NCsoft’s 3Q 2017 financials: Lineage M drives record profits, Guild Wars 2 Path of Fire isn’t too shabby either

NCsoft had an exceptionally good third financial quarter this year, reaching a record high in sales and operating profit for the company, and it’s almost entirely thanks to the mobile MMORPG Lineage M, which didn’t even bleed the rest of the Lineage franchise as you might have expected (Lineage and Lineage II held remarkably steady this quarter compared to last, as did Aion and Blade & Soul).

Good news for Guild Wars 2 as well; NCsoft notes that ArenaNet’s flagship brought in over $20B Won, “an increase of 49% [quarter-over-quarter], driven by the second expansion pack sales” that saw US and European sales figures in particular increase 13% QOQ “on the back of Guild Wars 2 performance.” $20B Korean Won is about $18M US. So Path of Fire at least performed well enough for NCsoft to gloat about it, twice, and it’s a big boost to GW2, especially considering Q2 2017 was the game’s worst ever – but it didn’t top Heart of Thorns’ huge showing two years ago.

Before you ask, no, we don’t know how well WildStar is doing; NCsoft doesn’t report it separately anymore. But it’s still flying. That’s enough.

SHARE THIS ARTICLE
Code of Conduct | Edit Your Profile | Commenting FAQ | Badge Reclamation | Badge Key

LEAVE A COMMENT

36 Comments on "NCsoft’s 3Q 2017 financials: Lineage M drives record profits, Guild Wars 2 Path of Fire isn’t too shabby either"

Subscribe to:
Sort by:   newest | oldest | most liked
Siphaed
Reader
Siphaed

Business -not gaming business, but business in general- sense says that Wildstar is a lead-loss (leader loss) for NCSoft. Namely for company namesake and consumer PR appeal. They took a very heavy hit when the shuttering of City of Heroes in the Western market. Nearly every other new MMO announcement article from their future portfolio included “not buying another NCSoft game after City of Heroes” commented on it. Whether a minority or not, that is publicly viewed as negative press.

So by keeping Wildstar open for a significant lifespan of an MMO, they can siphon off good PR relations for their other games. “Oh, NCSoft has changed and is no longer killing off unprofitable games such as Wildstar. Maybe I should check out [insert other NCSoft game here].” The profits of other games, significant as they are, will keep that one afloat doing what it is doing as a marketing campaign, so to speak.

P.S. Before bringing up Richard Garriot’s Tabula Rasa, know that there was a whole contractual legal spiel behind that catastrophe. In order to cut ties with Richard Garriot, they had no choice but to cancel the game because of his name being in the title (and I’m sure there were larger stipulations in his contract making the game, possibly owning certain aspects and payable royalties even if employment was severed with the company at a future time).

kalamari_
Reader
kalamari_

things to remember:

PoF is 30 bucks, not 50 like HoT was.

PoF had a very short timespan between announcement and release (and also literally 0 hype building and advertisment, like anet did with HoT)

PoF launched at the end of the quartal. (many ppl waited for reviews. first looks and their next salary before purchasing PoF) so the next quartal should also have some significant box sales.

deekay_plus
Reader
deekay_plus

we shall see in three months won’t we :)

Nick
Reader
Nick

Wow – the mobile games made more money than all their MMOs combined. :(

That said I am going to check out the Lineage mobile game and see how it goes when it releases tomorrow. I would be playing Aion, but every since buying a top of the line computer it no longer runs. Maybe it was meant for older computers. Hopeing for an Aion 2 MMO that isn’t mobile.

Reader
Patreon Donor
Veldan

I’ve been hoping for an Aion 2 PC MMORPG for years. That said, I hope there won’t be one any time soon. I hope that there will be a day that lockboxes, P2W, obnoxious daily rewards that require you to log in 3 seperate times at least an hour apart and many more things will all be in the past and we can go back to actually having good games. When that day comes, I hope they make Aion 2. If they did it today, I wouldn’t even try it.

Nick
Reader
Nick

I actually agree with all of this. The lockboxes are off-putting and I hate games that put me on a schedule like it’s work with consistent and scheduled log-in requirements.

Reader
rafael12104

So my key take away? You bet your ass they are going to do more mobile. Mobile BnS II and another flavor on top of that. And don’t be surprised if you see an annoucment for mobile GW2 in the near future. No way?

Look at that first slide! Let that silince any doubt about where the money is in APAC. And what is good for the goose, is good for the gander. Seriously, don’t be surprised if you see a Guild Wars flavor of mobile announced soon.

A good quarter for NCsoft and that explains the re-tooling and the renewed effort call Linage TL. They can afford to bring that home, and as you can see for the game charts Lineage is in decline. They need a replacement.

Blade and Soul, had a good Q1 but has fallen off. It went F2P in Korea in Q1. It was still a sub game then, and in Japan. Mixed results. I think, to be honest, missed opportunities here in NA/EU. It is amazing how little they promote the game here until recently. Ask MOP staff. Their PR is crap, but suddenly, it is a little bit better this fall. Overall, they have a few things in the works to sustain BnS. We will see if plays out well. The good news might be that success of BnS mobile might actually help BnS standard.

Wildstar. Guys, I think that is a gimmie for us. They haven’t shuttered it, and I think they are willing to keep it limping along to keep use engaged in the West. It seems to me, they learned something from CoH and wary of the NCsoft brand here in NA.

Overall, things are looking good for us in the west. Exceptional for mobile fans.

Reader
Armsbend

Can anyone tell me why you would use lighter shades of the same French blue on a bar graph?. Are we expected to download it. Take it to a copy shop. Blow it up to 500% and then use a magnifying glass to find out where the lines are?

Reader
rafael12104

Ok, good. I thought I was going color blind.

miol
Reader
miol

A less distorted chart for a better comparison:

3Q17 chart.jpg
Reader
rafael12104

Awesome. Thanks. Was this in the full deck?

miol
Reader
miol

Nah, did the same last quarter and only added the new numbers this time.

Like others, I just couldn’t take their “philosophy” on charts anymore! ;P

Reader
rafael12104

Well done, and thank you!

miol
Reader
miol

And how much “mobile” outshines the rest now:

3Q17 chart mobile.jpg
Reader
rafael12104

Sheeeez… Welp, I think we all know which way is up.

Reader
Sally Bowls

If you read the comments hereabouts, I think you will find vast herds unclear on the direction of up. :-)

Reader
Sally Bowls

Seems like a very good quarter for NCSoft

Its sales doubled and operating profit quadrupled on-year thanks to its mobile game Lineage M, which was released in late June. Its cumulative sales through September reached W1.23 trillion, making this the first year the 20-year-old company’s sales have exceeded W1 trillion. NCsoft is the third game developer in Korea to achieve the milestone, following Nexon and Netmarble Games.

I think the GW2 news was fine but my initial impression was more good than great, but it is complicated by PoF being in the end of the quarter.

For HoT, the revenue level of GW2 was about 20BKW per quarter and the launch quarter saw a bump of about 17BKW. In an earnings call, NCSoft said between 2/3 and 3/4 of that was from cash/shop gems which says that HoT sales of the expansion itself from June through Dec of ’16 were about 5BKW or US$4.5M. The total bump for PoF was 6.6BKW. If the cash shop sales % remained the same, that put the expansion itself selling a couple of million dollars. Note that PoF launched late in the quarter and NCSoft does expect a bump to continue. Although we will probably never know how much of that will be from people buying PoF after launch vs cash shop sales.

GW2 is doing fine; no reason it could not outlive me. However, if I were an ambitious manager at ANet, I would worry about the intangibles.
I think with this quarter we can see that NCSoft has turned the corner and is now a mobile developer more than PC/console.
NCSoft wants to sell globally and GW2 is not very global.
NCSoft wants mobile tie-ins to their PC (now PC/console) MMOs and while NCSoft has discussed work being done on GW2 mobile, it was not discussed this quarter. IMO, this is not a good sign; it may have been rebooted/cancelled.
NCSoft says for Western Hemisphere and Japan, console is larger than PC and that new non-mobile games which support the PC will also support consoles. I have not heard GW2 console rumors since ’13.

Q2’17 being the worst quarter ever is not really news as Q1’17, Q4’16, Q3’16, and Q2’16 were also the worst quarter ever for GW2.

GW2 can and hopefully will continue to motor on, but it seems like it will be fighting a headwind as it may not be a great fit in NCSoft’s stategies-du-jour.

FYI: from the Earnings call:

The second part of my strategy is that, as we have continued to develop — as we continue to develop the MMO games that we have on the mobile platform, what we have seen is that different from the existing games that we developed on our PC-based MMO, of course, Lineage M would be a quite exception to this second strategy. But for the games that we develop on our ongoing basis, from the current time going forward, we actually are targeting a global market when we look at the target user base for these games. So when we develop look of the game, the feel of the game, the game style of the game, we are looking at a global audience as the target audience for the development. And also looking to service these games on a global basis. So I think that is a different approach that we have had from the past. And also, we have talked about our PC-based games and talked somewhat during the presentation about the revenues and the projections going forward. But rather than calling them PC-based games, we now internally call them PC/console-based game. So what this indicates is that when we develop these games, that would be the non-mobile games — the non-mobile online games. These are games that we will be developing to support both the platforms that would be PC and also console. In terms of the overall situation, because as you are aware, in the Western Hemisphere and also in the Japanese market, there are — the console-based platform is the bigger market. So we do want to be able to tap into that market with the future games that we do release. So that is a second strategic direction.

Reader
Utakata

“But it’s still flying.”

…and under the radar apparently. o.O

Reader
Bruno Brito

I’m going to assume the game is not expensive to keep afloat. Or just under the radar, yeah.

Call me crazily optimistic, but i still think WS can get a following. I just don’t know how, and clearly, not the devs either.

Reader
Utakata

It’s a way underrated MMO that has likely one of the best housing mechanics going. It’s unfortunate WildStar left a bad taste in a lot of mouths that folks can’t get over when it was first released. Not that I blame them…but I think it’s time some of those folks give it a second pass IMO.

Meanwhile, it appears to sit sustainable – perhaps even slightly profitable I dare say – on the North side of the big plug being pulled on it. The bad news is, so did City of Heroes. :(

finyar
Reader
finyar

For comparison: Heart of Thorns made 37,331 billion KRW during its launch quarter, PoF only 20,145 (the full, rather short pre order phase included).

TRU?H
Reader
TRU?H

Keep in mind PoF launched at the end of it’s quarter as well, with only a few days worth of sales in this quarter. So we will likely see more PoF sales numbers in the next quarterly report.

Reader
Schmidt.Capela

A nearly 50% increase, compared with the worst quarter for the game ever, in a B2P game where box sales supposedly play a large role, happening in the quarter where a new expansion was released. To be sincere I’m not sure this is something worth gloating about, though we need to wait until next quarter to see just how much an effect the expansion has on non-box-sales revenues.

The big news, though, is how incredibly well mobile games are doing; with mobile being the main driver for the company growth, it’s now bringing NCSoft over 4x more money than all their MMOs added together. Great news for NCSoft, though I’m not sure it’s good news for fans of their MMOs.

deekay_plus
Reader
deekay_plus

18 million usd divided by $50 (which is iirc the price of POF) is 360k copies sold if no gems were sold in the quarter.

that’s worse than HOT’s maximum of less than 500k launch copies sold.

Reader
Terren Bruce

PoF only cost $30 actually.

deekay_plus
Reader
deekay_plus

yes we established that below.

Reader
Sally Bowls

Remember NCSoft explicitly said it was mostly cashshop/gem sales not expansion.

So to answer the question about Guild Wars 2, if you look at the revenue before the expansion pack it was in the range of around KRW20 billion so what you have said is the situation that we face right now. Then after we launched the expansion pack of course we did see a revenue increase. If you see where the revenue drivers were in terms of the increase in itself, actually around three-quarters or maybe two-thirds of the revenue came from our in game item sales or our gem sales and then the remaining revenue was actually driven by the actual box sales that we had.

So my math is:
HoT Expansion bump (37.3-20) = 17.3BKwon
7/24 (1 – average(2/3,3/4)) of 17.3 = 5BKWon of direct expansion sales.

PoF Expansion bump (20.1-13.5) = 6.6BKwon
7/24 (1 – average(2/3,3/4)) of 6.6 = 1.9BKWon of direct expansion sales. (Note this assumes the cash shop % stays the same which is not unreasonable but it could be more or less)

miol
Reader
miol

But if they really sold 500k copies for $50 a piece at launch for HoT, those 5BKWon would only make ~16% of the sum of direct expansion sales in those first 2.5 months after launch… /scratches head

deekay_plus
Reader
deekay_plus

500k figure for HOT was only if no special edition or gem sales occured. it was the maximum theoretical that could’ve sold at launch.

Reader
Peter

PoF is $30. Many people mention that PoF made less than HoT without taking that into consideration.

deekay_plus
Reader
deekay_plus

not forgetting sally’s note above that’s just 600k copies sold maximum if no other sales, and in teh investor call they attributed thebulk of sales in teh quarter to cash shop revenue.

so it sold even worse than that, even at a loss leader price point.

Reader
Riccardo Tavano

Consider also That PoF released little before the end of the quarter. Meanwhile HoT released at the begin of it…so it’s like 2 months of sales vs few weeks.
If sales were 32+18 for two quarters, we could easily end up with something like 20+25…which wouldn’t be too shabby considering that PoF cost less than HoT.

rahkeesh
Reader
rahkeesh

Still you don’t drop the price to $30 hoping to sell only 100k more units. GW2 is hanging on but this expansion didn’t bring in the people the game would need to actually grow. Meaning it’s all a slow march downhill from here, and that Arena.net will start putting (more?) resources into another game if they want to continue as a company.

Reader
Sally Bowls

The company is NCSoft, not Anet. In one year NCSoft went from almost no to 40% mobile engineers. I think they will continue to keep headcount lean in cash cow products in order to fund NCSoft’s strategic / growth areas which are not currently a strength of ANet. Why would a NCSoft executive approve a new engineer in Anet over Lineage M or B&S M or the four new games from the recent NCSoft Media Day?

rahkeesh
Reader
rahkeesh

If you’re saying that NCSoft won’t allow Anet to develop a new game, the alternative would be that Anet starts laying off employees as profits continue to dwindle. As far as GW2 is concerned the results will be similar, diminishing resources for a diminishing amount of customers.

Its worth noting that Anet already put out an ad or two for mobile graphics modelers, and in the last conference call was mentioned to be “exploring” some mobile offering of the Guild Wars IP. Most of NCSoft’s mobile profits are from Asia, and Anet remains their main foothold in the west, from which they might try to launch some inroads into the Western mobile market. TBH though they have appeared fairly hands-off with Anet in the past as long as the money keeps flowing their way, so it wouldn’t surprise me if an Anet mobile initiative was what their own internal management came up with.

Reader
Sally Bowls

Between growth and layoffs, there is hiring freeze. If you have 500 people and the goal is 450 you don’t have to lay off people you can just not replace people when they leave until you reach your goal. 15-30% of employees will leave most game companies per year so you can reduce staff without hitting the L word.
————–
Re “was what their own internal management came up with.” yes and no. Sometimes dictates come down from top. Other times, executives who want money from corporate will tend to dress up their project plans and funding requests to match the way the winds are blowing. Although it could be MO has an strong employment contract and does not care what Yoon Songyee thinks
————
Last quarter NCSoft did confirm they had worked on a mobile version of GW2. The “attempted to develop” and “There are a lot of projects that actually or frankly will not make that cut.” did not sound good, this quarter it was not mentioned and worse, it was not discussed in the recent media day which mentioned “Project TL, Lineage 2M, Aion Tempest and Blade & Soul 2.” So I don’t see GW2 fixing its lack of a mobile in the next year.

Q: For example, for Guild Wars 2, you have said that there will be an expansion pack launched in the second half of this year for the PC version. But I think that from an investor standpoint, rather than talking about a PC-based expansion pack, we would welcome maybe a mention or a discussion about a mobile version of Guild Wars 2 or any update of that nature. And that would be more value that we could give to the company. So what are your plans for a mobile version of Guild Wars 2?

A: For example, for Guild Wars 2, the expansion pack is not something that we developed overnight. This was a very long development that we had forthcoming. However, for the mobile version of Guild Wars 2, of course, this is something that we also attempted to develop, and we did have a project for that. So there are various attempts or various projects that are ongoing in-house. Whether that project actually makes the cut to be at
the stage in which we think that it is worthy of the NC brand and having it out into the market with that brand name. There are projects that make that cut. There are a lot of projects that actually or frankly will not make that cut. So this is a continuous and ongoing process that we are engaging in. So I do hope you understand it from that point.

wpDiscuz