CoH, Sales and a test audit

[Starsman]

OK, I am not posting this in the profit thread because it's a bit of a separate thing. I decided to download all the profit reports from NCSoft since 2005 and enter all CoH sales numbers into a neat spreadsheet, then compare year-to-year changes.

Here is what I got so far:


Now, there are a few things that just don't make sense to me. In 2011, Q2, CoH went F2P. It is no secret that everyone at NCSoft and Paragon have stated they started making a lot more money at this point, but my data entry does not show this. On the contrary, I see a pure drop of 20% year over year... it's almost the kind of thing that you would expect to happen if the game went F2P but added no shop...

Next quarter is worse; an even bigger dive year over year (although to be fair, that same quarter the previous year was strangely exceptional, release of GR and extra box sales?)

Anyways, this has be troubled. Either the values are entered wrong, meaning I F-ed up, or for some reason the quarterly reports never gave credit to City of Heroes for their Cash Shop sales... Anyone around here can shed some light on this?

Even with those low values, the last quarter showed a small year over year increase and the game was headed for a 10-11 billion won year, something that seems to still have been profitable. My wory here is:

A) Conspiracy: Investors were intentionally blinded to cash shop revenue
B) Incompetence: I am an idiot and missed something.
C) Lies: someone lied to us about the positive impact of F2P, but I highly doubt it. Would be the first game to not at minimum double revenue by going F2P.

[Terwyn]

It had been "suggested" to me that NCSoft was playing games with their accounting - under-reporting CoX so that they could inflate the numbers from other properties, among other things. This fits nicely with that suggestion.

[Starsman]

It had been "suggested" to me that NCSoft was playing games with their accounting - under-reporting CoX so that they could inflate the numbers from other properties, among other things. This fits nicely with that suggestion.

Maybe, but would love to see people poke holes at my numbers to make sure I didn't mess up. Maybe CoH cash shop was listed somewhere else in the reports...

[FatherXmas]

Freedom came out for existing subscribed players on Sept 13th and open for new and returning players Sept 27th.

First July to Sept is 3rd quarter not 2nd and only for the last 4 days of of the 3rd quarter.  That's why you see the sales surge in the 4th quarter.

Also the 3Q 2010 surge was due to Going Rogue hitting the shelves, which is why YoY in 3Q 2011 was off by over 50%.

Lastly and most important.  Those aren't profit numbers.  Those are sales numbers.  NCSoft never released any profit numbers on a per game basis.

[Osborn]

OK, I am not posting this in the profit thread because it's a bit of a separate thing. I decided to download all the profit reports from NCSoft since 2005 and enter all CoH profit numbers into a neat spreadsheet, then compare year-to-year changes.

Here is what I got so far:


Now, there are a few things that just don't make sense to me. In 2011, Q2, CoH went F2P. It is no secret that everyone at NCSoft and Paragon have stated they started making a lot more money at this point, but my data entry does not show this. On the contrary, I see a pure drop of 20% year over year... it's almost the kind of thing that you would expect to happen if the game went F2P but added no shop...

Next quarter is worse; an even bigger dive year over year (although to be fair, that same quarter the previous year was strangely exceptional, release of GR and extra box sales?)

Anyways, this has be troubled. Either the values are entered wrong, meaning I F-ed up, or for some reason the quarterly reports never gave credit to City of Heroes for their Cash Shop profits... Anyone around here can shed some light on this?

Even with those low values, the last quarter showed a small year over year increase and the game was headed for a 10-11 billion won year, something that seems to still have been profitable. My wory here is:

A) Conspiracy: Investors were intentionally blinded to cash shop profits
B) Incompetence: I am an idiot and missed something.
C) Lies: someone lied to us about the positive impact of F2P, but I highly doubt it. Would be the first game to not at minimum double profits by going F2P.

I think your findings sort of assume that City of Heroes is the only thing to effect NCSoft's profits though. Aion tanked for a while by a margin larger than all of City of Heroes, period. I'm sure that would change some stock numbers more than City of Heroes could, period.

NCSoft hasn't really released the information to needed to really evaluate any of this data properly, so it's all speculation.

[Starsman]

Freedom came out for existing subscribed players on Sept 13th and open for new and returning players Sept 27th.

Hmmm I got the wrong date from the wiki then, looked at the issue release... just went back and realized I looked at the beta release date, not the actual release.

First July to Sept is 3rd quarter not 2nd and only for the last 4 days of of the 3rd quarter.  That's why you see the sales surge in the 4th quarter.

That surge is of only 6% YoY, though... almost everyone that does the switch to F2P tends claims anything between 300% and 700% jumps. Also, I think words like "insanely more" or "way more we would ever be able to do with subscriptions" have been used do describe the CoH bump in sales. 6% is very far from such a description.

Also the 3Q 2010 surge was due to Going Rogue hitting the shelves, which is why YoY in 3Q 2011 was off by over 50%.

Yea that's what I guessed.

Lastly and most important.  Those aren't profit numbers.  Those are sales numbers.  NCSoft never released any profit numbers on a per game basis.

Yea I know, it's sales not "profits", I realize it. That was mostly a typing error not a logic one, will edit my post. But so far it still does not look like they accounted for the F2P sales in these numbers, they still seem like subscription based revenue...

[Starsman]

I think your findings sort of assume that City of Heroes is the only thing to effect NCSoft's profits though.

No, NCSoft itemizes the games. I only entered above revenue directly accredited to City of Heroes in the quarterly reports.

Maybe I should do this again for Aion, to see how that one reflects the F2P jump...

[Codewalker]

Well, one theory that might explain some of the discrepancy was alluded to in another thread, and that's that reportedly, point purchases go directly to corporate and don't get accounted to individual games until those points are redeemed for items in the in-game store.

When Freedom released, a lot of people spent a large amount of money to jump to Tier 9 VIP. If the above is true, unless they immediately turned around and spent those points (and I don't think there was even enough physically in the store yet for some of them to be able to do that), then all that cash they dropped wouldn't show up on the COH sales reports for quite some time, if ever.

[Mistress Urd]

Heh, this made me think how much of a difference would have been if Paragon Studios just came out and told the playerbase that NCSoft would shut the game down if they didn't see a bigger increase in money coming in. Given the response to the shutdown, I'm fairly sure players would have spent more knowing the game was on the line.

[Starsman]

[dwturducken]

I think we've established that money wasn't going to keep the game open. The numbers and tables are just trying to make that more readily, visually apparent.

[chasearcanum]

not sure how much it matters, but did you account for fluctuation of KRW to dollar over this timeframe?

[Starsman]

not sure how much it matters, but did you account for fluctuation of KRW to dollar over this timeframe?

That table is just in krw. I didnt convert anytying to dollars (for the exception of Q1 2005, for some reason the number in the report was in USD and I had to find a converter that allowed me to enter a year so I could convert that one year into KRW)

[Starsman]

I think we've established that money wasn't going to keep the game open. The numbers and tables are just trying to make that more readily, visually apparent.

This is not so much about saving the game, but find out how full of it NCSoft's statement about the game not being profitable was. So far, if it was not profitable it likely wasn't for about 2 years, maybe 3.

[Little Green Frog]

Heh, this made me think how much of a difference would have been if Paragon Studios just came out and told the playerbase that NCSoft would shut the game down if they didn't see a bigger increase in money coming in. Given the response to the shutdown, I'm fairly sure players would have spent more knowing the game was on the line.

The community would most likely react with a backlash, unless it was done with extreme caution, possibly only hinting at it through unofficial channels. Otherwise the ethics of such statement would be questioned and people would assume (and they would be right), they are being blackmailed into spending more on the game or else.

[Starsman]

The community would most likely react with a backlash, unless it was done with extreme caution, possibly only hinting at it through unofficial channels. Otherwise the ethics of such statement would be questioned and people would assume (and they would be right), they are being blackmailed into spending more on the game or else.

I think he means on actually using up the points they purchased.

[Codewalker]

Hmmm that does not make much sense... not with the cash shop structure in use here. Not saying its' impossible, just that it would not make sense.

Perhaps, though I can also seeing it making perfect sense to an executive. "That's how we do it for NCCoin in Korea, so that's how we're going to do it for Paragon Points, too!"

[Starsman]

Perhaps, though I can also seeing it making perfect sense to an executive. "That's how we do it for NCCoin in Korea, so that's how we're going to do it for Paragon Points, too!"

Yea, but they actually share NCCoin in Korea accross multiple games. Besides, if true they still got to somehow report that collected money somewhere in the report...

[Valjean]

I think he means on actually using up the points they purchased.

It depends on if the revenue was recognized on points purchased or points spent.

[TimtheEnchanter]

Wasn't there already a thread about potential money-laundering through the lack of transparency regarding micro-transactions? In short, nobody but NCsoft knows what % of store purchases is attributed to each of their titles. So with a F2P game, they can more or less make up whatever numbers they like.