NCsoft Q1 2008 Financial Results Announced

http://www.plaync.com/us/news/2008/0..._q1_finan.html

SEOUL, South Korea, May 15, 2008—NCsoft® Corporation (KSE: 036570.KS) today announced financial results for the quarter ended March 31, 2008. On a consolidated basis, sales came to KRW (Korean Won) 88.1 billion (US $84.3 million), operating income of KRW 19.7 billion (US $18.9 million), and net profit of KRW 8.1 billion (US $7.7 million). Operating profit showed significant improvements quarter over quarter (63%) and year over year (16%).

Popularity of the Lineage® series in Asia, sustained sales of Guild Wars® and City of Heroes® in North America and Europe, and a decrease in expenses such as advertising and other variable sales costs were some of the primary reasons for the increase in operating income. Of note in Q1 2008, Lineage II reached record-high sales since its 2003 release.

In Q1 2008, NCsoft decided to take a one time write-off expense for the advanced development costs associated with the Spacetime Studios project, after determining the project did not fit into the company’s core development plan. That left a net profit decrease of 22% quarter over quarter and 43% year over year. However, excluding the write-off expenses, net profit would be KRW 15.2 billion (US $14.5 million) an increase of 48% quarter over quarter and 8% from the same quarter last year.

By region, sales came to KRW 49.8 billion (US $47.7 million) in South Korea, KRW 10.9 billion (US $10.4 million) in North America, KRW 8.9 billion (US $8.5 million) in Europe, KRW 9.6 billion (US $9.2 million) in Japan, KRW 2.8 billion (US $2.7 million) in Taiwan, and KRW 6 billion (US $5.7 million) in royalty income. The percentage breakdown of sales by region shows 57% in Korea, 12% in North America, 10% in Europe, 11% in Japan, 3% in Taiwan and 7% from royalty income.

By game title, sales came to KRW 29 billion (US $27.8 million) from Lineage, KRW 35.7 billion (US $34.1 million) from Lineage II, KRW 5.4 billion (US $5.2 million) from City of Heroes/City of Villains® and KRW 9.5 billion (US $9.1 million) from Guild Wars. The percentage breakdown of sales by game title shows 35% from Lineage, 43% from Lineage II, 7% from City of Heroes/City of Villains and 12% from Guild Wars.

NCsoft CFO Jaeho Lee said, “As proven once again in the Q1 financial results, we strongly believe our key franchise products, such as Lineage and Guild Wars, will meet our sales target with a strong customer base and continued content updates going forward.” And he added, “We plan to ensure the smooth launch of many new products in the next two to three years, which will strengthen our position as a global leader in online games.”

This summer NCsoft plans to launch its third closed beta test of Aion® before formally launching the much anticipated product later in the year. Casual online games such as Point Blank™, Punch Monster™, Dragonica™, and Love Beat™ are also scheduled for an official service launch later in the year.

Heh, no mention of GW2 launching or even testing. At least we're still beating CoH/CoV. Lol.

Woo GW>CoH ;D

Guild Wars !> CoH/CoV...

The majority disagrees.

Although, the majority also thinks Lineage II is anything other than a giant pile of frustratingly boring crap, so the majority's mental faculties are a bit suspect... as is the case with most majorities.

Saying Guild Wars is > then CoH and CoV because of its sales revenue, is like saying WoW is > GW for the very same reason.

It isn't better than both because of that, which is what I was saying.

Woah would never have tought GW brings in more money then CoV/H
always wanted to try it, went WoW instead though.

still as long as GW is still making money it must be a good sign.

Ouch, poor CoH : o

Except the thread is about financial performance, so yes, they are both better.

I'll quit being a dick now, though. I realize you're just referring to your personal opinion on the matter versus that other guy's; I'm just being pedantic.

Wow GW made $9.1 million that quarter! That is insane! I bet as soon as they start releasing GW2 info, they are going to get another sales hit.

Rock on, A.Net, rock on.

I don't know about that. Most of the sales come from Lineage II, but, more importantly, most of the titles sold were sold in South Korea where that game is very popular. It's a safe bet that Lineage II is basically subsidizing the other games at this point.

I think I (barely) understand your theory, but I fail to see how you go from Occam's "By game title, sales... KRW 9.5 billion (US $9.1 million) from Guild Wars" to your complex theory.

Please share whatever secret shareholder info you have because if I was a shareholder and they said "this product sold this much" but the truth was "this product is being subsidized to make it look like it sold this much." I would not be a happy investor.

Pretty much. ANet has 135+ employees, that have to be payed each month.

L2 is a pretty popular game over there, but I really don't see or hear about a whole lot of people playing it in the states. It's proof that a games success is never universal.

Despite your smarmy choice of wording, I'll respond. Once.

You don't invest in the video game, you invest in the company. I know maths are tough sometimes, but stick with me here.

57 is a lot bigger than 12 or 10, and 34.1 million is a LOT bigger than 9.1 million. I don't know how much it costs to maintain and market Guild Wars, but the net profit was $7.7 million dollars. Not having Guild Wars would have meant a net loss of $1.4 million minus whatever it costs to operate the game per quarter. Not having Lineage II, however, may well mean not having a company anymore, and that means no Guild Wars.

This is all voodoo, like all economic analysis, and I would never claim to really know that much about economics since it's all bogus smoke and mirrors anyway. However, taking the numbers at face value and adding a few sound assumptions, Lineage II is keeping the company afloat while Guild Wars may or may not be completely paying for its own upkeep.

I agree with you, but losing 1.4 million in a quarter would be a critical hit. A blow so great that could cause the company to break, this rules applies to both GW and Lineage (only one lineage, lets take Lineage 2, this way we can compare one on one). Its not all companies that can fill 1,4 million so easly if they have a negative profit. Not to metion that investers usualyl stop investing after seeing a company with a negative profit, so the monye would stop flowing in and would start to flow out, leading to a breakdown.
Please correct me if im wrong.

Well I wouldn't be smarmy if you read and responded to my post rather than quoting it and talking about something completely different (which isn't even apparent until you clarified it). I know words are tough sometimes, but stick with me here.

I said basically it is amazing that Guild Wars sales is still so high (considering relatively no new content and no subscription fees in most of the world). You said in direct response, "I don't know about that... blah blah subsidization." Subsidization has almost nothing to do with Guild Wars continued sales. It deals with NCSoft's health as a company and the subsidiaries' healths for sure. So maybe you just responded to the wrong post.

perhaps you're making the wrong assumptions. you'd get better numbers in their annual and quarterly reports rather than a press release.

additionally, your assumption of a $1.4million loss without guild wars isn't correct. the $9 million in sales for gw is revenue, not profit. ncsoft's total profit was $7.7 million. you don't know how much profit gw contributes to this. it could be a little, it could even be negative. without a complete breakdown of the numbers, you really don't know.

they had sales of $9.1 million, they didn't necessarily have a profit of that amount.

They will always make profit, because their market area is current in massive expansion, and has been since games emerged. The day they lose profitability is the day MMOs stop growing. I probably will be dead before that happens.

That doesn't excuse their flaws as a company. I am not impressed.

You have to pay monthly fees for Both Lineage games btw, that might explain why it yields such high revenue

No, that was in response to your speculation that the release of new GW2 details may provide a bump in sales. The remainder of the response was merely my own speculation as to why that may not be a safe bet.

This is always a possibility, yes. Hence my distaste for economic data in general. Just think, the sort of speculation we're currently engaging in (albeit it in a relatively more sophisticated way with much more data) is what drives the largest economies on the world! o_0

No, but that's where the sales percentages come in. Lineage II's income stream is huge compared to Guild Wars. While it's certainly possible that Lineage II costs substantially more to run than it's bringing in (or it's very close to break-even), that seems fairly unlikely. You can even look to other pay-to-play games like WoW for evidence of that. The profit margin on that game, even with the free content updates that are provided, is ENORMOUS.

Um wait a sec...am I reading this right? Are you telling me WoW's profits are more than all of NCsofts combined? Maybe I don't know what I'm talking about...

That's probably true. Blizzard made over $1bn last year, most of which was likely from WoW. I wouldn't be surprised if WoW generates 2 or 3 times as much revenue as all of NCSoft's offerings.

Did I mentiont their secure website (account management area) is so slow, it is actually resetting the connection and failing to load? Wow, talk about terrible.

If you think about it, City of Heroes/Villains is a standard MMORPG where you buy it at the store and then pay a monthly fee to play it. Guild Wars, on the other hand, only makes money if people buy the game, the "real world" fan merchandise, or online game upgrades (like character slots or PvP packs).

Guild Wars is still making money than City of Heroes/Villians, and I think that says quite a bit. I think that it's pretty amazing when a free online game is making more money than one that is charging every single user a monthly fee to play it. Keep in mind also that GW is super-cheap in the stores, with each chapter going for $17-30.

not a single word about Tabula Rasa...

blizzard's revenues are closer to 10x ncsoft's revenues

Blizzard owns both world of warcraft AND Starcraft, which is even bigger than WoW in japan and surrounding countries.

And even though the Diablo series is a bit outdated, I can still see chunks of people still buying it as well as the Diablo Chest.

They have 3 renowned titles under their belts.

I'm betting NCSoft wants to say as little as possible about that money pit.

That's true, but you only buy Starcraft for $30 once, not $18 every single month.

Well I think the numbers for NCsoft published games are just average. Keep in mind that NCsoft cut back on marketing and other expenses just to make a profit out of the quarter which really isn't that great. Though I suspect they are assuming sales will be much greater once Aion and Guild Wars 2 hits the shelves whenever they decide to do so.

I thought CoH/CoV died.

i really dont see why NCsoft wont bring games like, dragonica, punch monster, point blank, and smash star, to the united states of america and or canada i bet by doing so there profits will increase tenfold!!!
this is my biggest question i know it will cost them a couple bucks to bring them to the u.s but with the right promotions those games can be pretty successful in america for example dragonica can steal many players from maplestory.

For comparison:

Q2 2007: 8.3 billion KRW
Q3 2007: 13 billion KRW (Eye of the North release)
Q4 2007: 9.2 billion KRW
Q1 2008: 9.5 billion KRW

Sales numbers only, not profit.

Q2 2007 was 1 year since Nightfall's release, with customers eagerly anticipating a soon to come expansion.

I suspect in Q2 2008, 1 year since Eye of the North with no more expansions and no news of GW2, sales will go below the 8 million KRW mark.

Unless they continue cutting advertising and "other variable sales costs"; can anyone say Support team?

Thats a pretty good sustainable income, considering Guild Wars doesn't have a monthly fee. That means a great many people are buying new campaigns, despite the thousands of QQ'ers you see here, and they were able to cut advertising at the same time. The game should do fine as long as GW2 isn't a total downer.

Doesn't change the fact that before the Sims and WoW, Starcraft was the number one selling computer video game ever.
Blizzard makes godly money. It really shouldn't be a surprise. It's like comparing A&W Root Beer sales to the entire Coca-Cola franchise. Of course they are going to have disparaging results. But that doesn't mean anything about the quality of the product (so stop the oh so subtle trolling, profits don't have anything to do with the quality of the games)

Well gaming is now, apparently (at least according to the GDC) the largest media industry out there

beating both box office and the music industry by a mile

Haha, I was a beta tester for that. I remember after about 2 hours of it, I laughed, shut down my computer, and didn't play games for about a week.