Wednesday, June 29, 2011

Fun Financial Facts About CCP

It was only a matter of time before players obtained the public financial records of CCP for 2010.  And really, isn't it fitting that the records are on a web site owned by Chribba for safe keeping?

So what do the records tell us?  First, although  Wikipedia will need to have its entry on CCP Games updated after yesterday, Bjorgolfur Thor is the biggest investor in CCP.  The investors with the largest stake in CCP are the Bjorgolfur Thor-owned NP ehf. with 30.5%, Teno Investments with 23.9% and one of CCP's founders, S. Reynir HarĂ°arson, with 10.2%.

The second is that CCP's profits for 2010 are a bit inflated.  While CCP's total profit for 2010 was $5.4 million (USD), due to a $3 million tax credit it received, $1.7 million of that profit came from a governement.

The item drawing the most player scrutiny on both Failheap and the official forums is the $11.8 million loan due on October 28th (p. 31).  Much is made that at the end of 2010 CCP only had $11.2 million in cash on-hand.  And the decision not to pay out dividends this year definitely indicates that CCP expects to have a cash-flow problem this year.  But I'm not sure if at the beginning of 2011 CCP was really in that bad of shape.  Looking a few pages farther into the document (p. 34) shows that while CCP's total liabilities due for the year was $22.2 million, it was expecting to receive $18.4 million in loans and receivables throughout 2011 (p. 37).  Still, that gap of $3.7 million was greater than CCP's non-tax profits in 2010.  If CCP could maintain its growth of 2010 (where gross profit rose by 11%) then CCP will have no problems. 

That is why last week's mess is so critical.  Instead of expanding sales, Incarna and the Noble Exchange is driving players away, something CCP cannot afford if it wishes to continue with its development of both DUST 514 and World of Darkness.  An intelligent introduction of a cash shop should eliminate the cash flow problem.  But in my opinion CCP isn't acting intelligently in this manner, as both the outrageous pricing for the virtual items and the refusal to rule out "pay to win" items shows.  Hopefully the emergency meeting with the CSM will allow the policy makers a chance to get back in touch with the player base and retrieve the situation.

Related: After The Layoffs: CCP Is Not Dead Yet

7 comments:

  1. Vote with your wallet for a positive change in CCP's policy.

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  2. Actually their profit is nearly 17 million the "operating profit" listed on page 5 is just a number they picked to try to explain where their money went. Income statements are a notoriously poor way to judge a company because you can flat out lie in them. Look at the statement of cash flows on page 7. All of a sudden their cash from operating activities (which really means profit) is up to $17,140,640. Where'd the money come from? $2.7 million "net financial cost" which they weren't counting, the income tax expense you mention. $8,443,400 Decpreciation "expense" I use quotes here because that money doesn't go anywhere. They keep it and can use it anywhere. In addition they decreased inventories and operating liabilities which means they simply had a higher ratio of cash/inventory or cash/liabilities this last year.

    For a more complete analysis hit up my blog.

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  3. I think you're seriously overestimating the short-term profit potential of a cash shop in a context where avatars can't yet leave their hotel rooms, and players don't want cash shop items to be part of the spaceship part of the game.

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  4. What Tom said. CCP Should have Introduced Incarna (not FAMC, the interactive part) let the draw of that bring new people into the game, THEN started up the cash shop. Unfortunately they went with it backwards, mostly because they are bleeding money, and hilarity ensued.

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  5. Actually, I don't think that CCP needed a lot of cash to push on with their plans. But I would wager Hilmar was planning on seeing a bump of 5-10% in subs + a decent showing from the cash shop. I figure that would bring in about $2 - $2.5 million in extra revenue in the 4 months running up to the October 28 debt repayment.

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  6. The current cash shop is essentially a public beta to make sure the technology works (just like CQ).

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  7. EVE is going to go belly up because of the sociopathic element community, it has a reputation for being a game where years of work can literally evaporate in seconds and there are players who take great delight in making this happen.

    My only concern is that when EVE goes bankrupt they will take their playstyle into other games and ruin them too.

    ReplyDelete