NCsoft issued a statement about the future of City of Heroes / Villains (CoH/V). The TL;DR version is “It’s still shutting down”.
“City of Heroes®Players and Fans,
We wanted to let you know that your voices have been heard and your concerns have been taken into serious consideration. We appreciate the overwhelmingly constructive and positive messages in the emails, notes, and packages you’ve sent in support of the game. It has not been an easy decision for us to close Paragon Studios® and prepare to shut down City of Heroes. We’ve exhausted all options including the selling of the studio and the rights to the City of Heroes intellectual property, but in the end, efforts to do so were not successful. City of Heroes has a special place in all of our hearts, and we want to ensure its reputation and the memories we share for the game end on a high note.
Once again, we will be holding events throughout the process of preparing for the game’s end, and we encourage players and fans of the franchise to join forces and enjoy their time in a game that we’ve enjoyed supporting for more than eight years.
The NCSOFT® Team”
CoH/V fan reaction hasn’t been particularly positive to the news (not that you’d expect it to be). There are a lot of comments that the statement is just a PR move and that if NCsoft really wanted to, they could have found a buyer for the studio and the IP and keep the title going.
I don’t believe that NCsoft ever genuinely thought about selling off this title. If NCsoft was serious about selling CoH/V and / or Paragon Studios, they would have started the process BEFORE announcing the shut down (and maybe they did, but I doubt it). This is because the day that NCsoft announced CoH/V’s closure, they cut a huge amount of potential value out of the title. Announcing the closure before trying to sell told the market that NCsoft didn’t want the game anymore, thus discounting the price they could have received.
So what kind of price would be reasonable for CoH/V? The simplest approach would be looking at the last 12 month’s revenue and make it a multiple of that. The last four quarters earned NCsoft about US$10m from CoH/V, so the starting point to discuss price would be probably be around that US$10m figure.
In normal situations you’d probably factor in things like future earnings, studio debt (which I’d doubt Paragon Studios has much of, at least for CoH/V) and ongoing studio costs (e.g. 80 people by industry-rule-of-thumb $10k a month in earnings and rent costs equals US$9.6m a year) to work out a sale price. In selling a title like CoH/V I’d expect NCsoft to want to get as much back of its ‘potential revenue’ as possible if they were going to sell. No point giving a future competitor a free ride, especially when CoH/V comes in with a lot of goodwill behind it. A back-of-the-envelope sale price for CoH/V and Paragon Studios in the realms of US$10m to US$25m wouldn’t seem unreasonable (at least before the closure was announced, anyway).
As a point of comparison, Perfect World bought Cryptic Studios in a US$50m+ deal with that price covering the entire studio and its IP rights. Cryptic had two active titles (Champions Online and Star Trek Online) and a third underway at the time of purchase, while also apparently running up losses for Atari of US$7.5m for that fiscal year.
When NCsoft announced the closure of Paragon Studios, they shut people out of the office on the same day and appear to have made job offers / other positions available to those people they want to keep. Other ex-Paragon Studios employees have been looking for work elsewhere. This means that NCsoft wouldn’t actually be able to sell off Paragon Studios as it was and only be able to include those who remained or resigned from their new job to come back.
Again, not a move you’d make if you were seriously thinking about selling the studio off and had the cash reserves to hold out for a good sale price as NCsoft does.
Writing off the studio likely has a number of tax benefits and it is a lot simpler. Corporate tax specialists would be pretty certain about the size of those benefits based off an internal look at the financials, while negotiating a sale price has no fixed outcome and can end up costing you both time and money for zero return.
And again, the crucial question: who buys? Who wants to add a superhero MMO to their portfolio of titles? Their aren’t any obvious contenders that come to mind. Another eastern MMO publisher might consider such a move if they are looking to get into the US and / or Europe, with NCsoft better served to charge those kind of buyers a premium or not sell at all just to avoid dealing with the extra competition.
I’ve seen titles like APB and Hellgate: London mentioned as examples of ‘saved’ MMOs, but it should be remembered that their IP owners basically collapsed financially and those games were picked up cheaply as a result; this isn’t the case with CoH/V.
At this point the future for CoH/V is limited from a commercial point of view. With NCsoft not looking to sell, private servers could be an option if those dedicated to them can get them working, but it is likely that NCsoft would launch legal action if any such servers did pop up.