. One is a battle map based on the city of Kharkiv, which has been devastated by the Russian attack, and the other is a map based on Wargaming’s former headquarters in Minsk.
Wargaming also donated $1 million to the Ukrainian Red Cross, and said in a statement that “all available company resources are helping and supporting our 550+ colleagues [in Ukraine]: providing them with alternate housing, early salary payments, additional funds to aid travel and relocation. We are helping our employees’ families to travel to neighbouring countries and organizing accommodation for them.”
The situation for Wargaming’s management is clearly very personal, but the company has, as it’s said, completed a strategic review that also points to a difficult decision on the basis of its future business.
While Russia has the largest player base for the signature game World of Tanks, Wargaming has a thriving business globally that also depends on licensing. Over the Christmas holidays, as one example, World of Tanks launched a licensed promotion with Hollywood star Arnold Schwarzenegger, who is also an outspoken critic of the Russian invasion. Future licensing deals with Western companies would be very difficult for a company based in Belarus and Russia.
It is also true that, while Russia has the largest player base, the revenue per player is much lower than Wargaming receives from its fans in North America, Europe and even Asia.
Nevertheless, Wargaming’s decision to cut all ties and to forego revenue from Russia is a move that appears to be primarily based on a ethical, rather than a business, decision. The company certainly could have demanded licensing fees from Lesta, but instead has opted to turn a cold shoulder to the country where most of its fanbase lives.
That decision will come at a huge cost to Wargaming, but as with many other companies choosing to terminate their Russian ties, the cost in revenue is seen as less important than the humanitarian disaster unfolding in Ukraine.