NCSoft – Q4 2006 report

Fifth article in a series! A couple of weeks ago NCSoft release their quarterly reports about subscription numbers and financial status.

The .zip file with the original pdf document can be downloaded here.


– Tabula Rasa close to beta and to be released in second half of 2007.
– Guild Wars skips the “spring” expansion, only one expansion to be released near the end of the year.
– Lineage 2 breaking 100k subs in the western market.
– CoH/CoV falling back to 150k.
– “All pass” service in the works (one monthly fee for all games).

Raw numbers:

1,408,170 subs worldwide (+52,200)
11,953 in the US (+2,226)

Lineage II
1,036,303 subs worldwide (-80,624)
105,039 in US + EU (+11,039)

City of Heroes
154,953 subs worldwide (that is US + EU only) (-17,467)

Guild Wars
3,122,000 boxes sold (+675,000)

Lineage is doing pretty well and currently has 400k more than its sequel. This should give a hint to all those mmorpg companies that continue to abandon their games to build stupid sequels that cannot even top the original. I repeat: in this genre sequels are stupid for a long list of reasons, and this is valid even for the “disguised” sequels, not just for those games sharing the exact same name. Anyway, Lineage seems stable or slightly growing everywhere and I also noticed the “personal accounts” are rising. Someone knows how much Koreans pay monthly?

Lineage 2 instead is like Lineage in reverse (sales went up 2% for Lineage and down 2% for Lineage 2), while one is stable but slightly growing, the other is slightly declining and losing subscriptions in a consolidated downward trend. The only point of notice is that the game is becoming successful in the western market and now has more than 100k. I’m impressed. I don’t know from where these players are coming (maybe the consequence of NCSoft aggressively countering the “free shards”?) and I DEFINITELY cannot understand what players like in this game. Maybe the lust for PvP make people digest all sort of crap. I wonder what could happen if there was in the market a vaguely decent PvP game.

CoH is losing a sensible number of subscriptions but I saw that coming. The development stalled as the staff was moved to other projects. I read that they released a new patch recently, so the subscriptions may slightly rise in the next quarter, but I doubt this game has an interesting, bright future. As for the binomial DAoC/Warhammer, only one can survive between CoH/CoV and the Marvel-branded title in the works. The game is on a (albeit long) countdown and will likely sink over time as its appeal fades (obviously that’s not something they are going to admit).

Consolidated City of Heroes/Villains franchise sales were 5.5 billion Won, down 26% QoQ due to a decrease in user base.

Not much to say about Guild Wars. In the last report I wrote that the Nightfall release made them sell another 500k and reach 3M total, so the number was already updated. It seems holding rather well. The real interesting thing is that they seem to have discarded the plan of one expansion every six months as only one is planned for this year and to be released around the release of Nightfall a year ago (October). I wonder if this is still a viable business choice.

Overall from a superficial glance at other numbers it seems that the only market sensibly growing is the European one (+68%). While the profit for the full year 06 is down a -43% over the 05. Sales are stable, while costs went up (also because of Auto Assault trainwreck).

It’s interesting to see their previsions for 2007. They expect Lineage 2 to go up by a 12%, CoH and Guild Wars to lose 15% and between a +969% and +1313% for “other” games. This last number is actually believable and even conservative as they are launching new stuff this year (Aion in Korea and Dungeon Runners and Tabula Rasa in the western market).

For 2007 business goals, NCsoft is anticipating sales to be between 358 billion Won and 367 billion Won, a 6% to 8% increase from the previous year. Operating profit is expected to be between 42 billion Won, with little change YoY and 49 billion Won, a 13% increase year over year. This guidance reflects Tabula Rasa, Aion, and several casual games officially launching within year 2007.

NCsoft’s total investment in product development (Live update cost + new game development cost) grew to approximately 90 billion Won last year from 25 billion Won in 2003. In 2007, this investment is expected to grow to 108billion Won, a 18% increase from the previous year. This strong commitment in product development reflects NCsoft’s strategy to build a strong portfolio of products to keep up with growth in online game market, that is expected to grow 30% a year.

NCsoft has built a development system to introduce at least one blockbuster MMO games and several casual online games a year. To do this, NCsoft spent 64 billion Won for new game development in 2006. This amount will grow to 80 billion Won in 2007.

I hope some of those go to Lum ;)

Tabula Rasa and Aion will officially launch in the second half of 2007, meaning that sales contribution from these products will be limited to some extent. However, games launches have certain costs associated with them, such as the purchase of game servers, the hiring game masters, and marking expenses. For these reasons, profit margin in 2007 could be lower than our mid-term target margin 20%.

In North America & Europe, Exteel, a mech shooter game and Dungeon Runners, a multiplayer action role-playing game, will officially launch in the first half of 2007. These multiplayer games will be free to download and play at the basic levels of gameplay. Additional contents will be available for a fee (in-game item sales and membership packages).

Tabula Rasa, a highly anticipated MMO, will enter a closed beta testing stage soon and will officially launch in the second half of 2007. Also an additional update to the Guild Wars franchise will go live in the second half of 2007.

As I’m against RMT I don’t like what they are doing with Exteel and Dungeon Runners. As I wrote in the past I’m willingly to pay for content, but not pay for items or other unjustified smoke and mirrors.

Finally, they also announced an “all pass” monthly subscription working along the lines of SOE one. So you can play all NCSoft games while paying one unified monthly fee, but I guess you still have to purchase the single games and eventual expansions. We’ll see if NCSoft will be able to provide a better deal.

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