What is money to NCSoft?

[Mantic]

I just caught wind of NCSoft's report of second quarter earnings for City of Heroes being in excess of two billion dollars. That has me confused. Even paying 70 white-collar employees, that looks like a huge profit for a single quarter. More than I ever expected the game was bringing in, even with the F2P model changes. So... what is money to NCSoft, if that was not enough to satisfy them?

Folks at the company tell us not to ask "why" and obviously can not speak about any legal matters. But, if there is some legal snarl at the heart of all this, rather than merely a business decision, folks here may all be barking up the wrong tree looking to recover City of Heroes through any sort of normal legal channel.

[eabrace]

Is that in dollars or South Korean won?

Currently, 1 South Korean won = 0.0009 US dollars.  So, ₩2,000,000,000 would be $1,762,658.00

[NecrotechMaster]

nearly 2 million dollars profit is still nothing to laugh at though which is why them dropping coh confused the heck out of everyone

[Mantic]

The number was in excess of two billion, but that would make a LOT more sense (correlating to about 12-13K regular subscribers or equivalent in premiums). And actually, with 70 employees, 2 million could be a tight quarter. Not nearly a loss, though, unless people at Paragon were making especially high wages (which I doubt), or there was a very large overhead to their offices and equipment.

[Codewalker]

NCsoft normally reports financials in Millions of Won, IIRC.

[TinFoil]

Those numbers were Korean Won.

Everything I've read puts the average monthly profit for City of Heroes at $860,000 a month (that's US dollars), but that number was sliding. If you look at the report, City of Heroes only makes up ~2% of the overall profit for NCSoft.

[jacknomind]

The takeaway here is that even in decline, CoH was making quite a bit of money... so crowdsourcing alone is unlikely to let us make a serious bid on the property.  We're going to need some combination of:

• More money (from outside investors)
• A better deal (by giving NCSoft the opportunity to look really good by bargaining with us)
• More pressure (by representing a significant number of lost customers -- hence my support for the idea of a targeted boycott)

Hopefully we can leverage some combination of these things to bring what we need from crowd-sourced funds into something attainable.

[eabrace]

CoH was making quite a bit of money

Also keep in mind that "quite a bit" is objective and means something different depending on how much a corporation is worth.  $2M means a whole lot more to a small indie developer than it does to a software giant like - for example - Electronic Arts.

Using another example, a switch manufacturer might be quite proud of bringing $30M of profit to a reseller like Dell.  A board member at Dell, on the other hand, would state, "I can tie a switch to the bumper of my truck and drag it through town and make $30M."  $30M just doesn't even move the needle at their level.

[Questor]

I don't know which part of the quarterly report you are looking at, but the part I read shows them losing money in the second quarter and they attribute it to a one-off labor cost. Sales show a 4% increase Quarter over Quarter but a 12% decline Year over Year. It also shows CoX making up just 2% of the company's income. Just some things to keep in mind.

[jacknomind]

$2M means a whole lot more to a small indie developer than it does to a software giant like - for example - Electronic Arts.

Yeah.  "Quite a bit" by the standards of what we can feasibly raise by crowdsourcing.

...$30M just doesn't even move the needle at their level.

Yes.  Unfortunately for us.

[Codewalker]

I don't know which part of the quarterly report you are looking at, but the part I read shows them losing money in the second quarter and they attribute it to a one-off labor cost. Sales show a 4% increase Quarter over Quarter but a 12% decline Year over Year. It also shows CoX making up just 2% of the company's income. Just some things to keep in mind.

It's kind of hard to read. NCSoft itself lost quite a bit of money, most of which they're saying is the result of the "one time severance". IIRC they laid off about 400 people back in June; I think it was related to the Nexon purchase and some restructuring.

City of Heroes had over $2M in sales for Q2. That's gross revenue, before operating expenses are subtracted out. They don't release profit numbers for individual divisions; they may or may not even calculate that internally since some of the infrastructure like account management systems and support is shared across them.

So we don't really know how much CoH was making. I think it's probably a fair bet that they had less than $2M worth of expenses for the quarter. Hints we've been given from the inside suggest it was profitable. Only the bean counters know for sure.

[FrankTurk]

I just caught wind of NCSoft's report of second quarter earnings for City of Heroes being in excess of two billion dollars. That has me confused. Even paying 70 white-collar employees, that looks like a huge profit for a single quarter. More than I ever expected the game was bringing in, even with the F2P model changes. So... what is money to NCSoft, if that was not enough to satisfy them?

Folks at the company tell us not to ask "why" and obviously can not speak about any legal matters. But, if there is some legal snarl at the heart of all this, rather than merely a business decision, folks here may all be barking up the wrong tree looking to recover City of Heroes through any sort of normal legal channel.

First time commenter at Titan; 18-month devoted fan of CoX.  Heartbroken and going through a lot of weird, unexpected feelings about the end of Paragon City.

One thing that has to bother everyone is the way we (on the outside) are viewing this decision.  I think someone should say this out loud: CoX should not run if it doesn't make money for NCSoft.  Period.  That should not be a question.

If total game sales in Q2 were only about $1.5 million (converted Won to USD), that means CoX was only bringing in about $6 million annually in revenue -- which is just barely enough to cover payroll and benefits at Paragon Studios.  That doesn't even account for office space or server costs.

We have to right-size our expectations here, as painful as it is.  CoX wasn't making money for NCSoft anymore.  If that's true, they made a sound business decision, and it's sad to see it go -- but the old model won't work.

[Victoria Victrix]

War Witch told me they were "doing well" which translates to "making a decent profit" to me.

[Questor]

They do have sales listed. But this doesn't tell us operating costs vs. sales. A look at their P&L for the quarter shows they lost over $3 Won in the quarter (again, total company). Clearly they aren't doing something right and if they can make some money off the sale of a game they no longer wish to support seems within the realm of possibility. Here's hoping.

Consolidated Sales Breakdown by Game (Excluding Royalties)         
NCsoft Corp. & Subsidiaries         
(January 2012~ June 2012)         
         
         
         (Unit : KR Mn Won)
                                         1Q, 2012     2Q, 2012    Total
Lineage                                   43,646     58,449        102,095
Lineage II                           18,413     16,912         35,325
Aion                                           52,947    36,367         89,314
City of Heroes / City of Villains    2,890     2,855          5,745
Guild Wars                            1,709     1,277          2,986
Others                                    6,334    13,822         20,156
Total                                           125,940    129,682     255,622

[jacknomind]

Ah, see, the thing is, in this case, the better they were doing, the harder it's going to be for us to acquire the IP and code.

If they were doing moderately well but were shut down for some other reason, NCSoft won't want to let the property go cheaply (since it's profitable and could be competition) but obviously isn't inclined to continue it themselves.

[Vulpy]

"What is money?" To almost any free-market corporation, money is a means to make more money.  What is CoH's money to NCsoft? I can only speculate, but I would guess that CoH's money is less than the same money spent on, say, GW2 would be. Or at least, NCsoft seems to think so.

It's not about the worth of 2 million quid in profit. It's how much more money that 2 million quid can possibly make, and how best to pursue the growth of that wealth.

[Codewalker]

If total game sales in Q2 were only about $1.5 million (converted Won to USD)

What exchange rate are you using? Google says:

2,855,000,000 South Korean won = 2,517,193.5450 US dollars

(commas re-inserted for readability)

[FrankTurk]

I cannot imagine how awesome CoX would be if it was released to an OpenSource community.  It would re-define awesome if all the love for this game translated into openSource development.

That's what we should petition for.

[Questor]

I cannot imagine how awesome CoX would be if it was released to an OpenSource community.  It would re-define awesome if all the love for this game translated into openSource development.

That's what we should petition for.

That would be pretty cool.

[laufeyjarson]

That would be pretty cool.

It would.

They've made an announcement that such a release won't happen.  I admit, I'm not surprised or disheartened by that.  They licensed the code from someone else.  They can use it, but they don't own it and can't give it away.  Lots of commercial software has things like that in it.  It makes converting a lot of commercial properties to open source very difficult.

That being said, the "Plan Z" that's been bandied around as an if-all-else-fails is to write a new MMO, with new IP.  It can't be COH2 - NCsoft owns that.  But it can have alien invasions, nazis, zombies, ancient magics, hidden cities, magical relics, etc., etc., etc., because all of those things aren't specific to CoH, but are well established story items.  It'd have to be a new game, in a new place... but it could belong to the community, to an organization that wasn't beholden to the marketplace and board members.

Plan Z is a HUGE amount of work.  It's years out, if it can happen.  There's been some naysayers that it can't, but I think it can.  There's a lot more tools and resources to write something like an MMO today than there was in 2003ish (or earlier) when Cryptic started.  They had to build a lot of infrastructure that we can rent on-demand in the cloud today.  There's a ton of new information about good ways to make an MMO work that we don't have to discover - things they struggled with.  I think it's possible, but it's a big job.

In general, the urgency is to talk to NCsoft about the existing system while it's still running, and to make sure people have grabbed the information they need from that system while it is still there.  That's what the folks here at Titan Network seem to be doing now; the calls to action and the Sentinel+ release.  Plan Z, while interesting, can wait until all else has failed.  There's plenty of time then.

[Zombie Hustler]

Not a really constructive post here, but i regards an Open Source CoH, I've long thought how cool it would be to have an Open Source MMO, where there was one engine powering it, but people would have their own servers and potential content that ran on it that anyone could access- you could have a CoH style server universe; an Old Rome server; a space server; etc.

[Moonfyire101]

Maybe i overlooked something but it said GW1 made less than CoX right? If this has been explained sorry but it doesn't make sense to me that CoX got cut but not GW1...Also, all CoX needed was a little cheap adverising. With all the superhero movies and stuff the people just needed a little push.

[eabrace]

Maybe i overlooked something but it said GW1 made less than CoX right? If this has been explained sorry but it doesn't make sense to me that CoX got cut but not GW1...Also, all CoX needed was a little cheap adverising. With all the superhero movies and stuff the people just needed a little push.

I noticed that, too.  The only thing I could think of is that they wanted to keep GW1 open long enough for players to transition to GW2 before shutting it down.

[StarRanger4]

I noticed that, too.  The only thing I could think of is that they wanted to keep GW1 open long enough for players to transition to GW2 before shutting it down.

doubt it.  its big in Korea.  We're not.  and thats the problem.  we're the red headed stepchild they dont want to have to feed, even though we bring in as much as some of the others.

[Mantic]

Its big in Korea.  We're not.

That seems to be the biggest reason, alright. As well, there seems to have been a bit of tension between Paragon and NCSoft over how to manage the game because of this. Paragon was just as focused on the Western market.