City of Heroes Gets the Headsman’s Axe

I got the news from Massively, but it’s everywhere: NCSoft is sunsetting City of Heroes before the end of the year, folding Paragon Studios and letting go of all staff, due to a "realignment of company focus and publishing support." While City of Heroes has always been a game I respected more than liked, there is no question that it has had a fine and decent run and contributed a great deal to the hobby both when it launched and afterward. Best wishes and speedy re-employemnt to all the fine and talented folks at Paragon who after years in the trenches, as usual, take it in the dumper so some suit can pay himself out a multi-million dollar bonus and buy a new yacht and a couple of rentboys.

As to the closure itself, I am wholly unshocked and even predicted that another high-profile title would fall this year. How I didn’t point to NCSoft’s stable of games as being particularly vulnerable possibilities is something I can’t quite reason out now.

My guess, based on the subtext of NCSoft’s announcement of a second-quarter loss, is that Aion, the company’s internally-developed baby, which took a revenue hit of about 35% over the preceding year despite a switch in most of the world to a f2p model, is tanking steadily and that City of Heroes is taking the hit in the name of tightening the corporate belt.

I don’t have any insider information regarding NCSoft’s finances. However, as a publicly traded company some of it has to be available for public perusal. And NCSoft has a whole took about at 16% hit in revenue over the same period… while at the same time, costs for development of Guild Wars 2 and for marketing the Korean launch of Blade & Soul were being accrued. Plus, in Q1, NCSoft bought $97 million (about two Rifts worth of development,) worth of interest in Korean casual game company Ntreev, leading to a 25% surge in total costs. In a situation like this a company might feel like it has to do something to reassure the shareholders that they have their money under control.

City of Heroes itself brought in just under 1% of the company’s total revenue in Q2, and the guts of what Paragon Studios was bringing in and paying out aren’t available. (As an aside, I note that Lineage 1 is still the company’s financial backbone, bringing in more revenue that both Lineage 2 and Aion combined.) But CoH seemed to many of us (from outside) to be a stable and healthy game. Perhaps not growing even with the f2p change, but not obviously in danger. And yet the NCSoft axe strikes again. Perhaps it wasn’t profitable, but NCSoft has shown in the past that it’s ready to be absolutely ruthless and final about closing titles that are insufficiently profitable. It’s shown no interest, ever, in trying to improve the market position of a title that didn’t do well right out of the gate. One might be inclined to take the f2p transitions of Aion and CoH as those kinds of efforts, but if so, it’s failed both times — Aion made 30% less money the quarter after it went f2p. So much for the “perfect f2p model” that some are touting as superior to those of games like EQ2 or LotRO — which are apparently working better for those titles.

Business is business. But the lesson for gamers should be clear: If you like any of NCSoft’s games, don’t get too attached. That applies to any MMO, really, for which you're dependent on an external publisher to continue providing game services. But especially for NCSoft's titles. Lesson #2 is "don't aspire to work in the video game industry, for it is a dreadful business." Unless you're lucky enough to snag a spot with one of the handful of companies that doesn't pull this kind of shit once a year.

3 responses to “City of Heroes Gets the Headsman’s Axe

  1. Wow, so much um.. nonsense… err maybe wild speculation in this post. I’ll just mention an investor meeting comment about a year ago where they basically said both CoH and Lineage 2 (western) were both in trouble and facing closure unless things improved, a bit before they shut down Lineage 1 (western market), as I recall. I’m just surprised it was CoH and not L2 getting the axe, (or even both of them) but then I don’t think there are enough comics fans to support more than 1 or 2 superhero MMORPGs, especially something that isn’t based on DC or Marvel comics. Sad, but true. CoH had a good run and will be missed.

    More troubling is the industry rumblings I hear of a lot more closures on the way from various MMO companies. The pointy haired bosses at a lot of companies are spooked about recent failures of new releases to meet expectations (especially the one with a sure fire, can’t lose, massive IP), the public crash and burn of 38 Studios, the increasing number of games that are spreading the available player base too thin, and that LoL type games are now seen as the future. Also, quite a few were betting on Farmville / Facebook type games as the future and now with that market looking like fools gold, well, lots of panic in the boardrooms these days. Scary.

    And you do realize just how small SOE and their total market share is compared to even a single game like Aion don’t you? Or maybe not, but in its first year Aion had around 4.5 million paying customers worldwide based on Korea / China / Japan-Taiwan-SE Asia / NA / and Europe published figures; enough to make a massive profit on the game, help keep Blade and Soul devs going (B&S’s future was very iffy for awhile by all accounts), and pay some towards GW2′s longer than expected release (NCSoft originally projected late 2010).. doubly so considering a lot of Aion is based heavily on assets from Lineage 2, even down to almost identical armor sets and weapons. Although, as you correctly mention, Lineage 1 in Asia continues to rake in the lion’s share of profits for them, which is pretty amazing, and something NCSoft can’t be all that happy about long term.

  2. The post is filled with numbers and facts from NCSoft’s own corporate reports. Other than my speculation as to their motivation (marked as such,) and the remark (again, clearly marked as such,) that CoH wasn’t obviously in danger (I never said it wasn’t, just that it wasn’t exhibiting obvious warning signs,) what did you take as nonsense?

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