CoH, Sales and a test audit

[FatherXmas]

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

On one hand, converting it to dollars is useful in the pre-Freedom days to help estimate subscription population.  On the other NCSoft is a Korean company and what matters to their bottom line is KrW so a strong dollar, like when it was in early 2009 when it averaged over 1400 KrW to $1 USD during that 1st quarter actually helped the game.

[chasearcanum]

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)

I'm more looking at how the fluctuation of currency over time may affect the profitability.

Take 3 months, all with the same US Dollar revenue.  In one month, the KRW is weak against the dollar.  The next, its stronger.  The next, stronger still.  Although the actual us revenue is flat, when measured in KRW, it would look differently.

[FatherXmas]

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.

This is what I got from NCSoft's various quarterly reports, CoH sales in millions of KrW, average exchange rate for that quarter, CoH sales as millions USD

Q2 2004   11135   1161.21      $9.589
Q3 2004   9403   1153.77      $8.150
Q4 2004   10937   1084.59      $10.084
Q1 2005   6341   1020.28      $6.215
Q2 2005   5806   1006.62      $5.768
Q3 2005   6412   1027.84      $6.238
Q4 2005   15706   1029.57      $15.255
Q1 2006   6523   961.633      $6.783
Q2 2006   5532   935.032      $5.916
Q3 2006   7429   940.203      $7.901
Q4 2006   5532   924.872      $5.981
Q1 2007   5954   924.36      $6.441
Q2 2007   6370   922.454      $6.905
Q3 2007   5721   924.968      $6.185
Q4 2007   5401   919.505      $5.874
Q1 2008   5416   952.842      $5.684
Q2 2008   5743   1015.58      $5.655
Q3 2008   6193   1060.2      $5.841
Q4 2008   6835   1355.91      $5.041
Q1 2009   6837   1409.81      $4.850
Q2 2009   6673   1283.09      $5.201
Q3 2009   5471   1236.44      $4.425
Q4 2009   3928   1164.46      $3.373
Q1 2010   3348   1140.89      $2.935
Q2 2010   3491   1160.81      $3.007
Q3 2010   5709   1180.94      $4.834
Q4 2010   3239   1130.23      $2.866
Q1 2011   3051   1117.46      $2.730
Q2 2011   2787   1081.89      $2.576
Q3 2011   2812   1079.47      $2.605
Q4 2011   3435   1144.09      $3.002
Q1 2012   2890   1129.19      $2.559
Q2 2012   2855   1149.05      $2.485

Edit to include exchange rate and estimated sales number is USD.

[dwturducken]

I'm more looking at how the fluctuation of currency over time may affect the profitability.

Take 3 months, all with the same US Dollar revenue.  In one month, the KRW is weak against the dollar.  The next, its stronger.  The next, stronger still.  Although the actual us revenue is flat, when measured in KRW, it would look differently.

Just from a layman's perspective, this is actually valid. The change in exchange rate between the US dollar and the Canadian dollar had a significant impact on film and television production in Vancouver.  I have to wonder if exchange rates are a factor.

[Victoria Victrix]

My memory of this is very foggy, but I do recall that Q1 and Q2 were full of stories about how every electronic game across the board had lost massive amounts of money--stories often headlined with things like "The End of Electronic Games?" and "Games No Longer 'Recession-Proof'".  Even WoW supposedly lost millions of subscribers.  Given that, the drop in CoH revenues is miniscule.

[ukaserex]

There is no question that exchange rates were a factor. That is an undeniable truth. What is questionable is to what extent.
All in all, a very interesting time reading the Titan Network forum today!

[FatherXmas]

Why do I have a feeling that I'm on a number of ignore lists?  I posted the average exchange rate for every quarter.  You all now have the data to draw your own conclusions from.

[Tanglefoe]

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.

I look at sales and P&L a lot where I work and our quarters are divided up Q1 Feb-April, Q2 May-July, Q3 Aug-Oct, Q4 Nov-Jan.  I'm sure each company has its own timeline figured out to reflect pretty much whatever makes them look the best if this is not standard (I have no idea, I've honestly worked where I work since I was 17 and now I'm 31).  Maybe their timeline is different?  I don't know, just throwing in my 2 inf.

[Little Green Frog]

Why do I have a feeling that I'm on a number of ignore lists?  I posted the average exchange rate for every quarter.  You all now have the data to draw your own conclusions from.

Hey, i do read and enjoy your posts, for what it's worth!

[Copper Cockroach]

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.

Sounds like the MMO Industry in general... "Give us more money or we'll shut down your game and trash your community." And the MMO Industry wonders why it's not universally loved.

[Starsman]

My memory of this is very foggy, but I do recall that Q1 and Q2 were full of stories about how every electronic game across the board had lost massive amounts of money--stories often headlined with things like "The End of Electronic Games?" and "Games No Longer 'Recession-Proof'".  Even WoW supposedly lost millions of subscribers.  Given that, the drop in CoH revenues is miniscule.

I really doubt that Matt or anyone in Paragon Studios would actually claim drastic change in numbers if there was just a 6% increase, though, even considering economy issues.

Why do I have a feeling that I'm on a number of ignore lists?  I posted the average exchange rate for every quarter.  You all now have the data to draw your own conclusions from.

Just a note: any conversion you do now is going to be wrong, since revenue will be over a period of time of 3 months or so for each quarter, and any calculator that takes into account historical rate changes will at best get you just the average for the window, not an accurate translation. The discrepancies can be significant during the entire window, with a big impact generated by high and lows that you cant fairly average out.

I would asume any money transfer would be done on a regular period and only those that know the exact date of the transfers can provide an accurate USD conversion.

Still don't think conversion rate had anything to do with the "disappointing" F2P jump. I really expected those numbers to have at minimum a 50% jump for the first quarter of the F2P model change.

[houtex]

Why do I have a feeling that I'm on a number of ignore lists?  I posted the average exchange rate for every quarter.  You all now have the data to draw your own conclusions from.

I see you.  And I read you loud and clear.  Just didn't have anything to say, until now. *waves*

--

I'm not terribly sure the previous year quarter comparison is a valid comparison in the first place.  It's the last few quarters, and the overall, but previous year Q1 to this year's Q1?  That's... odd.

Meh, I guess it's some sort of comparison, but it's not something I would trust as a trend in any way... just an interesting byproduct.

[Starsman]

I see you.  And I read you loud and clear.  Just didn't have anything to say, until now. *waves*

--

I'm not terribly sure the previous year quarter comparison is a valid comparison in the first place.  It's the last few quarters, and the overall, but previous year Q1 to this year's Q1?  That's... odd.

Meh, I guess it's some sort of comparison, but it's not something I would trust as a trend in any way... just an interesting byproduct.

Comparing Q1 of one year to Q1 of the next year is THE way you do business. Reason is that every quarter has special characteristics to it, from holidays, school out time. Q4 is historically the most profitable quarter of the year, for instance. If you just compare month to month revenue, the whole of NASDAQ would collapse every January.

[dwturducken]

Why do I have a feeling that I'm on a number of ignore lists?  I posted the average exchange rate for every quarter.  You all now have the data to draw your own conclusions from.

Did somebody hear something? What? No?

Just kidding. I will admit that I don't always read through everything, so, if I missed something, I apologize. I tend to skim when it comes to numbers, for reasons that don't bear exploring at this juncture. It's not always perfect, as I may have just demonstrated. I'll try to do better next time.

[FatherXmas]

Comparing Q1 of one year to Q1 of the next year is THE way you do business. Reason is that every quarter has special characteristics to it, from holidays, school out time. Q4 is historically the most profitable quarter of the year, for instance. If you just compare month to month revenue, the whole of NASDAQ would collapse every January.

The spreadsheet I made back when the closing was first announced, which is where I quickly got those numbers I posted, included a running 4 quarter total every quarter which also helps to eliminate seasonal spikes and dips.  For what it's worth it showed the games "annual" earnings plateauing for the 7 quarters in USD, it would have been a few quarters longer if it wasn't for the GR spike.

[houtex]

Comparing Q1 of one year to Q1 of the next year is THE way you do business. Reason is that every quarter has special characteristics to it, from holidays, school out time. Q4 is historically the most profitable quarter of the year, for instance. If you just compare month to month revenue, the whole of NASDAQ would collapse every January.

I get the seasons, but there's whole years of reasons the entire set of quarters would be different.

This isn't a retail store, like a Wallyworld, after all, that sells the same goods, albiet maybe different styles, year in and year out.  Yearly quarter comparison makes sense there.  This is a service, and, well, steady ship should be the expected desire, not quarter bouncing.

I get your point... Just... I dunno, doesn't seem the thing to do for a game service, as it would seem to me novelty and/or repetitiveness, coupled with spikes due to release content driving people back to check things out... quarterly can't ever be a steady report unless you had a steady spike system setup for the releases.  EVERY June 1st, a release.  EVERY September 1, a release. 

We all know that it was always "Soon(tm)" with the Issues, and that, friends, is why I think the Qs being compared is bunk.

But then, I'm just an ordinary average guy.  *dit dit dit de de da da dat dat dat daaaaah...*  Ordinary average guy (average guy (average guy....) )

/How do I put music symbols in here again?

[Starsman]

I get the seasons, but there's whole years of reasons the entire set of quarters would be different.

This isn't a retail store, like a Wallyworld, after all, that sells the same goods, albiet maybe different styles, year in and year out.  Yearly quarter comparison makes sense there.  This is a service, and, well, steady ship should be the expected desire, not quarter bouncing.

Consumer behavior actually changes over the periods, though. Especially with any kind of micro-transaction system in place, but not exclusively.

It is more common than you may think to have college or high school students only play during summers and winters breaks, for instance. CoH is a service, but it's an entertainment service that is very susceptible to player available time, not to mention available budget. You can actually look at the chart I set up there and you will notice the game indeed always had it's biggest year-quarter in Q4.

Anyways, it's not entirely intuitive until you sit down and see reports for various companies and realize how apparently every type of business has similar seasonal changes.

[Tiger]

What I would like to know, is someone's opinion, that actually worked at  NCSoft. Are the people that work there even gamers or strictly business people, that might not even speak English, and never posted on message boards their entire life. It seems like there is a strong disconnect between the developers and NCSoft. But apparently at least some people from NCSoft, doctored their Wikipedia as here is a direct quote from it, under the section called "customer satisfaction":

"NCsoft and RightNow Technologies were both recognized in 2006 with the "Beagle Research 'Whiz Kids' Award for Innovative Embedded Customer Service Solution."[9] for NCsoft's integration of RightNow's customer support software.

Since August 2010, NCsoft's North America publishing branch has been rated as "A+" by the Better Business Bureau.[10] This rating is based on a number of factors, including its history of resolving customer complaints filed with BBB."

I personally think, that NCsoft, is itself is not one of the best publishers, despite it having published good games. I do not think people when looking to play games, specifically look for NCsoft published games. I do think though that at least for single player games, most games would rather buy say an EA Sports game, vs say a generic sports game. Or when deciding between two games, you might notice, "hey it has the Rockstar Games logo".

[Kallandra]

What I would like to know, is someone's opinion, that actually worked at  NCSoft. Are the people that work there even gamers or strictly business people, that might not even speak English, and never posted on message boards their entire life. It seems like there is a strong disconnect between the developers and NCSoft. But apparently at least some people from NCSoft, doctored their Wikipedia as here is a direct quote from it, under the section called "customer satisfaction":

"NCsoft and RightNow Technologies were both recognized in 2006 with the "Beagle Research 'Whiz Kids' Award for Innovative Embedded Customer Service Solution."[9] for NCsoft's integration of RightNow's customer support software.

Since August 2010, NCsoft's North America publishing branch has been rated as "A+" by the Better Business Bureau.[10] This rating is based on a number of factors, including its history of resolving customer complaints filed with BBB."

According to the BBB website itself they are rated A+. No wikipedia doctoring involved, unless you're counting the possible corruption of a website that has been proven to (at least in the past) upgrade ratings when they received payments to become accredited with them. NCSoft are not accredited with the BBB.

[TimtheEnchanter]

According to the BBB website itself they are rated A+. No wikipedia doctoring involved, unless you're counting the possible corruption of a website that has been proven to (at least in the past) upgrade ratings when they received payments to become accredited with them. NCSoft are not accredited with the BBB.

I don't think it takes much to get on their good side. And I highly doubt that the BBB is still on the side of the consumer.

Decided to try the most obvious comparison. Oddly, EA isn't even rated.