Alawar Entertainment was founded in 1997 by a group of Novosibirsk State University's students. Initially game development was a hobby, eventually the hobby became a steady job. Over the years Alawar's product line has expanded to include shareware games, PDA games for PocketPC and PalmOS and set top box games.

Russia's economic crisis in 1998 caused a great drop in prices on CD games. The prices of CD ROMs dropped to about $ 3-4.00 each, developers receiving only 10 cents for each copy sold

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