MMORPG - COH profitability

[Rae]

http://www.mmorpg.com/gamelist.cfm/game/3/feature/7015/City-of-Heroes-Profitable-or-Not.html

Includes the following:

An anonymous 'former employee' who claimed:

CoH was profitable even before they converted to Free to Play but were even more so after the conversion.

The studio's total annual operating cost was 4 million USD.  They grossed 12 million in revenue annually.

NCSoft paid $8 million USD to buy CoH. They wanted $80 million USD to sell it. They only value it at $3 million for tax purposes.

CoH had a high retention rate. Subscribers had a stick rate of 95-98%.

NCSoft has no plans for a CoH 2.  Paragon wanted to do it but NCSoft was growing ever more uncomfortable with a Superhero IP, worried that it wouldn't work in today's market.

Brian Clayton tried to orchestrate a management buyout of Paragon starting over a year ago because it became progressively more difficult to deal with NCSoft. They had created a Kickstarter page and a campaign video, but it never went to press.

They (Paragon) had a second project in the works. It was a compromise to not being able to make CoH 2.  It was the show "Lost" meets Minecraft.  You crash-landed on an island and you were able to build your own fortress and weapons. You teamed up with other players to tackle the mysteries of the island.

NCSoft tried to work with Paragon, they really did.  But the profits were not what they needed to be, and CoH/Paragon were the weak link in NCsoft's lineup moving forward.

And NC Soft's response:

"It is disappointing that such inaccurate information was provided to MMORPG by an anonymous source and is being reported on as news. The operating cost, annual revenue figures and other financial information shared by this anonymous source are simply wrong. The studio was unprofitable before the shutdown. Both NCSOFT and Paragon Studios were incredibly proud of the transition of City of Heroes to a Free to Play business model, but unfortunately it wasn't enough to support the studio's needs. We made the difficult decision to close Paragon Studios and sunset City of Heroes because the franchise no longer aligned with the long term profitability goals for the company.

"While we looked to sell the franchise multiple times, we were unsuccessful in finding a suitable partner that we thought would support City of Heroes' fans in a manner they were accustomed to for years to come. Closing a studio and sun setting a beloved franchise is never an easy thing to do for the publisher, the developer or the fans. This was not an easy decision to make. The Heroes and Villains have taken to the skies of City of Heroes for the last time, but the game and community will remain in our memories. We truly thank our fans for their years of support and we hope they understand the difficult position we were in when making the final decision."

[Starsman]

Beat me to it  :P

[The Fifth Horseman]

NCSoft seems to have strange understanding of profitability.

[Starsman]

From the article, a quote from NCSoft:

While we looked to sell the franchise multiple times, we were unsuccessful in finding a suitable partner that we thought would support City of Heroes' fans in a manner they were accustomed to for years to come.

What a load of bull.... so they saying they did find interested parties to aquire the game, but none they considered "suitable" enough to make the fans good, so... NCSoft found it was more humane to euthanize the game than let it live in the hands of some one they thought was not worthy????? W... T... F????

[Quinch]

Posted in comments, pasting it here for good measure, although with missing emphasis and formatting.

-cricks knuckles-

Let's try to dissect this sucker. First, I'll try to quickly run through some of the anonymous info with what we've dug up before. Some of it is also anonymously sourced, so take it for what it's worth.

The rough revenue is on target - it can be confirmed through NCsoft's own revenue reports. Going hybrid-F2P was also a profitable move, publicly confirmed by devs on every occasion it was brought up. Retention rate was a little lower than stated here - around 90% monthly. Clayton also tried to arrange Paragon buying itself from NCsoft, confirmed by Positron in open interview. The existence of the side project was an open secret for years, though details have been scarce - this info is the most we've ever gotten, I think. The $80 million price tag was confirmed by parties who approached NCsoft, in addition to contractual provisions that nobody in their right mind would sign. No idea about the actual operating costs, but devs have confirmed before the shutdown that the pay was on the low end of the scale, and that CoH was mainly a labor of love for them.

And now, on to our ever so lovable liars. Though I do so very much appreciate that they finally took the time to actually say something.

"The studio was unprofitable before the shutdown." - Oddly enough, up until now, NCsoft has gone out of their way not to say that the studio was unprofitable. In each of their previous casualties - Auto Assault, Exteel, Dungeon Runners and Tabula Rasa - they cited low subscription numbers and lack of interest as the reason for the shutdown. City of Heroes was signed off with a "realignment of company focus and publishing support" which quite honestly means absolutely nothing. While they stopped publishing subscriber numbers some time ago, the revenue was equivalent to around 60,000 $15 a month subscribers, a healthy income by any standard.

""While we looked to sell the franchise multiple times, we were unsuccessful in finding a suitable partner that we thought would support City of Heroes' fans in a manner they were accustomed to for years to come." - Let's disregard the fact that the studio itself tried to buy itself out for the moment and analyze that sentence. It means that somehow, closing the game entirely and making sure that it stays closed is somehow preferable to it being sold to someone who might not live up to the expectations. Not only that, but that they still think they know the fans well enough to make that decision. Nevermind that now CoH's players nearly unanymously treat NCsoft with complete contempt.

"but the game and community will remain in our memories" - Frankly, that's what we're counting on.

"We truly thank our fans for their years of support and we hope they understand the difficult position we were in when making the final decision."" - Given the fact that NCsoft has never given us a reason for making that decision in the first place, it's pretty hard to be sure we understand their position. But if the dots we've been connecting for the past four months are anything to judge by, I'm pretty sure that us understanding their position does not in any way improve it.

[The Fifth Horseman]

Moreover: NCSoft demanded for the IP as much as the game would bring in if it turned in the same amount of profit for the following decade. Or two. :p
That in itself is proof enough that they were not willing to sell, just pretending they were open to offers.

[WildFire15]

Seems to me like NCsoft really don't know how to handle this situation. Considering we've always shown our proof, it's ridiculous for them to say 'Oh, it wasn't profitable' without showing some proof of their own, not to mention the fact that there was plenty of things they could do to reduce costs if the studio really was having trouble.

Also, the fact Paragon wanted to 'buy themselves' and NCsoft's claims that they 'couldn't find a suitable buyer' shows how trust worthy they are

[HarvesterOfEyes]

NCSoft = liars with no honor.

If the money really was their motivation practically everything they've done would have been done differently unless <insert tinfoil-hat theory here>.

More likely someone with the financial means to sustain a bad business-decision made one and now would rather screw everyone involved in and with CoH than admit an error. That person is a sociopath.

[Ironwolf]

More lies from NCSoft. Now suddenly they say they were losing money at Paragon!

Prove it.

If it was unprofitable you would:

1. Cut staff not pertaining to CoH directly
2. Slow development
3. take steps to drop costs

You then take the money and run after a couple years as the game swirls down. You don't shut down a studio running an active game and developing 2 more. This is the stupidest thing these people have said in a long line of stupid.

[Quinch]

Personally, I'm glad they went out with those arguments.

We've been debunking them for the past four months.

[Lucretia MacEvil]

This is the stupidest thing these people have said in a long line of stupid.

Agreed. 

I wonder if NCsoft managers actually talk to each other?

[Lily Barclay]

Its like NC Soft wants their stock to keep tanking.

[WildFire15]

Its like NC Soft wants their stock to keep tanking.

It likely won't move if this news remains in the west. I think maybe Mercedes needs to get back in contact with her Korean journalist friend and see what he thinks

[Quinch]

Personally, I'm quietly begging the universe this story gets picked up by other outlets as well.

[Greg Lloyd]

"The Heroes and Villains have taken to the skies of City of Heroes for the last time, but the game and community will remain in our memories. "

NCSoft, I look forward to the day that you are nothing but a memory.
G

[Starsman]

It's like NC Soft wants their stock to keep tanking.

I think that's the reason they said something about profits, finally (even if a lie) as it can be very bad for them to admit they killed a healthy source of revenue (small as it may be) when the company is not meeting revenue forecast and the stock is tanking due to it.

[Lily Barclay]

Personally, I'm quietly begging the universe this story gets picked up by other outlets as well.

Same. Bet it will. At least by massively. Guessing this has already been forwarded to Joe? I'm glad that NCSoft is helping our cause by keeping us in the news.

[Starsman]

"The Heroes and Villains have taken to the skies of City of Heroes for the last time, but the game and community will remain in our memories. "

Of course we will remain in their memories, the backlash was to hard for them to ever forget entirely.

[Lily Barclay]

Another thought... If the title wasn't performing well, why would the studio attempt to buy itself? They would throw in the towel and be glad they got severance.

[TonyV]

Sounds like a clear case of he said/she said, which is what I've believed all along.  You really have to ask yourself, who do you believe?  A Paragon insider, or NCsoft?  I know that most people here will instantly go to the knee-jerk reaction of, "the Paragon Insider, of course!"  But to be completely fair, you have to acknowledge that both have an agenda: the Paragon insider has recently lost their job thanks to NCsoft, and NCsoft is currently in the midst of trying to staunch a negative publicity campaign against them, striking at the heart of the matter.

The reason I bring that up is because I don't want anyone to think that I'm overly naive or gullible, willing to believe anything that anyone tells me.  I'm well aware of the various politics at play here, and I've spent MANY long nights thinking VERY hard about the possibility that I'm being duped.

And in the end, based on the best information I have, I've decided that I believe the people I know at Paragon Studios over NCsoft.  I've met them personally, they don't have as much at stake by simply staying silent (and indeed, some of them have put their reputations and quite possibly financial well-being at stake by coming forward, even as an anonymous source), I've heard very similar accounts from multiple people, they've historically proven to be honest and reliable, and not to put too fine a point on it, their version of events makes more sense to me than a publisher completely shutting down a studio like it did instead of making cuts and layoffs that could have restored it to profitability.