NCsoft
There's an interesting article about NCsoft in the Korea Times (thanks Kotaku). Here are a few excerpts:NCsoft Shifts to Non-Game Internet Services
NCsoft is slowly but steadily expanding to the non-game Internet service sector, while its cash-cow game business is losing vigor. Korea's largest game company this year has released a series of social-networking services from Openmaru, an in-house software studio, with strong support from its CEO Kim Taek-jin.
Meanwhile, its stock price almost halved over the past two months, as investors raised doubt about the prospect of its online games business.
CEO Kim said Wednesday that the firm will increase investment in the online services sector...its online game business is showing signs of decline.
... The sales heavily depend on two PC games, "Lineage'' and "Lineage II.'' Both have earned the company more than 1.5 trillion won since 1997, but are gradually losing subscribers. In the second quarter alone, its revenue fell by 16 percent.
To create a new momentum, the firm has spent enormous amounts in hiring renowned game developers in the United States and gave them the freedom to create anything for the past six years. But the resulting product, an MMORPG named "Tabula Rasa'' which was released earlier this month in the Untied States, is far from convincing anyone.
In one example, MSNBC's Scott Taves reviewed the game that it "tries, but comes up short'' and "it's just not compelling.'' It is ranked eighth among recently released PC games in the United States according to gamerankings.com, an online site that evaluates new games ― a fair performance for ordinary games but not for a six-year money-devouring project.
NCsoft said that it will take some time to check the U.S. sales, but added that there have been "ups and downs'' in sales in local retail shops.
What I find most interesting about this article is the extremely negative tone it takes toward Tabula Rasa, as if it's already been determined that the game is a white elephant. I haven't played it, so I can't comment on the quality of the game, but it's interesting that the tone is so negative before even initial sales numbers have even been released.
What's also quite interesting are what appear to be the expectations from the Korean media for the game. Let's look at this again:
To create a new momentum, the firm has spent enormous amounts in hiring renowned game developers in the United States and gave them the freedom to create anything for the past six years.
Absolutely no one in the U.S. thought Tabula Rasa was going to be a massive hit. It has the potential to be a niche MMO, develop a loyal following, and last for quite a while. What it sounds like from the Korean side, though, is that NCsoft thought they were obtaining a huge growth driver, a mega-hit, when they signed Richard Garriott. Or, at least, that's what they expected after six years of development--the next Lineage.
Um, sorry about that.
Far more serious, though, is the apparent hemmorhage of revenues from the Lineage games, which are NCsoft's money machine. Down sixteen percent in one quarter? That's a crisis. And in case you're wondering about the stock, it's lost almost half its value in the last seven weeks.
That's not a decline--it's a plummet.
NCsoft countered the next day with a statement that flatly denied the article's claims (again, thanks Kotaku):
For over ten years, the core business of NCsoft has been Online Games. NCsoft has no intention of moving focus away from online gaming...Gaming is clearly the core of NCsoft's business and will continue to be that way for years to come.
That may be be true, but if the MMO revenue line continues to go down, while the social networking revenue line keeps going up, it may force their hand.
When a publicly-traded company makes its name on one product, like NCsoft did with Lineage, it's both hugely profitable in the present and very dangerous in the future. Look at it this way: a company grows at an incredible pace because of one game, so the entire company is focused on that one product. Revenue and profits soar, and so does the stock.
At some point, though, growth of that one game (and its descendants) is going to tap out, and when a publicly-traded company stops growing revenues, it costs anyone who owns stock in the company money, because the price-to-earnings ratio of the stock is going to begin to contract. So publicly-traded companies are under tremendous pressure to continue to grow.
The catch-22, though, is that to continue to grow, NCsoft had to become something they weren't, which was a diversified company with many MMO properties. Very few companies in any industry manage that kind of transition successfully
I was wrong about them exiting the U.S. market (at least for now), but a company with major issues like this are almost guaranteed to significantly change how they do business.
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