MMORPG - COH profitability

[Electric-Knight]

Basically, the only way that NCSoft's new statement could be true is if these two following things are true:

• NCSoft was being overly charitable in both continuing to run and produce CoH while also giving the studio more titles to work on
• The people at Paragon Studios were clueless and naive about the numbers and business ends of things

I'm really not believing either of those (not to the extent that the history and these claims add up towards having to mean).

[Electric-Knight]

Here's an idea... How about a poll to see if the CoH fans would be happier with the complete shutdown of the game or if the title was sold to buyers that NCSoft deems "unsuitable".

[Lightslinger]

Would love move on from the shut down and get to simply "There are thousands of players desperately wanting CoH back, why not sell?"

But I'm sure a question like that would be ignored, too hard to put a good spin on it.

[chasearcanum]

The reason I'm more willing to buy the anonymous source's story is because the 'response' to the story in itself contains 2 lies. One, if the game was unprofitable as long as it was, then sun setting the game would have been a lot more gradual and they wouldn't be ramping up production on new Issues like every 2 months, and it also contains the ridiculous lie that nobody 'suitable' tried to buy the game.

At NO point did they try to save money on the game. They didn't cut it down to a skeleton crew or slow down on publishing Issues. That sort of thing a sane person would do to slow down the bleeding of the game, for the supposed several years it was unprofitable?

They're ridiculous.

Agreed.

Look at shutdowns that have gone in the past.  Many of the companies have found it profitable and acceptable to pare down resources but leave the servers running until populations are much MUCH smaller than ours were.  This is a community-centric approach that lets the community continue to experience the game as long as the company isn't losing money.  Updates may be slower/fewer, but the servers stay on.  Many MMOs last a very long time in that.

What causes a more abrupt shutdown of an MMO?
* Licensing issues. Look at SWG.  The Lucasarts license expired.  Lucasarts kept the license renewed until the new star wars mmo flagship was about to launch, but then terminated it.  Even then, SWG's population was measurably smaller by all metrics and I'd heard jokes that internally SOE's SWG dev team had been pared down so much it was sometimes jokingly said the next step would be "the intern under the stairs."

For CoH, the IP wouldn't be an issue, but there may have been other licensing expenses.  NCSoft's account management systems and the CoH marketplace were both middleware components that would likely be licensed rather than purchased.  It could be that the way the fees were determined, they were costlier when applied to the CoH business model (for example).  if poorly negotiated, there could be all sorts of agreements that have unforseen costs.

* Performance issues.  This is what NCSoft used to justify TabulaRasa & AutoAssault, for example.  Both were killed quickly after launch.  On the back-end, both contained significant performace/stability issues that required much more resources to keep them afloat.... even if they cut all new content development to the bone, they just would require too many resources and/or too much development time chasing bugs to make things work.  True or not, that explains an abrupt shutdown.

For CoH, this is anything BUT likely.  From everything we know, CoH was lean, stable, and streamlined rather well in this regard.

* Platform issues.  I've experienced this personally- Worked on maintaining a product that we *had to* retire.  It relied on 3rd party components that only worked on an older server OS and the security risks of that older server OS meant we HAD TO upgrade.  Retiring the product was less operationally painful than trying to get it running on the new OS with custom-made parts.

For CoH, I rate this is "unlikely"-- its possible-- this was the original dev team's first foray into mmo's so they may have unwittingly "painted themselves into a few corners" when it came to platform, portability, and upgradability, but I've neither seen nor heard any hint of such issues on CoH.

*Ego Although I listed Tabula Rasa under performance, I believe that its shutdown was more driven by ego.  NCsoft loves a blockbuster.  They were HUGE in Asia and hoped to have proportional success in the US market.  They hired a legend, gave him a blank check for his "blank slate" and expected great things that never arrived.  It was an embarrassment.

What would MORE embarrassing and damaging to ego would be a near-pullout of the US/Euro market.  At the time, with so little working for them, CoH was a small-but-stable anchor that gave them a face-saving example of success in the western market.  It didn't fit with their current lineup.  It didn't fit with their internal philosophy.  It didn't reflect what they wanted to do or be, but it could be pointed to as a financial success, given the money they invested into it and the return they got.  Once GWII came out- something closer to their styles and philosophies, but still uniquely catered to western likings- they had something they could point to as one of their own... more or less...  then, they could finally cut away that redheaded stepchild CoH.   I consider this "more likely than the other reasons given.

* Finally, there's Resources  One thing that bugged me when rumors of buyers being snubbed was the "why?"  Well, any sale would likely have included the provision that NCSoft continue operations of CoH until hosting and account management could be transferred to a compatible system, and that meant keeping those resources locked up on CoH servers.

What if they had already planned a use for those resources?

City of Heroes runs on virtual servers, but those servers have very real resources allocated to them.  Launching a new title in a new market requires a HUGE investment in new server resources... or you repurpose ones you already have.  Killing a less-profitable product that doesn't fit your design philosophies with one you hope will rake in the money (NCSoft is constantly shooting for blockbusters) so you can use their resources seems logical to the businessman that doesn't think much of its customer base.

NCSoft was preparing for a Blade & Soul launch in the US not long after the server resources would be freed from the CoH shutdown.  That would offset some of the cost of the B&S launch.  Having a profitable launch is both about reducing costs AND decent sales.  Given that NCSoft's track record in bringing their asian titles to the US, making this launch as cost-effective as possible may have been very critical to the egos (see above) of well-placed people.... people that couldn't allow those CoH resources to remain locked away.  This is purely conjecture, but mostly due to my own experience, I find it to be plausible conjecture.

[Atlantea]

Removed by request.

[Atlantea]

Agreed.

Look at shutdowns that have gone in the past.  Many of the companies have found it profitable and acceptable to pare down resources but leave the servers running until populations are much MUCH smaller than ours were.  This is a community-centric approach that lets the community continue to experience the game as long as the company isn't losing money.  Updates may be slower/fewer, but the servers stay on.  Many MMOs last a very long time in that.

What causes a more abrupt shutdown of an MMO?
* Licensing issues. Look at SWG.  The Lucasarts license expired.  Lucasarts kept the license renewed until the new star wars mmo flagship was about to launch, but then terminated it.  Even then, SWG's population was measurably smaller by all metrics and I'd heard jokes that internally SOE's SWG dev team had been pared down so much it was sometimes jokingly said the next step would be "the intern under the stairs."

For CoH, the IP wouldn't be an issue, but there may have been other licensing expenses.  NCSoft's account management systems and the CoH marketplace were both middleware components that would likely be licensed rather than purchased.  It could be that the way the fees were determined, they were costlier when applied to the CoH business model (for example).  if poorly negotiated, there could be all sorts of agreements that have unforseen costs.

* Performance issues.  This is what NCSoft used to justify TabulaRasa & AutoAssault, for example.  Both were killed quickly after launch.  On the back-end, both contained significant performace/stability issues that required much more resources to keep them afloat.... even if they cut all new content development to the bone, they just would require too many resources and/or too much development time chasing bugs to make things work.  True or not, that explains an abrupt shutdown.

For CoH, this is anything BUT likely.  From everything we know, CoH was lean, stable, and streamlined rather well in this regard.

* Platform issues.  I've experienced this personally- Worked on maintaining a product that we *had to* retire.  It relied on 3rd party components that only worked on an older server OS and the security risks of that older server OS meant we HAD TO upgrade.  Retiring the product was less operationally painful than trying to get it running on the new OS with custom-made parts.

For CoH, I rate this is "unlikely"-- its possible-- this was the original dev team's first foray into mmo's so they may have unwittingly "painted themselves into a few corners" when it came to platform, portability, and upgradability, but I've neither seen nor heard any hint of such issues on CoH.

*Ego Although I listed Tabula Rasa under performance, I believe that its shutdown was more driven by ego.  NCsoft loves a blockbuster.  They were HUGE in Asia and hoped to have proportional success in the US market.  They hired a legend, gave him a blank check for his "blank slate" and expected great things that never arrived.  It was an embarrassment.

What would MORE embarrassing and damaging to ego would be a near-pullout of the US/Euro market.  At the time, with so little working for them, CoH was a small-but-stable anchor that gave them a face-saving example of success in the western market.  It didn't fit with their current lineup.  It didn't fit with their internal philosophy.  It didn't reflect what they wanted to do or be, but it could be pointed to as a financial success, given the money they invested into it and the return they got.  Once GWII came out- something closer to their styles and philosophies, but still uniquely catered to western likings- they had something they could point to as one of their own... more or less...  then, they could finally cut away that redheaded stepchild CoH.   I consider this "more likely than the other reasons given.

* Finally, there's Resources  One thing that bugged me when rumors of buyers being snubbed was the "why?"  Well, any sale would likely have included the provision that NCSoft continue operations of CoH until hosting and account management could be transferred to a compatible system, and that meant keeping those resources locked up on CoH servers.

What if they had already planned a use for those resources?

City of Heroes runs on virtual servers, but those servers have very real resources allocated to them.  Launching a new title in a new market requires a HUGE investment in new server resources... or you repurpose ones you already have.  Killing a less-profitable product that doesn't fit your design philosophies with one you hope will rake in the money (NCSoft is constantly shooting for blockbusters) so you can use their resources seems logical to the businessman that doesn't think much of its customer base.

NCSoft was preparing for a Blade & Soul launch in the US not long after the server resources would be freed from the CoH shutdown.  That would offset some of the cost of the B&S launch.  Having a profitable launch is both about reducing costs AND decent sales.  Given that NCSoft's track record in bringing their asian titles to the US, making this launch as cost-effective as possible may have been very critical to the egos (see above) of well-placed people.... people that couldn't allow those CoH resources to remain locked away.  This is purely conjecture, but mostly due to my own experience, I find it to be plausible conjecture.

This is a fantastic post. I suggest you re-post it in the comments section of the above story. If you don't have an account there and don't want to bother, may I have permission to re-post it for you?

[Fluctuation]

I may be straying into a bit of hyperbole above. But y'know, I just can't bring myself to quite give a s___ about it. If cmgangrel hadn't burned all his bridges behind him, he'd have some credibility. As it is, I'm gonna call him out.

I hate making this my first post as I'm really not trying to be "unicorn-ish" but I don't think that was a fair response to cmgangrel's comment on the story.  His assertion of $2.5 to $3 million a quarter actually tallies with the anonymous sources statement of an annual $12 million in revenue.  I think he was mostly just pointing out the article mistakenly stated $3 million per month.

Ultimately either way it would still be profitable, which is all that matters - slowly declining or not.

[johnrobey]

It seems quite likely that NCSoft may well have taken Paragon's attempts to buy itself out as an insult, really.

It had been mentioned to me by those who were probably in a position to know that someone at Paragon, or Paragon itself, did something to seriously irritate/offend/annoy NCSoft, and it may well have been the attempt to buy-out.

I am increasingly coming to that opinion as well.  If not that then something.  NCsoft has played this so close to the vest, I don't think the devs know or I believe they'd have said something.  The former employee inside source may or may not have all facts right--I can't know that but perhaps someone like TonyV or V.V. etc can ascertain how likely is it the anonymous source is factually correct.  Myself, I just can't see closing a studio even out of spite as profitable as source claims.  But I'm also coming to believe that NCsoft's reasons for closure go beyond "realignment" and maximizing profits, to actively wanting to kill the game and keep it gone, though whether that's simply to maliciously punish some people (along with the entire community) or because there's some factor of competitive rivalry, I don't know.   The idea that NCSoft couldn't find a buyer they'd trust with the game and community is ludicrous!  Especially since the studio wanted to buy itself!!  Geez, how stupid does NCsoft think people are?  I feel angry about this.   >:(

[chasearcanum]

This is a fantastic post. I suggest you re-post it in the comments section of the above story. If you don't have an account there and don't want to bother, may I have permission to re-post it for you?

Share away.  Once upon a time I had an account there, but couldn't get in.

[johnrobey]

Folks the reason for closing the game is right here:

•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.

The next thing is the peasant dared to negotiate with the Lord of the manner. The studio had been working on CoH2 and the masters did not want that. So they switched to a different game and yet NCSoft didn't just drop the 2 games that had been started - they killed the WHOLE STUDIO AND SALTED THE EARTH.

I work for a large company and if you have ticked off the wrong person they will bury you as a lesson to everyone else.

I think you're right, Ironwolf.  It explains why the numbers don't reconcile when trying to understand closing CoH from a purely money-making enterprise as well as why they didn't scale back to reduce bleeding profits as Osborn and others noted.   Grrrr this NCSoft pancake really p**ses me off!  Only a corporation with lots of money could afford to make a vindictive choice rather than pursuing all active revenue streams.

[johnrobey]

I'm not finding the post I saw wherein someone suggest V.V. aka Mercedes Lackey see whether the journalist from the Korean Times would be willing and interested into looking into this further.  If nothing else, more press coverage especially in Korea questioning the decision to close from a purely business aspect as opposed to a decision fueled by vindictiveness might help our cause.  If the latter, what a lame-ass reason for closure.  If NCsoft really did cut off their nose to spite their face, wow!

[Terwyn]

I am increasingly coming to that opinion as well.  If not that then something.  NCsoft has played this so close to the vest, I don't think the devs know or I believe they'd have said something.  The former employee inside source may or may not have all facts right--I can't know that but perhaps someone like TonyV or V.V. etc can ascertain how likely is it the anonymous source is factually correct.  Myself, I just can see closing a studio even out of spite as profitable as source claims.  But I'm also coming to believe that NCsoft's reasons for closure go beyond "realignment" and maximizing profits, to actively wanting to kill the game and keep it gone, though whether that's simply to maliciously punish some people (along with the entire community) or because there's some factor of competitive rivalry, I don't know.   The idea that NCSoft couldn't find a buyer they'd trust with the game and community is ludicrous!  Especially since the studio wanted to buy itself!!  Geez, how stupid does NCsoft think people are?  I feel angry about this.   >:(

I hold no anger towards NCSoft, and that makes me unbelievably dangerous to them.

I am, after all, a Scot with some minor Viking ancestry. My people are the reason why Romans built several walls across the British Islands. ^_^

That said, most businesses that do as NCSoft has done tend not to survive for very long afterwards. I hope that they can shape up and prevent their own imminent demise, as I do not to be partly responsible for hundreds of people losing their jobs, but if it does happen, it will have been through their own actions.

As far as I understand North American business practices, we value honesty and equitable dealings in our exchanges, something which clearly does not exist in this situation.

[Rae]

I'm not finding the post I saw wherein someone suggest V.V. aka Mercedes Lackey see whether the journalist from the Korean Times would be willing and interested into looking into this further.  If nothing else, more press coverage especially in Korea questioning the decision to close from a purely business aspect as opposed to a decision fueled by vindictiveness might help our cause.  If the latter, what a lame-ass reason for closure.  If NCsoft really did cut off their nose to spite their face, wow!

I can forward it onto Joe, if people think it'd be helpful.

[Perfidus]

I do think it'd be helpful.

[Globetrotter]

What I see in the article is the anonymous source stating facts. The NCSof representative is just answering that the information is inaccurate, but does not give the real numbers as a counterargument.

Tells me enough about the credibility of NCSoft's Director of Corporate Communications: He is non-communicating.
Have him give his numbers and we will judge again.

[Ironwolf]

Let's look at this anonymous sources words with a Corp Speak decoder:

•CoH was profitable even before they converted to Free to Play but were even more so after the conversion.
But Paragon Studio's may NOT have been

•The studio's total annual operating cost was 4 million USD.  They grossed 12 million in revenue annually.
Split over 1 active game and 2 in development - again The Studio may not have been making money

•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.
NCSoft never refused to sell the game - they penalized the locals management for seeking to buy the property

•CoH had a high retention rate. Subscribers had a stick rate of 95-98%.
It was a game people liked if they tried it - but no one knew we even existed

•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.
In spite of The Avengers, repeated remakes of Spiderman and the Hulk. Thor, Green Lantern, Superman, Batman, Catwoman and more in the making - we think this whole Super Hero thing doesn't work - in Korea.

•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.
Korea wanted to shutdown an independant American studio and the studio said well if you won't work with us we will buy it out.

•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.
Korea said no after saying maybe.

•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.
Since CoH wasn't making WoW money putting up with uppity Americans wasn't worth the measely $12 million a year - if it was $120 million we would consider it.

[Rae]

I do think it'd be helpful.

And done.

[chasearcanum]

I hold no anger towards NCSoft, and that makes me unbelievably dangerous to them.

I am, after all, a Scot with some minor Viking ancestry. My people are the reason why Romans built several walls across the British Islands. ^_^

That said, most businesses that do as NCSoft has done tend not to survive for very long afterwards. I hope that they can shape up and prevent their own imminent demise, as I do not to be partly responsible for hundreds of people losing their jobs, but if it does happen, it will have been through their own actions.

As far as I understand North American business practices, we value honesty and equitable dealings in our exchanges, something which clearly does not exist in this situation.

Aye, a Scot should na'er be trifled with, but  mex et wit sum Noseman blud n ya get yerself un real monster, ya do... 

and den you add sum ale o wiskee... o bof! 

Well, den... den we git mean... en unentellishibul, bet mosly mean.

[Ironwolf]

  ;D

Well done!

[Absolute]

Whoa, some serious modding just happened here.

It went from 4 pages --> to 3 pages, and responses I just read are gone.

That was trippy.