AreEss, where are you getting the $1M EXTRA for development? Paragon wasn't hiring extra employees, development was the JOB of the employees there. They weren't adding extra computers, the computers THERE were for development. I fail to see where this extra $1M in cost is coming from.
Because you're falling for the grand myth that "the development costs are baked in." They absolutely are not. Those are strictly the base operating costs. Those are the costs as though it were the exact same CoX
as on release day with no further updates at all for the next 24 months. The costs would be the exact same.
Those are the costs, and I cannot emphasize this enough,
just to keep the lights on. That is: to maintain and support the existing code and customer base and perhaps offer a few costume textures a year.
Here's what happened when NCsoft decided to consider City of Heroes 2 as an example of early stage development:
First, they took up the time of developers, accountants, managers, and artists to determine if it was viable. This is time not being spent on maintaining the existing asset.
Then consult this:
http://www.uspto.gov/web/offices/ac/qs/ope/fee092611.htm And then the
City of Heroes search.
They had to pay lawyers to do those searches first. Then they had to pay artists to come up with concepts. Then they had to pay lawyers to review those concepts. Then they had to pay the trademark application fees. All of these things take time and money.
Just maintaining the City of Heroes 2 trademark application is charged as an extension fee of $2,700 per month since late 2010.
Now let's say you want to do something relatively simple, and add a new canon character for a new story line. Get some artists to draw it up, animate with existing stuff and go, right? Wrong. Because or prior litigation (you know what) that goes to legal. Legal then has to research it extensively. Then research has to research it some more. Then legal looks at the results and gives a thumbs up or thumbs down. It could be "your concept is too much like Batman," it could be "your costume is actually from the KKK" (you like my Metalocalypse reference there?) but you get the general idea.
When you do get the sign off on your new canon character - which as you can see is very different from a player character, since it represents the company and the giant lawsuit target on their back - you now have to cycle through a different development process. New artwork. New textures. New costumes. New meshes. Tweaking till it fits just right, because once it's done, you can't change it so easily. Creating the lore and backstory for that, instead of correcting typos or grammatical errors in existing writing.
Now, there's two ways to overcome it. One, you let the base languish while you do your development work. Two, you hire more people to develop beyond the base. Paragon folks know how that is - they kept City afloat with all
eleven of them, but were hemmed in tight, and didn't have the resources to really expand till they got more people.
With purchased in-game content, it's an even uglier process. Because you have to spend more time in research to find out what it is that will sell. You need to direct your development resources to the appropriate tasks - namely, those that will bring in money. Let's say that means power sets. So back to legal, who gives the sign off, which sends it to art and programming and _Castle_. Who now can't maintain the game because they have to create new things and refactor balance endlessly. Which means that others are trying to pick up the slack, which could be slowing down bug fixes or some other really cool feature. (Again, ask the Paragon folks about the dark days. I heard straight from them "we wanna do this cool thing, but we just can't because we don't have the resources right now.")
And if that item cost you $10,000 in outside costs and $75,000 in existing, but you only sell $25,000? That's a $35,000
net loss. You spent more money making it than you made from it.
So no, development costs are not baked in. Only base maintenance, which no matter how hard you try, can never fully encompass the true costs of development. Every hour spent making something new is salary in the hole until the day that item is released, and stays there till it turns a profit. It's a cruel equation, but it is unfortunately, what it is. It's things like this that have kept me from a lot of projects I'd like to do or be involved with, because the development investment required would take too long to return or would just have too much risk of being a total wash.
A new City is a big endeavor, and no matter what, would involve and require abandoning the current City with a tiny skeleton crew at best. People who only have the time to just keep the hamsters in the wheels turning and maybe catching a bug or two. Exploits, cheats, and expansions would necessarily fall to the back burner as the key staff got moved to focus their efforts on a new engine, a new story, a new world. Which means new hardware, new software, and the time to build it all - an undertaking of months if not years.
I'm honestly forced to agree with NCsoft's decision because with the data they have - CO bombed, STO bombed, Aion bombed, SW:TOR bombed, even TSW bombed - the market looks rough and ugly. Subscribers and revenues have been declining. City is just not financially healthy, the primary driver for a while now has been the continued development and Free-2-Pray conversion, and the results aren't good enough to justify continuing down that path.