Some points. Because the data simply does not agree with the claim of "$800K profit per month." Not at all.
One, you cannot apply US accounting standards to NCsoft. NCsoft is a South Korean company, which is not US listed, and goes by South Korean accounting standards. They are different.
Two, no matter how much people try to paint Nexon as some sort of evildoer swooping in to axe City, they are nobodies. Their total stake in NCsoft is approximately 14.75% of all shares. Yes, the lion's share of 'major shareholders,' but also not much more than treasuries (9.4%.) See:
http://global.ncsoft.com/global/ir/structure.aspxThree, NCsoft uses the
diversified holdings method. What you hear about "NCsoft" in their earnings report is essentially independent of the performance of their holdings - some of which they own less than 50% of. The accounting of individual subsidiaries is not generally disclosed. Take with a grain of salt assertions from subsidiaries that they are/were "doing great." It's the same everywhere else - I've been there.
Four, NCsoft did in fact, break out game sales for City in the 2Q12 sheets - sales of $2,890M KRW for 1Q12 and $2,855M KRW for 2Q12 totaling $5,745M KRW. Sounds impressive, doesn't it? It's not - that's $5.1M total sales over 6 months against Lineage's
$90M. And that's
revenue not profit. (2Q12 Consolidated Fact, Pp. 5) In fact, the only game with lower sales than City was Guild Wars (excluding GW2.)
Sheet's here:
http://global.ncsoft.com/global/ir/quarterly.aspx - Earnings Report Download.
When you apply basic math to this equation, well, claims of "$800K/mo profit" do not pass a sniff test. Or basic arithmetic. A reasonable revenue estimate (that is, income before costs) for City based on sales would be roughly $950K/month in USD.
According to
http://data.bls.gov/pdq/querytool.jsp?survey=cm - that is, the Bureau of Labor Statistics - the per hour cost per employee can be averaged at $47.13. You'll want to plug in "Total Compensation", "Professional and Related Occupations", and "Private Industry" then scroll to 2012 Q1. Please note that this does not include costs like electricity, leases, office supplies or office equipment.
According to Wikipedia, Paragon Studios had 46 employees as of August 31, 2012 or thereabouts. So we'll roll with 46. That means that it cost Paragon Studios $2,167.98 per hour worked, $86,719.20 per week, and about $347,000 per month. Just to have bodies in the office (or remote.)
Mountain View offers some wonderful views and an .. interesting culture, I think I'd call it. It also offers very expensive real estate - even the "cheap" stuff is north of $14/square foot. Each employee requires as a rule of thumb, 200 square feet. We'll say only 40 people actually worked in the office - that's 8,000 square feet. Another $112,000 per month to put a roof over their heads.
Again, we consult BLS - this time at
http://www.bls.gov/ro9/cpilosa_energy.htm - to find a cost of $0.193 per kWH for electricity in the region. A reasonable estimate would be approximately 50 computers each consuming around 250kWH per month (also accounting for printers and copiers.) That's another $2,412.50 before you turn on the lights, the coffee makers, the vending machines...
So if you've been following along, then yes, you should have costs of over $460,000 against revenues of $950,000 per month.
This does not include costs for some benefits, office supplies, food, coffee, server operations, customer service costs (provided by NCsoft), legal services, outside consulting services, contractors, equipment replacement or repairs, cleaning services, or any other incidental costs of which there are many. These are also not disclosed by NCsoft as they are contained within the Paragon Studios subsidiary and then lumped into the "combined operations" with absolutely everything and everyone else.
And that's using only data we can confirm or reasonably estimate.
The unfortunate truth is that this is not the picture of financial health, especially for a game development studio which needs time and far more importantly, money to do major overhauls and updates. Issues may be given away, but they are not free to develop, and they add to those costs and sit on balance sheets you and I simply don't see. (Nor do developers usually, strangely enough.) If we say Paragon spends approximately $1M to develop, test, and release issues and DLC in addition to normal operating costs per quarter, it actually works out like this:
$2.85M (Revenue at $950K * 3) - $1.38M (Base Operating Costs at $460K *3) - $1M (Development) = $470,000 leftYeah. That would mean ending two quarters with total profits that likely wouldn't even keep the lights on for one month. To develop a CoH2 would easily cost several million dollars - probably over $10M these days. And again, that's not accounting for a number of other undisclosed costs or estimating anything we don't have data for. There simply isn't enough money to support continued development - a 4 month development cycle costing just $600K takes 6 months to pay back.
Data is what the data is. Nexon isn't leeching profits or axing spitefully, NCsoft isn't part of some grand conspiracy. There simply aren't the finances to continue, and it doesn't make financial sense from the data available to drop $10M on a maybe when your last few "guaranteed hits" cratered.