Wargaming: The Biggest Game Publisher You've Never Heard Of

"World of Tanks" game
Source: Wargaming.net
"World of Tanks" game

Ask a gamer—or an investor—in the U.S. to name the largest video game publishers and you'll probably get a list of the usual suspects.

Certainly, companies such as Activision (ATVI), Electronic Arts (EA), Take-Two Interactive Software (TTWO) and Ubisoft (UBSFF) are worthy of mention, but odds are the name Wargaming.net isn't on anyone's list.

That's understandable. Based in Belarus, this maker of free-to-play strategy games isn't as flashy as some of its contemporaries, but dig a little deeper and it quickly becomes apparent how powerful the company is quickly becoming.

Wargaming's flagship title, "World of Tanks," generates an average $7.50 a month per U.S. player on microtransactions. Worldwide, the game has nearly 60 million registered users in 200 countries making an average of 3.5 million item purchases daily.

Founded 15 years ago, the company has grown to 15 offices around the world (including two in the U.S.). It has a headcount of nearly 1,600 employees, having added roughly 200 in the past three months. And it doesn't plan to slow its expansion anytime soon.

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Much of Wargaming's growth is coming from Russia. Europe and Asia are growing quickly as well. North America has been a bit slower, says North American General Manager Jeremy Monroe, but the company expects things to pick up soon.

"We've got some good traction, some good momentum," Monroe said. "As you look at what's happening at the company, we see we need to put a lot more attention and resources into America."

Step one of its plan was buying Gas Powered Games earlier this year. Headed by famed developer Chris Taylor, the studio is well known for its strategy titles—though it hasn't worked in the free-to-play area before.

Step two is platform growth. Wargaming announced plans Monday to launch "World of Tanks" on the Xbox 360.

"We have to be reasonable and balanced," CEO Victor Kislyi said. "Yes, we are on the PC and, yes, we are online, but for most of America, England and [the rest of Europe], obviously the main way to play games is with that [console] controller in your hands. ... The installed base of the [current] generation of consoles is huge. It sits in your living room next to the TV and you have the habit of switching it on."

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Wargaming has been one of the biggest proponents of free-to-play games outside of Asia for some time. Earlier this year, Kislyi evangelized its potential at an industry summit in Las Vegas, saying other publishers needed to embrace the business model, as the industry has changed.

"At the end of the day, there will be leaders who will think strategically, who will change the direction in free to play," he said. "You have to invest. You have to risk. You have to be strong. There are pretty much only two options. You're either following the crowd, copycatting successful formulas again or you want to become one of the leaders."

Competition is coming in the space, of course. Electronic Arts has been increasingly exploring free-to-play games in the past year. Sony Online Entertainment (SNE) has converted to an entirely free-to-play model and plans to introduce its next-generation "EverQuest" as a free title within the coming year.

That could put pressure on Wargaming, which is part of the reason the company is expanding so rapidly. By establishing offices in different countries, it can localize "World of Tanks" as well as its other titles to fit the particular gamer culture.

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"Russian players want storybook campaigns, with accurate tanks and simulations," Kislyi said as an example. "Americans have their own pace. They want a tutorial and need more instant rewards—everything on the battlefield needs to be rewarded right away."

Wargaming doesn't aim to veer far from its military roots with future titles. "World of Warplanes" is in open beta right now. And "World of Warships" is in development, with a launch slated for next year.

While its game catalog is small, its sales are sizable. In 2012, the publisher took in 217.9 million euros, generating a net profit of 6.1 million euros. The company is listed on the Cyprus exchange but doesn't sell shares publicly. And don't expect an IPO in the U.S. in the near term.

"Right now, we're very self-sustainable with very healthy revenue," Kislyi saud. "There's no investment bank or hedge fund telling us what to do. And I really value that. We are in a sweet, sweet position where we have only one boss: 60 million players around the world. We don't have quarterly reports. We don't have any of those burdens. We have the luxury of concentrating only on what our players want."