I was surprised to see a large spike in my site traffic today, especially to older posts about how many players CoH/V had. Then I looked further and saw that NCsoft announced its intentions to shut down CoH/V and Paragon Studios. This has taken a lot of people by surprise, given that it seemed that CoH/V was doing well since its conversion to F2P and lots of extra things being announced.
The Why – NCsoft’s Possible View
There are a few reasons for CoH/V shutting down.
First off: NCsoft’s financial position. It’s Q2 2012 financial report came out in early August and it’s the first one I can remember seeing where NCsoft actually lost money in a quarter. It’s also part of a very clear trend of NCsoft’s group revenue declining – in Q2 2011 NCsoft’s operating profit was 43 497 M Won (approx. US$39m); a year later it is -7 641 M Won (approx. -US$6.6m). NCsoft is blaming it on a “one-off” labour cost, but even without that the negative trend in group revenue is very clear.
This decline in operating profit is despite NCsoft’s sales being down only 12% (from 166 815 M Won in Q2 2011 to 146 808 M Won in Q2 2012). For operating profit to have fallen so far without sales declining at the equivalent rate points to NCsoft having a lot of larger expenses it is now trying to cover (shown on page 6 of that Q2 2012 Earnings Report). It makes sense that NCsoft is looking around for costs to cut.
(NCsoft also saw Nexon become a significant minority shareholder in this time period – I don’t know the impact of that on NCsoft’s decision making, so I’ll just put that to one side.)
Which is where Paragon Studios comes into the crosshairs. CoH/V only provides NCsoft with 2% of its overall revenues, down from it’s best ever contribution when it was 18% of overall revenue (when City of Villains launched in Q4 2005). CoH/V’s conversion to F2P might have brought player numbers back, but it didn’t bring the revenue back. The Q2 2012 results continue this trend – this quarter’s revenue is 2 855 M Won (approx. US$2.47m), down about 3% from the previous quarter and 2% year on year despite CoH/V going F2P in Q4 2011.
Again, it’s another quarter of “CoH/V’s worst revenue performance ever”. Yes, CoH/V has paid for itself many times over. But it’s only apparent future is revenue down, down, down.
All the extra cost of turning CoH/V go F2P has failed to see a return on investment; it’s very possible that all the extra effort spent on turning CoH/V F2P and then producing content for players to buy has actually meant that CoH/V is now less profitable than it was before going F2P.
If NCsoft was looking for places to cut expenses, a title with no future revenue growth is a good place to start from their point of view. On top of this, Paragon Studios was allegedly working on a second title. They’ve been doing so since at least the start of 2010 and it involved a number of their more senior people. That’s a lot of effort (read: resourcing and expenses) for a title we know nothing about.
So whatever profit (if any) is made on CoH/V by Paragon Studios, it may well be that the studio itself is unprofitable when this second project is taken into account. Secret projects are the easiest to kill, regardless of the sunk cost – it’s hard for there to be fan / press outcry when the fans don’t even know what they’ve lost.
For those looking for a why, those are the obvious factors – NCsoft is under a degree of financial stress and Paragon Studios hasn’t been able to deliver increased revenues despite a lot of extra investment in CoH/V. So it becomes an easier decision to shut things down and reallocate NCsoft’s cash elsewhere.
But CoH/V is Profitable!
Assuming this is true, there’s a big difference between “profitable” and “profitable and worth the continued investment”. NCsoft wants big successes, not titles that have limited future potential for growth. If the money might be better off going to ArenaNet (you bet NCsoft wants Guild Wars 2 to an incredible success) or Carbine Studios (Wildstar is on its way) than staying with Paragon Studios, then it makes sense to divert the cash.
NCsoft Should Sell CoH/V Off!
I’m 99.5% sure they won’t. NCsoft doesn’t sell off its failing titles. Why would it want to create the competition for itself? Much better to try to convert current CoH/V players to titles like Guild Wars 2 than hand a competitor an existing title on the cheap that comes complete with a loyal fan base of something like 55k to 60k players.
So if NCsoft says CoH/V and Paragon Studios are shutting down, they are shutting down. CoH/V’s closing date is November 30. Don’t expect any cavalry to ride in and save it.
On A Long Enough Time Line, We’re All Dead
One of the things I’ve been criticised in the past for when tracking CoH/V’s revenue decline was that if I predicted its failure long enough, I’d eventually be correct. I don’t think I was constantly going “CoH/V will totally fail and it sucks and it’s the most awful game ever” because I didn’t believe that; what I had issues with was the approach it took to trying to evolve itself. (Plus I spent 5 years or so playing CoH/V – it definitely wasn’t the most awful game ever.)
I kept wondering what Paragon Studios had in the bag to draw players back, given the ever downward trend of revenue. Despite the popularity of CoH/V’s developers within the CoH/V community, they completely failed to grow the title’s audience despite delivering a lot of popular requests. The Going Rogue expansion came across to me as muddled and too limited, plus its attempt to be both the best newbie experience possible plus increase the difficulty for veterans at the same time seemed actively confused. The F2P experience for a completely new player was just plain unfriendly in my experience of it.
And right now the in-game death of Statesman – CoH/V’s most well-known character and icon – seems horribly portentous. (Looks like I was completely wrong about Statesman being brought back later on.)
Other factors need to also be considered – CoH/V has a number of direct superhero MMO competitors, none of whom have done that well. The MMO industry itself is in a malaise, with 2012 being the year of the massive flop, the massive collapse and a lot of closures, big and small. I’ve got another article in development about that, but the MMO age that flourished from 2004 to December 31, 2011 is over.
UPDATE TO ADD: I’ve also got a belief that NCsoft’s future corporate strategy is more focused its Korean home soil than in the US and Europe, which is possibly why CoH/V no longer ‘fits’. Tabula Rasa still casts a long shadow; after all, what new EU / US-based projects has NCsoft announced in the last 2 years? Guild Wars 2 and Wildstar don’t count, given the length of time they’ve already spent in development.
Proof I Have A Heart
What could have been done differently? Right now I think the wound is too fresh to answer that. Maybe later.
CoH/V was the MMO that ruined every other MMO for me. If your game doesn’t have travel powers, I’m not interested. I remember getting up at 4am on Sunday mornings so that I could take part in the beta and that the very first time I logged in, having followed the game pre-release for 2 years, my first thoughts were, “Wow! This game is fantastic and matches my expectations – I haven’t been wasting my time!”. So, despite not playing CoH/V for a while now, it is sad to see such a fantastic title that broke so many new, fresh ideas – sidekicking, travel powers, scaling instances – and that I spent so much time with is now on its way out.