The Zombie Man Conjecture (oh, and Beta is up)

Why would NCSoft close a studio making a profit?

The usual answer has been that NCSoft lost money elsewhere in the company and this will help.

Ummm... odd. If it makes money, it makes money. Closing down a money maker doesn't help pay the bills. *Selling* off the studio makes money.

And so, my conjecture is this: Paragon Studios lost money. Not year to year, though. Year to year, it generated a surplus. But, that yearly surplus would never pay off the initial investment: Buying the IP and setting up a new studio cost big bucks. Paragon would never, at the rate it's going, make enough money to pay back the initial investment. It's like paying a million dollars for a machine that prints a one dollar bill per day.

Now, does that make NCSoft's decision any less stupid since a money maker is a money maker and the least it could do is reduce the amount of bad investment? No. But NCSoft does have a history that if a title can't make a yearly profit *and* pay off the initial investment... then it gets written off as a loss. Isn't that right, Tabula Rasa?

However...

They bought the IP, built an office, hired the devs and expanded *years* ago. I don't believe, quite frankly, that PS was in the red - otherwise, why let them start a new "secret project" that, itself, would be quite some time before ever seeing a return?

TR, by comparison, crashed and burned fairly fast, so you can't really use that for comparison.

I think the Corporate Masters, frankly, decided to dump the one game that (a) was only making 2-3% of the money - steadily, yes, but only 2-3% and (b) had no actual Asian presence.

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I suspect you've hit the nail on it's proverbial bollox.

NCSoft invested a lot in CoH - three times I'd guess. Once at launch, once when they bought Cryptic out and once with Going Rogue.

In their eyes, they gave it as many chances as they could and it still owed them.

But - there's no politics with CoH unlike TR - so aside from any legal requirement to look at a potential buyer, they probalby would. There's no political impediment to them selling/leasing the IP. They would probably welcome a new buyer if you're correct.

Their response might well be "Give us the money and good luck on making your ROI!" Clearly they figured it was more cost effective to kill CoH than look for a new owner. That tells us a bit I guess

"You got to dig it to dig it, you dig?"
Thelonious Monk

Hooray, beta is back up! I can use it for last minute filming!

Michelle
aka
Samuraiko/Dark_Respite

There's another possibility, which doesn't preclude your conjecture. "Return on investment" doesn't just mean return on up-front costs. Maintaining, deploying and hosting CoH takes people, servers, data center floorspace, bandwidth, etc.

By and large, those things have unit costs that have no relationship to the game you're running. A programmer probably costs about the same whether he's working on CoH or some other game. A server of a given capacity definitely costs the same. So on and so forth.

Even if we ignore the notion that NCSoft seems to realigning its focus east on Asian markets, it may be that they decided that they would get better return on investment by folding the head count, server infrastructure, or whatnot, into some other game that they think will net them more subscribers (or more microtransactions) per unit of resource.

To give a hypothetical example, if CoH took, say, 30 servers to run and sustained 100,000 players, and Guild Wars 2 took 100 servers to run, but would sustain 1,000,000 players, it'd be 3x better a return on server investment to re-allocate CoH's servers to Guild Wars 2.

Edit: I can tell you from experience with corporate date centers that server cost is not just considered the initial price tag of the hardware. They have ongoing costs for maintenance, from software licenses to paying for people that figure out when the OS needs to be patched, apply those patches, monitoring the systems, and all kinds of other ongoing maintenance to keep the server running.

From my experience dealing with large companies looking at their profit margins (this is from the inside of a major healthcare provider with the understanding of the inner workings of many of their contracted medical groups).

When a report shows something is in the black, its in the black. There's no taking into consideration well what about the cost of X. Many of the man hours and operational costs are included in the final figures. They may not take into account other factors, such as hardware costs like servers (I've seen that happen), but usually those would fall into the company wide operational costs if the company has multiple assets that utilize similar or shared technology.

Now what you have to take into consideration with this particular scenario is the fact that the report points out that not only was CoH returning a profit, but that those returns were diminishing.

To many companies, that's not "we're still making a profit on this venture), it becomes, we didn't make as much, or we lost this much from last time. The positive part doesn't take precedence, only the negative. So to NCSoft, it may look like CoH made X when it used to make Z. The execs end up only seeing that they didn't get Y anymore.