So, thoughts/ideas, anyone?

[Rae]

I can tell you that I know (but cannot divulge my sources) that none of the offers made to NCsoft for CoH were anywhere near even half of that.  Steam offered something like $3million plus some profit share.  Imagine how such an offer as that must come across to a people whjo are known to be concerned about saving face and not insulting people.  Wow.  I wouldn't even speak to such insulting people either.

Ammon, would I be able to report that in an article I'm working on? I don't want to annoy your source.

Cheers.

[Knightslayer]

Advertising is incredibly expensive.  Its also very hit and miss.  A famous quote is from Henry Ford who said "I know half of my marketing is working ... if only I knew which half".  I know that early on, there were several experim,ents with marketing, and that CoH had a far larger marketing budget in the US and EU than it has had in recent years.  And I know just as surely that the results of those expenses never justified the returns.

As I mentioned before, one single TV ad campaign, just in the US alone, tends to cost many tens of millions of dollars.  That's like 5 years profit from CoH which may, or may not, even work.  Companies work up to this sort of advertising with smaller 'test campaigns' in other media.  It took WoW many many years to decide it could afford TV advertising, and that doing so would at least break even and reinforce their position as a market leader.

Quite simply, the test campaigns never justified larger experiments.  Instead, CoH needed to leverage social media and viral marketing far sooner, and with more passion.  It took them years to find Zwillinger, and even then I always had half a suspicion not everyone fully believed in what he was doing.  I'd advised the UK branch of CoH to do a lot more marketing online before, particularly in social media and in viral, and they'd been blocked by the US office and head office from doing so.

Paragon Studios were awesome game developers with a passion, but it wasn't until Zwill joined that anyone was able to realise and leverage that.  We always got the impression in the forums that they liked talking to us, but still regarded doing so as a distraction from their jobs, instead of as something that enabled and empowered them to do their jobs better.

Sadly I think they prioritized other games more. There used to be a period very recently where I saw Aion ads on YouTube all the time (in the sidebar), I've never seen this for CoH.
Maybe Aion was lucky and it was the first time they used YouTube for advertising with it, while they had already cut CoH's budget completely due to past failures?
Or they support Aion more because it is so huge on their home market? =/

[chaparralshrub]

Well, I'm hard to reach due to RL for a few days.

[Turjan]

Ammon, that is indeed a most rational and erudite description of the state of play you've laid out there - top job

It touches on a point I confess I've been feeling a little guilty about in my attempts to create the visual iconography for The MMOKiller and that's basically Taek-jin Kim's role in all this.

There's absolutely no doubt that TJKim was Tabula Rasa's strongest supporter. It was him who recruited the visionary Garriott brothers with an up front cash sum, and then doggedly backed them year after year, to the point it became a company injoke at functions when he announced that "Tabula Rasa will be coming out this year". I don't think he was doing so simply for the investment return - I truly believe TJKim is a visionary himself. He did after all create NCSoft and saw it rise from nothing to one of the two biggest gaming companies in Korea.

But I also believe he's a flawed visionary - or at least a visionary with a blind spot. As far as I can see, his Achilles' heel seems to centre around marketing and communications, a fact which would fit actually if one assumes he's a geek-type visionary. This explains his apparent singular inability to grasp the differences between Korean culture and the west (it also explains what benefit he's hoping to gain from getting into bed with the more marketing-savvy Nexon).

But he does support his company's creations, there's no doubt about that. Let's not forget that when Cryptic wanted to up stumps and head off to pastures new, NCSoft went to great effort to acquire the CoH IP and create Paragon Studios specifically to continue the support of the franchise. So when the CoH closure announcement said "The continued support of the franchise no longer fits with our long-term goals for the company", I found that to be the most telling phrase. It says to me that basically TJKim is no longer the one holding all the cards, pulling the strings, etc etc.

These "long term goals" are obviously the ones that coincide with Nexon's, and also explain the use of that wonderfully nebulous corporate phrase "a realignment of company focus and publishing support".

So from a certain perspective, it could seem that TJKim has been caught up in an escalation of events that are leaving him behind, almost like he's a victim himself...

...however...

...it was TJKim himself who elected to sell 2/3 of his personal NCSoft stock to largest rival Nexon, effectively entering both companies into a partnership. Kim created NCSoft, so this decision to essentially sell control of his own company to his biggest rival certainly was not taken lightly. So no, whatever's going on here, he can't really be seen as a victim. He knew what he was doing, and one must also assume that if he'd really wanted to keep CoH alive, it would still be alive today.

But yes, I still do feel a little guilty poking at him with visual gags. He has supported us diligently for eight years after all. But then I think "If I had a loyal dog for eight years and it suddenly turns round and bites me one day, would I still respect it? Trust it? I think not..."

I don't know if it's valid to snipe directly at Nexon with bad publicity (even though I actually already have with images like this... ) but I'm definitely at the point now where I feel that while NCSoft have been our friend for years, any bad publicity they get from us now is their own doing not least for the fact that they're giving us the 'mushroom treatment' here when we've been paying them good money for nearly a decade.

So I certainly endorse the idea of forcing a "realignment of company focus" of our own by getting them to shell out to fix damaged PR. They've shown how much they valued our loyalty by turning round and biting us - perhaps it's time we showed them that we can bite back

(btw, as an aside concerning visibility, when I Googled 'MMOKiller' just now, the second entry was the thread on this forum with the Photobucket account...perhaps I might put the word 'NCSoft' more prominently on the Photobucket account too)

[Minotaur]

Point 3:  One of the most commonly asked things I have seen is people wondering how closing a profitable business can possibly make sense.  This is largely down to a thing called 'Opportunity Cost'.  Let me explain it.

Imagine for a moment that I give you $10 to invest, and show you three people you can invest with. 

The first has a great idea about superheroes, and says that for each $1 you invest with him, he'll turn that into $1.20 for you at the end of each year.  That's a 20% growth every year.  Wonderful. 

However, the second guy I lead you to makes fantasy games that appeal to a wider base market, (it's mass-market over quality), but he can offer to turn every dollar you invest into $2 each year.  He can double your money, because mass-market is, well, mass. 

The Third guy just grins.  He's name is Mr Nexxon, and he mainly invests in java-based games for browsers, facebook, and mobiles.  These are dirt cheap to make compared to other games, and can yield mass-market profits even higher than the second guy's offer.  He promises that for every dollar you invest with him, he'll give you 4 times your money back each year.

Now, here's where opportunity cost comes in.  The way these get calculated is that for every dollar you invest with guy 1, you make 20 cents profit, but lose the opportunity to have made 3 dollars profit with that same dollar given to guy 3.  The dollar spent to make back one dollar and twenty cents, cost you the opportunity to make back four dollars instead.

Now, you could take that ten dollars I gave you and put it all into the first offer because that guy was making something great.  But the chances are that noone would ever again give you ten dollars to invest, because from their view, you're an idiot.  From that ten dollars, each year you make 2 dollars profit and can't even buy me a dinner to thank me for the ten bucks.  Instead of investing where you'd have made 40 dollars from the same 10 bucks.  That, is opportunity cost.

If you put Investor's money into Paragon Studios, where it has all the higher costs of a US office, US staff on US wages, paying US taxes, etc ... Well, that's as much as it would have cost to make 10 games that could each have made back more money.  Investors don't care if the game is fun, or of high quality.  They care about the balance sheet.  You only get a company chasing personal goals of quality when there is a majority shareholder who believes in that concept.

Suggestion 3:  Its hard for some people to understand that the choice isn't between making some profit and no profit.  Its about the degree of profit.  A game that makes a profit is no good to shareholders if there's another game that makes more profit they could have invested in instead.

This is only true if you're not sitting on a pool of cash so large that you can do both. At this point any enterprise that makes more than you can otherwise make on the money markets is worth continuing with. I've seen several posts suggesting that NCSoft is hugely cash rich atm, so am slightly confused how this works.

[Codewalker]

This is only true if you're not sitting on a pool of cash so large that you can do both. At this point any enterprise that makes more than you can otherwise make on the money markets is worth continuing with. I've seen several posts suggesting that NCSoft is hugely cash rich atm, so am slightly confused how this works.

Indeed it doesn't make sense.

http://global.ncsoft.com/global/ir/financial01.aspx

That's from year end, but unless NCSoft has somehow managed to blow through $577 million in the last 10 months, they should still have quite a bit of cash available. We'll know in a couple months.

To me, the only thing that makes any sense is that the company management wants to centralize all development in S. Korea for non-financial reasons. GW2 and Wildstar were too far along to kill without incurring massive losses, but as soon as those break even it wouldn't surprise me if ArenaNet and Carbine get gutted. Paragon was an easy target -- even if they were re-investing COH profits in the 'secret project', NCSoft corporate wasn't subsidizing that so they don't take a huge loss.

That seems to me to fit all the pieces of the puzzle -- "Realignment of company focus", financials not adding up, seeming unwillingness to consider selling despite interest from major investors, the inside reports about how their management operates on sites like glassdoor, and so on.

[Segev]

The "my loyal dog turned and bit me after 8 years!" comment is why I have been strongly suggesting we leave an "out" for NCSoft and all involved if they capitulate. Leave them a way to not just salve the wounds we've given, but make it look like they bravely and brilliantly resolved things as the heroes of the tale. So long as the solution goes the way we want.

[Moonfyire101]

We are continuing to attempt to get the overt support of celebrities of any sort.  If you know any, please reach out to them.  There are several threads here with good letters and press releases that explain things clearly and concisely.

Still trying, every time my dad says he's made plans to go over to Bobs he doesn't feel well that day. I told him to call his other friend that plays with him (Musician friend) and ask. He lives near Keego Harbor MI. I forget which city, one of the rich ones. He doesn't live far it's just a problem of timing. I'm sorry it's taking so long....

[eabrace]

I'm sorry it's taking so long....

No need to feel bad about it.  Any help is certainly appreciated, but there's no need to press the issue.  We've all got other things to think about that need to be taken care of. 

[Olantern]

Ammon, thanks profoundly for your analysis.  I hope it gets the exposure it deserves around here.

So....on perusing a Cracked.com article on video-game addiction...I came across this--

http://english.yonhapnews.co.kr/Features/2010/01/13/48/0801000000AEN20100113009600315F.HTML

"Last month, South Korea's top court ruled that unlike online gambling -- games of luck that are banned by law in Korea -- acquiring game items takes time, effort and skill. Therefore, selling them is legal, as long as the real money that backs the trade goes through legal channels."

Is there some way we can use this?  The highest court in Korea ruled in 2010 that all that time and effort we have put into purpling up, crafting up and enhancing up our toons is worth actual money.

As someone  who deals with taxing authorities on a regular basis, I can say that this is a road we definitely don't want to take.  The moment that unrealized in-game items start getting treated as property, we risk having to pay tax on gain from in-game sales or other gains with respect to those items.

I don't have a problem with paying tax on something like selling my account for real money, which is something the U.S. tax system taxes anyway.  (The U.S. system requires me to pay tax on the gain from that sale even if it's illegal!)  But I (and most people, I imagine) don't want to get into a situation where exchanging influence for an IO is potentially a taxable event because it's bartering of goods.

This is something the IRS has looked into from time to time, and the main reason it hasn't done more is that no one has provoked it into making the effort.  (Well, that and the cost- surprising as it sounds, the IRS is chronically too short of funds to accomplish much of what it's ordered to do.)

I suspect the South Korean court didn't have to worry about those types of issues because the tax base involved in most Asian systems is explicitly focused on taxing the value exchanged in transactions rather than the gain to individual taxpayers.

I'm much more comfortable with the recognition of player IP rights in things like character appearances, biographies, AE arcs, and the like, which generally don't change hands for gain, than with something like this.

[Ammon]

Well, I, for one, am hoping we can convince NCSoft that I am right and you are wrong--so we can get them to sell the IP at a bargain rate, and prove that you are right.

As you rightly stated before, the current conventional thinking is that Mobile is the only way to go, and that MMOs are no longer a good investment.  I merely state why I'm personally certain that this conventional wisdom is wrong.  One of the reasons that I believe the IP will not degrade in value is because time will tell.  Despite the predictions, another game will come along that disproves all the current trendy theories and investor models.  If you wait long enough, the wheel always turns full circle.  MMOs will come back into fashion, and again, will suddenly be overvalued again, despite all the lessons of the past years.  That's simply how investors tend to be.

Ammon, would I be able to report that in an article I'm working on? I don't want to annoy your source.

Certainly, though of course it will just be 'hearsay' in so far as its just what I personally have testified about another.  I'm keeping my source secret to prevent any of it hurting the source, so there's no danger of quoting me annoying or damaging my source.

It touches on a point I confess I've been feeling a little guilty about in my attempts to create the visual iconography for The MMOKiller and that's basically Taek-jin Kim's role in all this.

Don't feel guilty.  As you say, his own decisions are what is being criticised, and rightly so.  We are now in a fight, and even when two fighters respect each other, they still aim to hurt the other to win.  Its our duty to hit him hard enough that we win.  I merely say that you fight better when you understand your opponent, especially in why he is opposing you.  Understanding the fact that TJK has made business decisions, and knowing what will make him fight harder, and what will make him throw in the towell more easily is what it is all about.  

This is only true if you're not sitting on a pool of cash so large that you can do both. At this point any enterprise that makes more than you can otherwise make on the money markets is worth continuing with. I've seen several posts suggesting that NCSoft is hugely cash rich atm, so am slightly confused how this works.

No resource is ever infinite.  All the money NCsoft have is allocated somewhere.  And its someone's job to bet their entire career and professional reputation on allocating it where it can do the most.  That person is the one who did not have faith in CoH or Paragon as a smart use of money for the next quarter, next year, etc.

As Victoria Victrix explained a few posts ago, the current thinking in the market of game makers is that mobile is the way to go, and that MMOs have had their day.  Its like when the cancel a top TV series that is really popular - not because it no longer makes money, but because the costs have spiralled to the extent where despite being profitable, the costs in making that profit have grown to the extent that cheaper investments can make a lot more profit.  The expectations of the MMO market make developing an MMO more expensive than it ever was, with people demanding top class graphics, and more depth of content than ever, which means way higher costs to develop.  Its not that MMOs are dying, but it is seen that there are cheaper investments that yield a far higher ROI (return on investment).  The Chief Financial Officer is not hired to allocate resources to games he loves.  His job and duty is to allocate money to where it will give the most returns, and stop allocating money to where it yields lower returns than the desired threshold.  Its not personal, its business.

[downix]

As Victoria Victrix explained a few posts ago, the current thinking in the market of game makers is that mobile is the way to go, and that MMOs have had their day.  Its like when the cancel a top TV series that is really popular - not because it no longer makes money, but because the costs have spiralled to the extent where despite being profitable, the costs in making that profit have grown to the extent that cheaper investments can make a lot more profit.  The expectations of the MMO market make developing an MMO more expensive than it ever was, with people demanding top class graphics, and more depth of content than ever, which means way higher costs to develop.  Its not that MMOs are dying, but it is seen that there are cheaper investments that yield a far higher ROI (return on investment).  The Chief Financial Officer is not hired to allocate resources to games he loves.  His job and duty is to allocate money to where it will give the most returns, and stop allocating money to where it yields lower returns than the desired threshold.  Its not personal, its business.

Safe there are no costs, it is self-funded.

it is literally "ok, I'm taking $10, and setting it on fire so noone else can have it."

Not good business practice.

[Ammon]

Safe there are no costs, it is self-funded.

Nothing in business or investment is 'safe'.  Ever.  Money itself is nothing more than a promise to give you back value later.

There are always costs.  Self-funded means that it paid back what you put in, and happens after the fact, not before.  To think that something has no costs, or is self funded is a fallacy that is very old, and the reason we have such old sayings as "Don't count your chickens before they are hatched".

See also all the stuff I explained earlier about opportunity costs.

[TimtheEnchanter]

Its not personal, its business.

It's also not personal when your town gets blown up because a defective missile decided to level that instead of the strategic target a few blocks away.

Stop using "it's just business" as a means to excuse everything that business does. Since the recession began, I've had to hear that phrase uttered by somebody almost every single day. It's time for it to stop. The mindset has been going on for far too long and is an enabler for corruption. It's time for society to evolve, and time for people to start taking responsibility for their actions. Profit doesn't justify the means more than any other "end" does. Everyone needs to stop treating it like a god, wherein people are always 'righteous' and unanswerable to anyone, when they take action in its name.

[downix]

Nothing in business or investment is 'safe'.  Ever.  Money itself is nothing more than a promise to give you back value later.

There are always costs.  Self-funded means that it paid back what you put in, and happens after the fact, not before.  To think that something has no costs, or is self funded is a fallacy that is very old, and the reason we have such old sayings as "Don't count your chickens before they are hatched".

See also all the stuff I explained earlier about opportunity costs.

Should have been "save" not "safe."

NCSoft has not put money in to CoH in years according to their balance sheets. There was 0 money saved by closing it down, only money lost coming back from the studio.

The way they were funded:

Paragon Market collects funds. From these funds come the money to operate Paragon Studios. Money left over went to NCSoft.

Shutting down Paragon Studios and the game, no money goes in to Paragon Market.

Hence, no money is saved by this action, as the money to fund the studio is no longer being generated.

[DamianoV]

I've seen the opportunity cost argument mentioned multiple times, and quite frankly, I have to admit I don't think it applies in this instance... if we have an accurate understanding of the financial situation.

In short, IF NCSoft's revenue stream from CoH continued _despite_ shutting down CoH, THEN the example provided and associated argument would hold water.   It doesn't... this is a negative scenario for both cash flow and profitability, full stop. 

This is not a situation where they already have the cash and are deciding what to spend it on.  This cash stream is entirely dependent upon maintaining the service they have chosen to shut down.  And if they're counting on sentiment and goodwill to maintain that revenue stream via their other products, well, I'd suggest they seek psychological counseling... that level of delusion is dangerous.

Now, if CoH was NOT profitable, different story.  If they were looking at a required full-scale hardware replacement, another possibility.  If somewhere along the line the viability of CoH and Paragon Studios' other project were entangled and conflated, definitely.  Barring such additional considerations, however, I don't think the straightforward opportunity cost argument adds up.

[Ammon]

Stop using "it's just business" as a means to excuse everything that business does.

That is certainly not my intention.  I am merely stating that not to excuse, or judge, but simply to say its purely about money.  They don't care about your feelings, unless it affects their money.  To use your own war analogy for a moment, in a war you are most likely to be shot by someone who shoots you because he is a soldier told to do so.  He doesn't know you, or care about you.  He may not even care about the cause of the war or any of the moral or political issues.  At the end analysis, you get shot because he's doing what is expected of him as his job as a soldier.  Doesn't make you any less shot, but it does help you understand what kinds of propaganda may or may not influence that soldier.  If he shot you because he's paid to be a soldier and shoot you, all the political arguments in the world may not sway him.  Instead just offer him a better paid job to shoot someone else.

I don't like that mercenary attitude, but that's beside the point.  This is reality.  Most people do some pretty poor things without a thought.  Like foreclose on a mortgage not because they dislike you, or have any analysis or thought about it at all, but just because their manager told them to send a foreclosure form letter to every case in pile A.  They are just 'doing their job'.

[Codewalker]

No resource is ever infinite.  All the money NCsoft have is allocated somewhere.  And its someone's job to bet their entire career and professional reputation on allocating it where it can do the most.  That person is the one who did not have faith in CoH or Paragon as a smart use of money for the next quarter, next year, etc.

What is your basis for saying that all of NCsoft's funds are allocated?

I've looked at their annual reports. NCsoft has had a large cash surplus the last 3 years at least. I haven't tracked down earlier reports as they don't have them linked anymore.

Opportunity costs would be a valid argument if they were strapped for cash, but they apparently have more of it than they know what to do with. Their current ratio is very, very high -- they have 50% more current assets than fixed assets, and 200% more than their total liabilities, including long-term.

If I was an investor, I'd be asking them (1) Why are they sitting on so much money instead of investing it? and (2) Why are they closing down profitable ventures when there's no immediate need for the funds elsewhere?

I did manage to find a more detailed breakdown -- as of Dec 31, 2011, they had 59.1 billion Won ($53.5m USD) in cash, and 423.6 billion Won ($383.6m USD) of "other" short-term (easily convertible to cash) assets. From the reports it looks like most of that is its own stock (213 billion Won worth of common stock) that it's bought back.


Oh, I found something veeeeery interesting. On Dec 31, 2011, NCSoft reported to their auditors that the total value of their "Industrial property rights" (alternate terminology for Intellectual Property) for the company, worldwide, was 2,220 million won - just over $2 million US. That's for all their IP, worldwide.

Most of NCSoft's intangibles are wrapped up in accrued Research & Development costs. That's probably what they stand to be able to write off by shutting down a studio.

[TimtheEnchanter]

I don't like that mercenary attitude, but that's beside the point.  This is reality.  Most people do some pretty poor things without a thought.  Like foreclose on a mortgage not because they dislike you, or have any analysis or thought about it at all, but just because their manager told them to send a foreclosure form letter to every case in pile A.  They are just 'doing their job'.

'Reality' is a construct of society and is in a constant state of flux. We have the capability to change reality, at least as far as the elements of reality that would not exist were it not for humans.

Other factors need to exist in the minds of businesses besides profit. I'm not suggesting we can change that overnight, but things like "It's just business" or "They're just doing their job" excuses their actions. It's like we're telling them it's all good as long as they're doing it for profit. As if that is somehow 'better' than doing it in the name of a god, or nationalism, or (insert cause here).

[Codewalker]

To take it to the extreme, "Just following orders" is often not considered a valid defense in war crimes trials.