How Cyprus-based Mundfish built one of the best video games of 2023

In 2023, Paphos-based video games studio Mundfish released its much-anticipated title Atomic Heart, taking the gaming world by storm – within just three weeks, more than five million people had played it. Evgenia Sedova, the studio’s co-founder and CFO, discusses why it resonated with audiences, the business of gamemaking and the studio’s ambitious plans.

“It’s clear that the game was created with true passion; it’s not just a money-making project,” says Evgenia Sedova. I have met the co-founder and CFO of Mundfish, the Paphos-based game studio behind the critically acclaimed title Atomic Heart, at the Inspot gaming venue in Nicosia. Despite it being noon and supposedly a schoolday, there are several teenagers and young adults playing games on PCs. Some are shouting at their screens, on occasion using colourful language that can be excused as youthful exuberance. Sedova continues unperturbed, “We also have a great narrative, a deep story that truly complements the aesthetics of the game.”

Atomic Heart reimagines 1955, portraying a Soviet Union that emerged victorious after World War II to transform into a technologically driven utopia, where robots cater to every human need and desire. This idyllic existence is abruptly shattered when the robots turn against humans. Players immerse themselves in this compelling narrative as P3, a highly trained special forces soldier tasked with quelling the chaos and discovering the truth behind the robot uprising. At its core, the game delves into humanity’s profound anxieties about technology and the rapid unravelling of apparent tranquillity into chaos – an existential tale that is both universal and timeless. Sedova reveals that among the various inspirations for the game, the British TV show Black Mirror was particularly influential. “Also, our guys were all born in the Soviet Union, so who else could have created this world?” she muses. The game’s visuals are breathtaking: photorealistic environments, meticulously crafted monsters and psychedelic scenes converge to forge an immersive alternative reality. These elements have clearly struck a chord with audiences and critics alike. Released in February 2023, within just three weeks, over 5 million gamers had played Atomic Heart, while it was shortlisted for the 2024 BAFTA Games Awards and received other prestigious accolades.

The game’s success is all the more remarkable considering that Mundfish marks the founders’ initial foray into the gaming industry. Sedova and Robert Bagratuni were working in various roles in the Russian advertising sector before launching Mundfish in 2017, pulling their own resources, and were on the prowl for an idea. “One day, we were sitting around, drinking wine and brainstorming about these big ideas,” Sedova recalls. “And of course, we started talking about games when Artem Galeev said, ‘Well, actually, I’ve been working on something.’ He had done some concept art, basic sketches of a world he had imagined, and we found them absolutely insane!” Galeev, who had had honed his craft as an art director in major big TV productions, joined Mundish as a co-founder and Art Director; Sedova, whose background is in economics, took over the financial and legal aspects of the business while Bagratuni served as the CEO. Later, the team was bolstered by a fourth co-founder, Oleg Gorodishenin, who assumed the mantle of head producer. Nonetheless, operating as a small startup, it initially released a small project within the VR niche market before unveiling a few gameplay trailers for Atomic Heart. The trailers garnered such fervour, amassing millions of views on YouTube, that it solidified the founders’ resolve to go all out. Sedova says, “Because Atomic Heart was going to be this big global project, we started looking for a place to accommodate our ambitions.” By 2018, numerous game studios from the CIS region had chosen to establish their headquarters in Cyprus, enticed by its favourable tax environment, a streamlined regulatory system that assuages investor concerns, and a distinctive IP box regime – it offers an 80% exemption on profits from intangible assets like patents and software while taxing only 20% of IP income. “All of that made it clear that we should start the company in Cyprus,” Sedova says.

In gamemaking, so-called AAA titles are renowned for their staggering production costs and Atomic Heart belongs to this exclusive category. These games are akin to the summer blockbusters of the film industry produced by major studios. While reticent about disclosing the exact cost of creating the game, Sedova alludes to their success in maintaining control over expenses by handling much of the work internally, from narrative writing to the cut scenes – the story is being told via cut scenes, audio logs and the surrounding environment. The game’s optimisation, which includes beta-testing and debugging, was also done in-house. Sedova highlights that Atomic Heart earned recognition as one of the best-optimised games of the year, a claim substantiated by its ability to maintain visual excellence and seamless performance even on less powerful hardware. The organic push received from the gameplay trailers back in 2018 also meant the studio did not have to spend a ridiculous amount on marketing – in keeping with the games-movies parallel, marketing budgets can represent up to 50% of the production costs. Sedova also mentions that in the later stages of the game’s development, they partnered with publishers that took over the promotion and sales in their respective regions.

I can’t resist asking how much money Mundfish has raised.

Sedova wears a knowing smile. “We can’t really disclose the exact number,” she says. “Doing some mental maths, I’d say it must be more than US$10 million,” I press on. Seeing through my not-very-subtle ploy, she replies, “All I can say is that there is a certain valuation for the company, which is in the hundreds of millions.”

On the issue of development costs, Generative AI has emerged as a pivotal game changer for the industry as it promises to automate labour-intensive tasks, from creating generative game worlds to crafting compelling storylines, NPC behaviours and dialogue. Sedova mentions that, as a technologically driven company, Mundfish keeps its finger on the pulse and is waiting to see how the discussions will unfold and which direction the technology will take. “It’s clear that it can potentially save a lot of time for artists, especially in the pre-production phase, but we don’t believe that it will completely replace them,” she stresses. Considering the training methods of Generative AI models, critics have voiced concern about its potential impact on artists’ earnings. Sedova draws a firm line: every asset in their game has either been created in-house or purchased. “How Generative AI models will teach themselves, based on which art,” she goes on “is an important conversation. But as a general stance, we truly believe that if the artist draws something, he needs to be compensated fairly.”

Next to us, a pair of friends settle into a TV nook, the sounds of a prominent football game reaching us. Having previously glanced around, I noticed a solitary female player nearby, also a teenager, prompting me to ask Sedova how it feels to navigate what is often considered a male-dominated industry She’s quick to correct me: a wave of women has flooded the industry and Mundfish employs several in key management positions, from communications to publishing.

A smile flickers across her face and she says, “Women are more collected and responsible; they don’t forget things.”

“So, you keep the boys in line,” I say.

“In short, yes,” she says, “but what’s special about the gaming industry is that the people who come to work are very passionate.”

In 2023, the industry faced a wave of layoffs, instigated by both industry giants like Ubisoft and smaller mobile game studios, largely attributed to irresponsible hiring practices during the pandemic. The layoffs were indiscriminate, leading to the dismissal of many talented individuals. Sedova notes that this has placed the entire industry under stress and despite the increased availability of talent, it would be misguided to view the layoffs through the lens of the popular adage ‘In every crisis, there’s an opportunity’. Besides, she says, the value of top talent never truly diminishes and the success Mundfish has enjoyed has changed its hiring practices from its early startup days. It now targets specific people for specific roles. Indicatively, the studio now collaborates with around 200 people across the globe, which includes employees, freelancers and contractors. Its core development and management teams are based in Paphos, which amounts to about a third of the company’s full-time employees – it also has development teams in Yerevan and Abu Dhabi.

Perhaps the most remarkable aspect of Atomic Heart lies in its original intellectual property. In recent years, movie and television studios have deftly translated game titles: The Last of Us, Arcane, Gran Turismo, Super Mario Bros., Detective Pikachu – the list is impressive and seemingly endless. Adding to this trend, one of the most successful ventures under the Harry Potter franchise wasn’t a film or series, but a game: Hogwarts Legacy generated a staggering US$1.3 billion in global sales in 2023, making it the second most lucrative title in the franchise’s history. Sedova says, “The game and the price of the game are not as important as the value of the world you create and the ability to build a unique franchise.” Mundfish has attracted considerable interest from offline businesses, including amusement parks and restaurants eager to recreate elements of the Atomic Heart world within their establishments. Capitalising on the IP, the studio has also published a prequel book to the game, currently available only in Russian. Sedova hints, however, that translations into other languages, including Greek, may soon be on the horizon.

Have they been approached by movie or TV studios?

“Of course,” Sedova replies, “but we are not ready to announce anything yet.” For now, the studio is focused on releasing DLCs – extra pieces of downloadable content – as it wants to maintain a strong connection with its large player base. “We are working on a new project; nothing has been announced yet, but perhaps you’ll hear something about new collaborations soon. Our priority is to make the story even more global, to expand the world and its narrative.”

What does that mean exactly?

The ever-cryptic Sedova shrugs her shoulders and says, “You will see!”

(Photo by TASPHO)

(This article first appeared in the 2024 edition of The Cyprus Journal of Wealth Management, commissioned by Eurobank Cyprus and published by IMH. Click here to view the article. Click here to view the entire magazine online.)