World Class Villains

In the rush before Xmas, I missed NCsoft’s investor relations release for the Q3 2011 period. NCsoft is unique among MMO developers in that its quarterly earnings releases include a breakdown of revenue collected from each of their key titles in that period, making it very easy to track how a title is performing.

I don't kick puppies. It lowers the resale value.

Although I’d tracked City of Heroes / Villains’ financial performance for a while now, I’d gotten bored of the trend – there’s only so many ways you can say “Worst quarterly revenue in the game’s history” without looking like you are kicking a puppy. But the conversion of CoH/V to a free-to-play (F2P) title has made it interesting again. A lot of MMO studios that convert to F2P are able to make vague comments about the impact of the new revenue model – up 500%! up 1000%! – but haven’t been open about the actual dollars they were at before and after.

Unless NCsoft changes their earnings release policy, CoH/V won’t be hiding behind such things; hard financial data on the before and after of F2P will be available.

The Quarter Leading Into F2P

CoH/V launched its F2P conversion on 27 September 2011, so that the Q4 2011 results will include 2 full months of F2P revenue. These results should be available in about 2 weeks time, but we can see where CoH/V was directly before the move to F2P.

… which was, again, on the worst quarterly performance in CoH/V history (*punt*). At first glance the revenue of 2 812 M Won looks like an improvement because it is actually an increase in Won over the previous quarter, but a conversion to US$ shows that increase is due to the the Won weakening against the US dollar. Instead, it’s closer to a 4% decline in revenue from the previous quarter, with CoH/V earning about US$2.4m in the Q3 2011 period.

Click to enlarge it, because your eyesight isn't THAT good.

Using the rough formula of dividing that revenue by $45 (3 x $15 a month in subs this quarter) then increasing it of about 10% (because all those long-term players are paying less than $45 a quarter to play CoH/V) then we end up with CoH/V currently having somewhere between 55k and 60k players.

It’s all rough because there are a lot of factors at play that the financials don’t show; for instance, in those estimates I’m assuming that $0 came from the Booster Packs that CoH/V sells, whereas I know from other sources that they sell very well (or sold well, given that they were removed for sale in that form when the F2P transition happened). So revenue from such sources could actually be inflating the player number estimates shown here.

How Will CoH/V Do In Going Hybrid F2P?

Better than they were under a pure subscription model, that’s for sure. (This would have sounded better if I’d published this blog entry before Paragon Studios had announced they were “blown away” by how well the move to F2P has gone for their player numbers and revenue, but sometimes you sit on a blog entry for just a day too long…)

It's extremely unlikely that I'll be able to use the phase "worst quarterly revenue in the game's history" in conjunction with CoH/V for a while to come.

Regardless, the initial shift to a hybrid F2P model is likely a boon to any MMO title. Existing subscribers are unlikely to cancel, given that they’ve paid this long and the MMO is probably offering a bunch of reasons to stay subscribed (and some are probably locked into their discount payment period). So that revenue base is relatively solid.

Then a whole heap of new players come in and even if only 10% buy something, it’s a big source of new revenue. It could only mean an average of $1 or $2 per paying user (Average Revenue Per User, or ARPU) per month, but when that paying user base goes from 55k to (say) 200k, it makes a big difference.

Keeping those players in the longer term is a different story, however. And again, Paragon Studios still has all its eggs in one basket until they launch their next title. Which we’re still waiting for.