A Business Focused View of NCSoft's Actions
By
Adeon Hawkwood,
Posted on: 2012-09-16 13:26 in CoH and CoV General Discussions
We still need the operating cost for just City of Heroes and the operating cost for the new project they were working on against the total amount of revenue. To get this thing off the ground again you will need credit from an investor or investors. Hence you need to show the profit margin clearly, if there was a proft.
Don't mess with Texas!
--moo
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I agree 100% with this. What burns even more than the game shutting down is the abruptness of it and lack of any reason for the shutdown ('continued support of the franchise no longer fits within our long term goals' is corporate speak for 'we're not revealing our decision making on this.') |
Originally Posted by Oedipus_Tex
The most damaging part of this debacle may be for MMO players in general. I think we all can accept the fact that MMOs close, but if the way this game was closed is considered standard and acceptable in this industry, we're all screwed, no matter what game we're playing.
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Is CoH really not profitable enough to continue? If that's the case then say so. I can understand that. But a complete lack of communication from NCSoft since the original announcement just fuels the speculation and anger. I understand why Paragon employees can't talk about it (they are likely bound by NDA's and have to consider the effect that 'talking out of turn' might have on their future careers.) But the continued silence from NCSoft is inexplicable and unacceptable.
_________
@Inquisitor
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I think the best thing you can do to estimate that would be looking at the graph with active subs vs. revenue. Figuring out the average quarterly revenue per sub, when sub numbers were disclosed. On average you are looking at 40-45$ / Quarter. Assuming the average person spent 45$/quarter in 2012, you'd have about 54,816 subs. If they only spent 40$ / quarter you'd have around 61,668 active subs.|
Originally Posted by Bill Z Bubba
Makes one wonder if the 100000 active players statement was anywhere near accurate.
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Those number should be considered lowball since there is a f2p / premium option. If we wave our hand and say "Some play for free, some are premium, some play the old 40-45$ quarterly and some pay even more magically averages out to 20$ per sub" you'd be looking at 123,336 active subs.
I imagine its lower than that (as it is close to the same number we had back in '08). With no bell curve showing what the average sub pays, its pretty much all speculation. What we can say for sure is they are generating revenue at the level of at least 55-60k paid subs.
My favorite thing (That may be horribly biased) to compare these numbers against are the peak numbers for steam games on a daily basis.
Current Peak Today Game
56,798 87,168 Team Fortress 2
43,655 91,719 Dota 2
25,395 34,324 Sid Meier's Civilization V
22,629 36,967 The Elder Scrolls V: Skyrim
22,600 58,992 Football Manager 2012
18,559 54,122 Counter-Strike
15,030 28,447 Counter-Strike: Global Offensive
13,968 17,652 FTL: Faster Than Light
12,939 41,766 Counter-Strike: Source
8,961 38,056 Call of Duty Modern Warfare 3 - Multiplayer
Now I'm sure we don't have 55-60K players on our servers at any given time, but we do have at least 55-60K players paying for the game month after month.
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+1
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Originally Posted by Oedipus_Tex
The most damaging part of this debacle may be for MMO players in general. I think we all can accept the fact that MMOs close, but if the way this game was closed is considered standard and acceptable in this industry, we're all screwed, no matter what game we're playing.
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Well, if they are a professional analyst, then another member of our community has a skill set that could (potentially) be useful.|
Originally Posted by Shagster
After reading the linked article, my first thought is "Okay, either a regular COH player has a day job as a tech industry analyst, or this analysis based a lot of its research by following links on the forums."
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Lets face it, by this point we've learned that our player base contains a wide range of professionals. We've learned of authors and gaming industry professionals, members of our community with legal skills have chimed in from time to time, we have tech experts and artists and thousands of "ordinary" people who are contributing where and how they can. Whether this is a professional or a talented amateur, it is useful information.
Writer of In-Game fiction: Just Completed: My Summer Vacation. My older things are now being archived at Fanfiction.net http://www.fanfiction.net/~jwbullfrog until I come up with a better solution.
I'm not sure why people don't seem to understand that City of Heroes' 2.5-million-per-quarter revenue is not profit, but total gross income. NCsoft's quarterly financial report paints a more clear picture; they were spending nearly as much to keep CoH alive as the game was making. Its profits were minimal, and therefore did not represent a significant income for its investors. What NCsoft's decision represented was the desire to take the investment they were placing in City of Heroes and place it somewhere more potentially profitable.
I don't agree with how they did it, but I understand why.
Where do we go from here?
Good article, was very interesting to read.
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This is the big thing that's been going through my head for a while. They pretty much signed CoH's death certificate with what they did and how they did it, there's not much of anything you can do to save coh when NC took such an extreme approach right off the bat.|
Originally Posted by TwoHeadedBoy
If they were willing to sell, they probably wouldn't have fired all of our devs.
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The efforts people have been putting out have been great, and NC is getting explosive bad publicity, which is good after what they did, but as far as actually "saving coh" which is what alot of people have been trying to do, well, CoH just won't be CoH without the dev team we have, and they can't just wait to see if we're successful in any of our efforts to actually save coh, they have families to support and need new jobs.
Good read, well written.
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It depends on which "they" you are talking about. It probably wouldn't hurt NCSoft stockholders, much. They might lose some revenue due to people subbing to CoH instead of playing NCSoft games but that's a small number. On the other hand it has a huge potential to hurt NCSoft executives. If they sold CoH and it ended up making a larger profit than it did under NCSoft then it would indicate that they were mismanaging it which could hurt their career. A lot probability but still possible.|
Originally Posted by BrandX
That said, it likely wouldn't hurt them to sell the IP either.
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Originally Posted by MrLiberty
13,968 17,652 FTL: Faster Than Light
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Thank you for bringing this news to us Golden Girl - i recognise that it is by no means some kind of salvation for CoH but it is heartening to see.
As for the campaign to 'Save CoH', it is imporatant to understand that the demographic for this kind of endevour is well understood - the people responsible for pulling the plug are expecting us all to lose heart, fade away and buy a copy of GW2. In order to have any chance of success, the pressure has to be maintained.
Keep on fighting.
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Originally Posted by MrLiberty
I think the best thing you can do to estimate that would be looking at the graph with active subs vs. revenue. Figuring out the average quarterly revenue per sub, when sub numbers were disclosed. On average you are looking at 40-45$ / Quarter. Assuming the average person spent 45$/quarter in 2012, you'd have about 54,816 subs. If they only spent 40$ / quarter you'd have around 61,668 active subs.
Those number should be considered lowball since there is a f2p / premium option. If we wave our hand and say "Some play for free, some are premium, some play the old 40-45$ quarterly and some pay even more magically averages out to 20$ per sub" you'd be looking at 123,336 active subs. I imagine its lower than that (as it is close to the same number we had back in '08). With no bell curve showing what the average sub pays, its pretty much all speculation. What we can say for sure is they are generating revenue at the level of at least 55-60k paid subs. My favorite thing (That may be horribly biased) to compare these numbers against are the peak numbers for steam games on a daily basis. Current Peak Today Game 56,798 87,168 Team Fortress 2 43,655 91,719 Dota 2 25,395 34,324 Sid Meier's Civilization V 22,629 36,967 The Elder Scrolls V: Skyrim 22,600 58,992 Football Manager 2012 18,559 54,122 Counter-Strike 15,030 28,447 Counter-Strike: Global Offensive 13,968 17,652 FTL: Faster Than Light 12,939 41,766 Counter-Strike: Source 8,961 38,056 Call of Duty Modern Warfare 3 - Multiplayer Now I'm sure we don't have 55-60K players on our servers at any given time, but we do have at least 55-60K players paying for the game month after month. |
Where did you get those figures from?
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The quarterly statements show CoH's revenue, but they don't have anything that lists the costs for the game. Expenses and profits aren't broken down by game, just revenue. There isn't enough information publicly available to know what CoH's effect was on the bottom line. Is it losing money or making only a minor profit? If so, that's something I can fully understand. But NCSoft has simply not said that was the case.
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Originally Posted by Hero Prime
I'm not sure why people don't seem to understand that City of Heroes' 2.5-million-per-quarter revenue is not profit, but total gross income. NCsoft's quarterly financial report paints a more clear picture; they were spending nearly as much to keep CoH alive as the game was making. Its profits were minimal, and therefore did not represent a significant income for its investors. What NCsoft's decision represented was the desire to take the investment they were placing in City of Heroes and place it somewhere more potentially profitable.
I don't agree with how they did it, but I understand why. |
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@Inquisitor
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Steam's statistics page.
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Originally Posted by Cag
Where did you get those figures from?
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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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Which bit of it shows how much they were spending on CoH? I couldn't find it.
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Originally Posted by Hero Prime
I'm not sure why people don't seem to understand that City of Heroes' 2.5-million-per-quarter revenue is not profit, but total gross income. NCsoft's quarterly financial report paints a more clear picture; they were spending nearly as much to keep CoH alive as the game was making. Its profits were minimal, and therefore did not represent a significant income for its investors. What NCsoft's decision represented was the desire to take the investment they were placing in City of Heroes and place it somewhere more potentially profitable.
I don't agree with how they did it, but I understand why. |
Always remember, we were Heroes.
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Paragon Studios had 80 employees. Assuming each employee costs about 50k (that's salary + all benefits, a massive low ball), that's $4,000,000 of the $10,000,000 revenue right there. I wouldn't be surprised if it was double that (an employee usually costs far more than their salary, and that 50k is lower than a lot of starting salaries for the field).|
Originally Posted by Mr_Morbid
The quarterly statements show CoH's revenue, but they don't have anything that lists the costs for the game. Expenses and profits aren't broken down by game, just revenue. There isn't enough information publicly available to know what CoH's effect was on the bottom line. Is it losing money or making only a minor profit? If so, that's something I can fully understand. But NCSoft has simply not said that was the case.
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CoH, unfortunately, wasn't raking in the money, double so after all the costs. NC's other big name games, almost assuredly, have much higher profit margins.
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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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Actually there isn't a breakdown in costs on a per game basis. However employing 80 "professionals" full time, in the SF bay area, when you are only making $10-12 million a year, profits couldn't be much.
Edit: Damn, ninja'd.
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Active doesn't mean subcription, when it comes to a F2P model. :/|
Originally Posted by Bill Z Bubba
Makes one wonder if the 100000 active players statement was anywhere near accurate.
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Also, not all players are going to sign the petition, and most likely don't know where it is to sign.
The vast majority of players, very likely, sighed, realized it was over, and moved on.
Still, with i24 so close, I still think it would of been better to see how it did for the game before shutting down.
BrandX Future Staff Fighter
The BrandX Collection
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But Billy the Intern was only getting paid in used coffee grounds.|
Originally Posted by Kitsune Knight
Paragon Studios had 80 employees. Assuming each employee costs about 50k (that's salary + all benefits, a massive low ball), that's $4,000,000 of the $10,000,000 revenue right there. I wouldn't be surprised if it was double that (an employee usually costs far more than their salary, and that 50k is lower than a lot of starting salaries for the field).
CoH, unfortunately, wasn't raking in the money, double so after all the costs. NC's other big name games, almost assuredly, have much higher profit margins. |
Edit: And I'm not saying that CoH was or wasn't profitable. I was simply stating that solid information isn't publicly available.
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@Inquisitor
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Okay... there are a few things we can extrapolate, one of which is that at least three million of that ten million yearly revenue was probably spent in salaries and wages, and a matching amount in employee services like insurance. After that, you figure in server costs and bandwidth, administration costs, supplies and other office costs, and it's pretty easy to get to the point where the game wasn't making a significant profit, not for a company that draws in half a billion dollars in revenue yearly.|
Originally Posted by Mr_Morbid
The quarterly statements show CoH's revenue, but they don't have anything that lists the costs for the game. Expenses and profits aren't broken down by game, just revenue. There isn't enough information publicly available to know what CoH's effect was on the bottom line. Is it losing money or making only a minor profit? If so, that's something I can fully understand. But NCSoft has simply not said that was the case.
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No, we don't have hard numbers, but we can make some pretty educated guesses.
Where do we go from here?
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Unfortunately for Paragon's bottom line, the Red Names had a taste for Weasel Poop Coffee, so Billy was actually taking home more than Posi and WW combined.|
Originally Posted by Mr_Morbid
But Billy the Intern was only getting paid in used coffee grounds.
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(I think it was 80 full time employees, anyways)
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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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I think we all wish that. If for no better reason than the selfishness of "YOU SHUT DOWN THE GAME AS IT WAS ABOUT TO RELEASE THE PATCH WITH EVERYTHING I WANTED IN IT!!!!"|
Originally Posted by BrandX
Still, with i24 so close, I still think it would of been better to see how it did for the game before shutting down.
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Y'know.
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Would be interesting to know how many of those 80 worked on CoH and how many were on the other project
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Originally Posted by Kitsune Knight
Paragon Studios had 80 employees. Assuming each employee costs about 50k (that's salary + all benefits, a massive low ball), that's $4,000,000 of the $10,000,000 revenue right there. I wouldn't be surprised if it was double that (an employee usually costs far more than their salary, and that 50k is lower than a lot of starting salaries for the field).
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Always remember, we were Heroes.
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Well, I'm sorta wondering how well the Vigilante/Rogue Card Packs would sell. I believe the first card packs made lots of money, I would think that would happen again.
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Originally Posted by Feycat
I think we all wish that. If for no better reason than the selfishness of "YOU SHUT DOWN THE GAME AS IT WAS ABOUT TO RELEASE THE PATCH WITH EVERYTHING I WANTED IN IT!!!!"
Y'know. |
BrandX Future Staff Fighter
The BrandX Collection
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Totally agree. Fan blog is fan blog. No new information was added. No real industry analysis was added that was not already present on the forums here. Links were to fan-based responses... not to actual analytical data.|
Originally Posted by EvilGeko
That was an interesting article, but I think the lack of authority in support weakens its impact considerably. Really, it could have been written by a fan of the game and it appears that it was.
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I think we all agreed it was dumb to sink a profitable venture.
And WRT the 60-80 employees Paragon Studios had: remember that a fair number of them were beginning work on a different project. CoH was once run by a skeleton crew of 15 Developers (and 5 Support). It could still continue nicely with perhaps just 30-40 developers.
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