Why? The Answer is in NCsoft's August 8th Earnings Report
By
Adelie,
Posted on: 2012-09-01 05:17 in CoH and CoV General Discussions
The good side of this line of thought is, if it was about money, then it is more likely that Cryptic may be able to acquire the game back... IF they see any interest in doing so.
They are the most likely ones to do so since they would not face any issues with the license of the engine, since... its already theirs.
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Yes, but considering they are working on Champions Online (because I can say their name on the boards now), it probably isn't going to work out since having a studio work on two games in the same genre probably isn't a good idea.
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Originally Posted by Starsman
The good side of this line of thought is, if it was about money, then it is more likely that Cryptic may be able to acquire the game back... IF they see any interest in doing so.
They are the most likely ones to do so since they would not face any issues with the license of the engine, since... its already theirs. |
@Winter. Because I'm Winter. Period.
I am a blaster first, and an alt-oholic second.
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Doesn't make it a smart business move, cutting off a profitable limb is still cutting off a profitable limb, and while that margin was thin it was stable as the freedom launch showed city of heroes has had its base for years like *every* long term MMO outside of WOW has.|
Originally Posted by SpaceNut
A lot of people are going "they shut down a successful game!" etc etc, but money speaks the truth. This news has been all over my facebook, and it's amazing now many people are commenting "I don't play anymore, but this still hurts".
Well, yeah, the fact that you don't play any more is why this is happening. |
This reeks of some desk monkey who got their job by blowing the right person panicking when they saw a bad quarter and making a terrible business decision for short term gains. If I were an NCsoft investor I would pull every cent I had from the company because the management of the company has no real idea what they are doing apparently.
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Maybe we can sprinkle some Miracle Grow on their conscience. That'll make them buy it.
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Originally Posted by Winterminal
Yes, but considering they are working on Champions Online (because I can say their name on the boards now), it probably isn't going to work out since having a studio work on two games in the same genre probably isn't a good idea.
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Does "least profitable" equate with "not profitable"? To me, even if its making $100 a month, that's still a hundred bucks you didn't have before.
The Alt Alphabet ~ OPC: Other People's Characters ~ Terrific Screenshots of Cool ~ Superhero Fiction
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Again, they were faced with a Sophie's Choice moment: which of your MMO children are you going to give up just so the rest (along with your parent company) can survive? Looking at the numbers it doesn't make sense to give up the better performing titles. CoH was tied with GW1 as the rock-bottom performer and the success of GW2 has pretty much guaranteed the survival rate of GW1 (for now anyway). |
Originally Posted by ryu_planeswalker
Doesn't make it a smart business move, cutting off a profitable limb is still cutting off a profitable limb, and while that margin was thin it was stable as the freedom launch showed city of heroes has had its base for years like *every* long term MMO outside of WOW has.
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Meanwhile NCsoft is operating in the red; that's a frightening prospect for investors so they had to do *something* to get their bottom line back in the black or risk losing investors, a company buyout and/or going out of business permanently if the negative profit margins continued. I wish they'd waited one more quarter before acting this hastily as GW2 sales would've saved the day but they didn't - mostly likely because they couldn't afford to...
I don't envy the decision they had to make - nor do I like it - but it is what it is.
My game time card ran out and I was going to resub. I guess it's not going to happen now. Bye all. It was a great ride.
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There are ways and means of doing the same thing. The one they've chosen is the wrong one.
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Originally Posted by Rubberlad
I don't envy the decision they had to make - nor do I like it - but it is what it is.
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@FloatingFatMan
Do not go gentle into that good night.
Rage, rage against the dying of the light.
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$100 you didn't have before? Sure, but what does that mean when you're $100,000 in debt...? Sadly, not a whole lot (unless you declare bankruptcy and start over).
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Originally Posted by Ironik
Does "least profitable" equate with "not profitable"? To me, even if its making $100 a month, that's still a hundred bucks you didn't have before.
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I agree.|
Originally Posted by FloatingFatMan
There are ways and means of doing the same thing. The one they've chosen is the wrong one.
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I think GW2 sales would've lifted them back into the black and given them and Paragon Studios time to re-assess their needs and develop a stronger business plan. In their defense, it would've been corporate suicide to risk waiting another quarter and finding even worse negative numbers than before. Me personally, I don't think they had to go down this road but its the one NCsoft chose to take and it *will* affect their reputation in the industry and long-term bottom line for years to come.
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Was it CoH2?
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Originally Posted by Rubberlad
Bottom line: NCsoft couldn't afford to take the risk on another MMO game that was still a year or two under development (especially when they were operating in the red). Especially if marketplace analysts are worried that the genre as a whole is dying.
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I'm sorry, but the premise is incorrect.
It's true that NCSoft was losing money at an unprecedented rate, but CoH and Paragon didn't get axed because they were the smallest. Nor (as has been speculated elsewhere), did they get axed for the tax write-off. Nor did they get axed to appease angry shareholders.
None of those make sense even at a Business 101 level.
(It is possible that the management of NCSoft went bat**** crazy. But very unlikely.)
The only ways this move makes sense are:
1) Paragon was losing significant amounts of money.
2) Some upcoming event was going to make it impossible to continue for Paragon (e.g., the speculated license renewal issue.)
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Who knows? Unless the Devs tell us what it was (which they may do a year or two down the road once any potential NDA that may have been tied to their severance packages has expired) we may never ever know.
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Originally Posted by Mad_Cow_Milk
Was it CoH2?
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My two cents, choice to axe Paragon Studios and City of Heroes had nothing to do with either ones performance, success, or sales numbers.
1) A sudden labor cost spike of 27% for severance packages. An OpEx hit that hard would kill even a Fortune 500 company sitting on a horde of cash in most business sectors. It is rather astounding that the doors of NCSoft are even still open. If I was a stock analyst, their's would be on death watch just for that. (Remember, this isn't an issue of wealth, it is cash flow, the unseen killer in business.)
2) Aion and Soul & Blade.... Both were multi-year development efforts. Both were specifically geared to the Asian market space, and cyber cafes. Both started to see sales slips within three months of launch, followed by exodus. Neither one despite there initial and current sales numbers I would guess is anywhere near paying back initial CapEx. (Edit: Note, I am assuming this based on them applying Net Present Value with a fairly aggressive coupon to the IPs initial development cost.)
3) Paranoia over world economy slowdown. Quite literally could have been a 'Lose it, or lose it' scenario with NCSoft's analyst team. Either shutdown Paragon and CoH now and try to recoup something, while they have means to do so. Or have a complete loss as it was liquidated along with the rest of the company as it continues to be hammered. When the world wide economy is in depression (no not recession, it is a depression) everything looks like a 'sky is falling' scenario, where all your choices are matter of attrition not value. Not saying it is good, or right, just how humans are. Great businesses don't lose their nerve at these times and get through on value. Everyone else? They do the theoretical nonsense many MBAs learn at university, or follow the executive who got an idea while reading 'Some guy's blog', and some slip by on luck, most go the way of the Dodo.
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Pretty much all we know is it wasn't CoH 2. It was a totally new IP, so it was unrelated to any other games as well.
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Originally Posted by Mad_Cow_Milk
Was it CoH2?
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Originally Posted by ShadowNate
;_; ?!?! What the heck is wrong with you, my god, I have never been so confused in my life!
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Heh, you've never been through the corporate acquisitions/liquidation process or participated in board meetings where the top brass discuss options to improve the company's bottom line have you? If you have, then let me come work for your company because all the ones I've worked with in the past have all gone down the same road NCsoft has taken for a variety of reasons but always working towards the same result. |
Originally Posted by Brillig
I'm sorry, but the premise is incorrect.
It's true that NCSoft was losing money at an unprecedented rate, but CoH and Paragon didn't get axed because they were the smallest. Nor (as has been speculated elsewhere), did they get axed for the tax write-off. Nor did they get axed to appease angry shareholders. None of those make sense even at a Business 101 level. |
"This company needs to make money and remain profitable."
If that means lightening the load in the proverbial boat just to keep the company's bottom line from sinking any further, then so be it.
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Hmm... but isn't CoH performing better than CO? Perhaps they'd be tempted by owning a better performing game? |
Originally Posted by Winterminal
Yes, but considering they are working on Champions Online (because I can say their name on the boards now), it probably isn't going to work out since having a studio work on two games in the same genre probably isn't a good idea.
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*wishful thinking*
@Rylas
Kill 'em all. Let XP sort 'em out.
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You'd be surprised...|
Originally Posted by Rubberlad
Heh, you've never been through the corporate acquisitions/liquidation process or participated in board meetings where the top brass discuss options to improve the company's bottom line have you? If you have, then let me come work for your company because the ones I've worked for in the past have all gone down the same road NCsoft has taken for a variety of reasons but always working towards the same result.
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Originally Posted by Rubberlad
"This company needs to make money and remain profitable."
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What happens next is that they look to cut things that are losing money. If, as we believe, CoH wasn't losing money, then they wouldn't have cut it.
Now cutting the new project that Paragon was working on - that would have made sense. But why kill CoH? As long as it was breaking even or turning a small profit, there's no way the balance sheet looks better after doing that.
The only (far-out) scenario which would make sense is if there were something written down that said Paragon was going to continue to work on the new MMO as long as Paragon existed. Then CoH would be collateral to killing the new MMO project. But I find that pretty implausible.
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It's not that CoH was losing money, it's that it wasn't making *AS MUCH or MORE money* as some of the other aged IPs in NCsoft's portfolio. Again, the Earnings Report calls Aion's sales "weak" for xyz reason and that game was outperforming City of Heroes by quite a wide margin. |
Originally Posted by Brillig
You'd be surprised...
You're fine right up til that point. What happens next is that they look to cut things that are losing money. If, as we believe, CoH wasn't losing money, then they wouldn't have cut it. |
I'm sure NCsoft was losing money due to a culmination of operating mistakes across its entire portfolio. Rather than take the time to investigate and tighten up each IP's operating costs however, it looks like they took the easy way out. I'm not saying or condoning their response as a smart business decision but I will say they definitely took the quick and easy way out by dropping City of Heroes off the balance sheet.
Again, not the choice I would have made - especially in light of GW's strong "1 million preordered units" sales which would've easily buoyed NCsoft (and CoH) through hard times. They also could have (and should have) kept CoH on board and made strategic improvements across *all* their IPs. City of Heroes is still very much profitable and it could have been even more profitable had they taken a different approach. Alas, they didn't (much to our community's mutual chagrin) and now the end is nigh.
Me personally, I say blame NCsoft's corporate leadership for their short-sighted and panicky behavior. Ultimately, they're the ones that really need to go.
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Basically, you're alleging that they couldn't take five minutes to look at a spreadsheet before making a decision.|
Originally Posted by Rubberlad
It's not that CoH was losing money, it's that it wasn't making *AS MUCH or MORE money* as some of the other aged IPs in NCsoft's portfolio. Again, the Earnings Report calls Aion's sales "weak" for xyz reason and that game was outperforming City of Heroes by a longshot.
I'm sure the company was losing money due to a culmination of mistakes across its entire portfolio. Rather than take the time to investigate and tighten up each IP's operating costs, they took the easy way out. I'm not saying or condoning their response as a smart business decision but I will say they definitely took the quick and easy way out by dropping City of Heroes. Again, not the choice I would have made - especially in light of GW's strong sales. They easily could have (and should have) kept CoH on board and made strategic improvements across *all* their IPs. It's much to our chagrin however that they didn't. Blame NCsoft's corporate leadership for panicking. |
That's off the charts ludicrous.
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I'm not suggesting any such thing. Whether it took them five minutes to decide a course of action or weeks of deliberation is irrelevant. The fact is they made the decision to cut City of Heroes loose and I personally vehemently disagree with their decision. It was the wrong course of action but right or wrong, I'm sure they felt hard-pressed to act quickly -- or else.|
Originally Posted by Brillig
Basically, you're alleging that they couldn't take five minutes to look at a spreadsheet before making a decision.
That's off the charts ludicrous. |
Even CEO's and other members of executive leadership make mistakes (they're human after all and can be as fallible as anyone else in their thinking). I can sight any number of former executives in the US alone who've been unexpectedly shown the exit door with a golden parachute because they made some very ill-considered choices which ultimately damaged the brand and the company. If, in the coming year, we see a shake-up in NCsoft's leadership, then we'll both know what happened (and why it needed to happen).
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I'd say it is crazy to, on some fundamental levels. But at the same time, executives tend to make 'musical chairs' choices. There is no real rhyme or reason to it, they think the music is about to stop they go and get in a position to grab a chair. If that means axing liabilities, then so be it, regardless of what the technical analysis is telling them. Also I am sure they are assuming they never know the 'true' financial state of the company or it's holdings at a given point until months later, but they have choices now. So they are quite literally playing hunches.
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Originally Posted by Brillig
Basically, you're alleging that they couldn't take five minutes to look at a spreadsheet before making a decision.
That's off the charts ludicrous. |
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Considering that since the launch of Aion, it has raked in *around* $700million since launch... i would say that it has quite safely paid back its investment. Blade & Soul, no idea... its figures are not on the Quarterly reports yet... wait for Q3 of NCsoft financials for those ones.
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Originally Posted by Dethos_Zahrim
2) Aion and Soul & Blade.... Both were multi-year development efforts. Both were specifically geared to the Asian market space, and cyber cafes. Both started to see sales slips within three months of launch, followed by exodus. Neither one despite there initial and current sales numbers I would guess is anywhere near paying back initial CapEx.
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The weirdest part is the instant action. I've unfortunately been in organizations that had cash flow, profitability, and profit problems. The word comes down, need to do better. Things change. People start leaving for a variety of reasons (some laid off, some smelling the wind and looking elsewhere). Deliveries ship. Interaction with the public slows down. When the hammer falls, there's despair, sadness, anger - but usually not that much surprise.|
Originally Posted by Rubberlad
It's not that CoH was losing money, it's that it wasn't making *AS MUCH or MORE money* as some of the other aged IPs in NCsoft's portfolio. Again, the Earnings Report calls Aion's sales "weak" for xyz reason and that game was outperforming City of Heroes by quite a wide margin.
I'm sure NCsoft was losing money due to a culmination of operating mistakes across its entire portfolio. Rather than take the time to investigate and tighten up each IP's operating costs however, it looks like they took the easy way out. I'm not saying or condoning their response as a smart business decision but I will say they definitely took the quick and easy way out by dropping City of Heroes off the balance sheet. Again, not the choice I would have made - especially in light of GW's strong "1 million preordered units" sales which would've easily buoyed NCsoft (and CoH) through hard times. They also could have (and should have) kept CoH on board and made strategic improvements across *all* their IPs. City of Heroes is still very much profitable and it could have been even more profitable had they taken a different approach. Alas, they didn't (much to our community's mutual chagrin) and now the end is nigh. Me personally, I say blame NCsoft's corporate leadership for their short-sighted and panicky behavior. Ultimately, they're the ones that really need to go. |
This doesn't have any of that. From what those inside PS have said, this came as a shock.
So the word "panicky" rings true for me, and I suspect that the panic in part came external. A large somebody outside (Nexon is a good candidate) says "Those numbers aren't acceptable, take decisive action now or else". And looking at the numbers, closing CoH would qualify as decisive action while having the least impact on the future (NCSoft still expects great things from Aion which may be incorrect and great things from GW2 which probably is correct).
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I've been seeing more software development, certification, and support moving to the software sweat shops in other countries. I wonder if any of the other NCsoft games are developed elsewhere.