NCsoft Buys Unreal Engine 4 Licenses (But at What Cost?)

[Rubberlad]

I thought this was interesting. NCsoft has bought multiple Unreal Engine 4 licenses. I keep thinking what current NCsoft game(s) are going to be shut down in order for these "multiple" new projects to be fully realized? Aion? GW1? For a company that's been operating in the red for 3 quarters straight, I'm surprised they could afford to buy these at all right now. I'd love to say they scrapped CoH in order to help afford the new licenses (but I can't imagine they're smart enough to think *that* far in advance... Or are they?).


http://www.gamasutra.com/view/news/186694/MMO_publisher_NCsoft_licenses_Unreal_Engine_4.php#.UR4VBKV9Ct0

[Tanklet]

Yeah there's lots about this that concerns me. NC has the CoH IP, hardware, software, and rights to CoH2. They've refused to sell for anything less than an exorbitant amount, stating some crap that they "tried" to find a buy that would give the players the level of service THEY felt we deserved ...

They also know that we're not going away, we're not letting this go, and we're not all flocking to GW2 and B&S...
So ... what IF they use their new purchase of UE4 to try and recreate City or City 2...

It rids them of the Cryptic engine, and makes them believe they'll be "heroes" in bringing back the game.

Again, all supposition on my part. It just seems very ... questionable. Especially since right now, they own all the chess pieces...

[Colette]

One of the things I cautioned about, when the mood of our group started turning ugly, was that attacking NCSoft and calling 'em out on their actions would be a point-of-no-return. I'm certain they're aware of the PR stink that the CoH community has raised. They may even be aware that the stink is justified by their fly-by-night business methods. But I'm quite certain that re-entering the wastern market and trying to win back the CoH community is not even on the table. Not after having so carelessly alienating their once-loyal customers.

[Triplash]

Paragon Studios asked multiple times for permission to begin development on CoH 2, they've admitted it sincethe shutdown. They were refused every time.

If these guys did license this engine under the impression that they would gain either my money or my gratitude from letting some other company make City's updated sequel... then they are in for a tall glass of disappointment with some fresh-baked backlash, that's all I have to say.

[downix]

NCSoft uses the Unreal engine for multiple games already, including the upcoming Blade and Soul, but it is the older version. Most people predict that this purchase is for Aion 2 and Lineage III.

[Codewalker]

I really doubt they would. They want to focus on games that do well in their home territory, and superhero games... don't. North America and Europe are just a bonus for them. The big exception being GW2 of course. Kind of amusing to see a bit of egg on their faces with that one.

[FatherXmas]

I thought this was interesting. NCsoft has bought multiple Unreal Engine 4 licenses. I keep thinking what current NCsoft game(s) are going to be shut down in order for these "multiple" new projects to be fully realized? Aion? GW1? For a company that's been operating in the red for 3 quarters straight, I'm surprised they could afford to buy these at all right now. I'd love to say they scrapped CoH in order to help afford the new licenses (but I can't imagine they're smart enough to think *that* far in advance... Or are they?).


http://www.gamasutra.com/view/news/186694/MMO_publisher_NCsoft_licenses_Unreal_Engine_4.php#.UR4VBKV9Ct0

So what MMO did they shut down for the five years it took to develop Blade & Soul in UE3?  You don't need as many devs to launch a new MMO than maintaining it, even putting out new content.  Just because they are developing two new MMOs doesn't mean they are looking to shut down any of their current titles. 

However they really needed to declare that their are other MMOs in the pipeline since the only two they have publicly talked about is Wildstar and Lineage Eternal which both are suppose to be out within 18 months or so.

[FatherXmas]

I really doubt they would. They want to focus on games that do well in their home territory, and superhero games... don't. North America and Europe are just a bonus for them. The big exception being GW2 of course. Kind of amusing to see a bit of egg on their faces with that one.

Except GW 1 was proven to do okay in Asia (Korea, Taiwan, Malaysia, Thailand, Singapore, Philippines).  And since it was developed in the west it's only logical that it would do well here as well.  This is why they expect GW2 to do okay in Asia as well.

[Codewalker]

Except GW 1 was proven to do okay in Asia (Korea, Taiwan, Malaysia, Thailand, Singapore, Philippines).  And since it was developed in the west it's only logical that it would do well here as well.  This is why they expect GW2 to do okay in Asia as well.

Oh, I expect GW2 to do fairly well in Asia -- and so do they (that's why they funded development on it).

I just meant the fact that GW2 is doing better in NA than some of their homegrown titles are doing in Korea...

[HarvesterOfEyes]

I thought this was interesting. NCsoft has bought multiple Unreal Engine 4 licenses. I keep thinking what current NCsoft game(s) are going to be shut down in order for these "multiple" new projects to be fully realized? Aion? GW1? For a company that's been operating in the red for 3 quarters straight, I'm surprised they could afford to buy these at all right now. I'd love to say they scrapped CoH in order to help afford the new licenses (but I can't imagine they're smart enough to think *that* far in advance... Or are they?).


http://www.gamasutra.com/view/news/186694/MMO_publisher_NCsoft_licenses_Unreal_Engine_4.php#.UR4VBKV9Ct0

The fallacy here is that shutting down CoH in any way improved their cash position. It was making money. Shutting down is a money-loser in the immediate term. Doing so was in no way a "savings" as so many people seem to assume. One doesn't save money by shutting down a profiting entity. Doing so is a cost.

Therefore doing so in no way enabled them to make a purchase.

If they wanted to turn that action in to any kind of financial positive they would sell some part of the property to recoup some of their investment, but apparently they're unwilling to do anything that might make shutting down CoH look like other than a whim or vendetta.

Oh yeah, I forgot, they were looking out for the interests of the players... yeah that's the ticket.</John Lovitz>

[TimtheEnchanter]

The fallacy here is that shutting down CoH in any way improved their cash position. It was making money. Shutting down is a money-loser in the immediate term. Doing so was in no way a "savings" as so many people seem to assume. One doesn't save money by shutting down a profiting entity. Doing so is a cost.

Did that tax loophole theory actually get disproven?

[HarvesterOfEyes]

Did that tax loophole theory actually get disproven?

No idea.

The first rule of tax avoidance is "Don't talk about tax avoidance."

If a large corporation does something legal to avoid an anticipated tax (and admits that's why they did it) you can bet the IRS or some other part of the bureaucracy will find some way to penalize them.

Sometimes it doesn't even take that.  If a hew and cry can be ginned up congress won't scruple to make ex post facto tax law. (AIG)

[Aggelakis]

The fallacy here is that shutting down CoH in any way improved their cash position. It was making money. Shutting down is a money-loser in the immediate term. Doing so was in no way a "savings" as so many people seem to assume. One doesn't save money by shutting down a profiting entity. Doing so is a cost.

They didn't close City (profitable) so much as shut down Paragon Studios (not profitable), which has the side-effect of closing City. Paragon was developing two next-gen games in addition to City - they had 80-something folks working for them. They were definitely losing money. City was profitable but Paragon Studios was not. NCsoft allowed Paragon to be unprofitable and then decided that Paragon being unprofitable wasn't good for NCsoft. It's like chopping off your foot because the toe you shotgunned hurts.

[Codewalker]

They were definitely losing money.

Are you sure?

Most conservative estimates I've seen have showed a slight profit. Even if you factor in costs that NCSoft would split up among the subsidiaries (global billing, support, bandwidth, etc), I'd bet they were around breaking even.

However, it's true that "breaking even" would probably be considered as "not profitable". That's just wordsmithing and conveniently ignoring the fact that they were subsidizing development of new games in order to bring in more.

I think it's more likely that some higher up at NCSoft found out what they were working on and decided to kill the project -- and the studio along with it -- because it didn't fit with their core business model of making grindy MMOs. Perhaps it had been previously approved by someone further down the chain or even in NC Interactive. Since I doubt anyone who knows for sure what the motive is will talk about it, what happened on that island may forever be a mystery to us.

[Kosmos]

For a company that's been operating in the red for 3 quarters straight, I'm surprised they could afford to buy these at all right now.

You're kidding right? As mentioned in the thread on their 4Q report and in the stock watch thread, NCsoft is swimming in cash. In the last report they listed roughly $500M in liquid assets (cash, equivalents, financial instruments and accounts receivable). After two quarters of GW2 sales they've been hunting high and low for ways to invest the money instead of giving it to various governments.

Also, the consolidated companies (that is, NCsoft and all their subsidiaries) showed around a $150M net income for 2012 (I'm not actually checking exchange rates, so that's just a ball park figure). About 2/3rds of that was from the last quarter. So you're way off with the implication that they're bleeding cash.

Lastly, even with the parent company showing red ink for the 4Q, they weren't actually operating in the red; they had about a $20M net operating profit after taxes. The reason for the red ink on the bottom line was that they spent so much on non-operational expenses such as a baseball team and because they shuffled money off the parent's books by capitalizing a new American subsidiary.

Let's not delude ourselves into believing NCsoft is failing as a business. They aren't. They suck to do business with, but unfortunately they aren't being penalized for that by short-sighted customers.

[HarvesterOfEyes]

They didn't close City (profitable) so much as shut down Paragon Studios (not profitable), which has the side-effect of closing City. Paragon was developing two next-gen games in addition to City - they had 80-something folks working for them. They were definitely losing money. City was profitable but Paragon Studios was not. NCsoft allowed Paragon to be unprofitable and then decided that Paragon being unprofitable wasn't good for NCsoft. It's like chopping off your foot because the toe you shotgunned hurts.

How much were they losing? I don't need an exact figure, an educated estimate would be sufficient to this discussion.

[Victoria Victrix]

How much were they losing? I don't need an exact figure, an educated estimate would be sufficient to this discussion.

Depends entirely on if you count the 40 plus people they ADDED for the 2 new games as "reasonable development costs."  Obviously you can't run a development side in the black if you haven't produced anything yet.

[Aggelakis]

How much were they losing? I don't need an exact figure, an educated estimate would be sufficient to this discussion.

With around 3-4ish million each year at 80 employees @ 45k (some will be much higher and some will be much lower), salary alone is nearly half their total sales. Overhead (rent, employee benefits [close to what salary costs in some cases!], sending rednames to cons, Hero Con/meetups, merchandise, etc) plus NCsoft's take right off the top - means they MAYBE broke even, and almost guaranteed were in the red.

[FatherXmas]

For a company that's been operating in the red for 3 quarters straight, I'm surprised they could afford to buy these at all right now.

The corporation, NCsoft proper and all their subsidiaries, was slightly in the red ($6.8 million USD) for all of one quarter (2Q 2012) out of the last 35.  I don't have any information about the quarters before that.  In the last two quarters the corporation had a profit of over $41 and $93 million USD respectively.

The parent company, NCsoft without the subsidiaries, was slightly in the red ($6 million USD) for only one quarter (4Q 2012) out of the last 35.

So quit fibbing, it makes you like bad.

[HarvesterOfEyes]

With around 3-4ish million each year at 80 employees @ 45k (some will be much higher and some will be much lower), salary alone is nearly half their total sales. Overhead (rent, employee benefits [close to what salary costs in some cases!], sending rednames to cons, Hero Con/meetups, merchandise, etc) plus NCsoft's take right off the top - means they MAYBE broke even, and almost guaranteed were in the red.

Alright, so less than 10 million a year then.

We've been told over and over on these fora that NCSoft could easily afford to piss away 10 million a year and that hence shutting down CoH wasn't the fool decision many of us maintain that it was.

So I'm unclear which is true: Could NCSoft afford to piss away 10 million a year, or was a 3-4 million a year loss just too much for them to bear?