The FTC's $20 Million Dollar Fine On Genshin Impact

Lootboxes. Apparently everyone hates lootboxes except those who spend hundreds and sometimes thousands of dollars on the damn things. Sometimes attitudes change based upon the age of the people doing the purchasing. What is fine for adults becomes a horrible crime worthy of a government issuing many millions of dollars in fines against a game publisher. Such was the case for perhaps the final Federal Trade Commission action under the Biden Administration.

On Friday the FTC issued a press release about a settlement between the regulatory agency and the Singapore-based Cognosphere PTE Ltd and its U.S. subsidiary. 

The maker of the video game Genshin Impact has agreed to pay $20 million and to block children under 16 from making in-game purchases without parental consent to settle Federal Trade Commission allegations the company violated a children’s privacy law and deceived children and other users about the real costs of in-game transactions and odds of obtaining rare prizes.

“Genshin Impact deceived children, teens, and other players into spending hundreds of dollars on prizes they stood little chance of winning,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Companies that deploy these dark-pattern tactics will be held accountable if they deceive players, particularly kids and teens, about the true costs of in-game transactions.”

A complaint, filed by the Department of Justice upon referral from the Commission, alleged that Singapore-based Cognosphere Pte. Ltd and its California-based subsidiary Cognosphere LLC, which do business in the United States as HoYoverse, actively marketed Genshin Impact to children and collected personal information from them in violation of the Children’s Online Privacy Protection Rule (COPPA). The complaint further charged that HoYoverse deceived players about the odds of winning particular sought-after “five-star” loot box prizes and how much it would cost to open loot boxes to win the prizes. It also alleged that the confusing virtual currency system that players had to navigate to open loot boxes and the marketing and promotion tactics used to entice players to open loot boxes were unfair to children and teenagers.

Popular among children and teens, Genshin Impact is free to download but has generated significant revenue through the sale of in-game virtual currency and other content. Players advance in the game by collecting virtual heroes, forming a team and using heroes’ abilities to complete tasks. Five-star heroes are the most desirable to collect given their powers, and they can only be obtained by opening loot boxes, which players can purchase using virtual currency.

I'm going to go down the rabbit hole a little deeper. Many times over the years stories have told of game publishers not publishing accurate odds of obtaining items from lootboxes. The case, U.S. v Cognosphere, spelled out what occurred in Genshin Impact. Considering the below is the argument for count 3 in the case, I thought I'd provide the details.

73. In many instances, HoYoverse has represented that consumers who open loot boxes corresponding with Event Banner promotions will receive increased odds of obtaining the 5-star hero featured on the Event Banner.  For example, social media ads like Figure 10 have touted a “huge drop-rate boost,” and HoYoverse has instructed influencer-promoters to highlight “boosted rate[s],” or odds, if players open loot boxes during the Event Banner promotion. 

74. In reality, the purported “boost” in odds refers to the featured prize being available to obtain at all during the promotional period, while the underlying odds of obtaining the featured prize remains the same. 

75. Within the Genshin Impact game itself, HoYoverse makes further misstatements concerning purportedly increased odds of obtaining featured 5-star heroes. 

76. The Genshin Impact game represents that consumers can view complete information about the game’s loot box odds by engaging with a “Details” menu navigation button below the Event Banner (like the second button from the left in Figure 9), and navigating through several sub-menus. 

77. The consumer is presented with a “Promotional Items” subsection, which depicts the featured 5-star hero with the phrase “Increased Drop Rates!” and a statement that this hero’s “Percentage of 5-Star Item Drops” is “50%”, without adequate additional context. A second “Details” sub-menu within this interface states that the “[b]ase probability of winning 5-star character = 0.600%; consolidated probability (incl. guarantee) = 1.600%; guaranteed to win 5-star character at least once per 90 attempts,” and indicates that the featured hero has a “huge drop-rate boost.” A third “List of Items” sub-menu similarly states that the odds of obtaining the featured hero are “UP!,” but does not disclose actual or relative rates at which HoYoverse awards loot box prizes.

78. In reality, HoYoverse offers consumers only a 0.3% (three in one thousand) chance of obtaining the specific featured hero when they open loot boxes.  To put these low odds into perspective, this means that, even if a consumer opens 50 loot boxes in a row, the consumer has odds of less than 15% to obtain the 5-star prize featured on the banner. 

79. Consumers are also misled by HoYoverse’s “guarantee[] to win 5-star character at least once per 90 attempts” because they are led to believe that it applies to the 5-star character prominently featured in the Event Banner. As shown in Figures 9 and 10 above, a picture and name of a character is featured next to language touting the opportunity to open loot boxes for the chance to win an “event-exclusive 5-star character.” In reality, if a player opens 90 loot boxes, HoYoverse frequently does not provide the player with the featured five-star character: half of the time, HoYoverse will instead award the player an unrelated, and typically less desirable, 5-star prize not featured on the Event Banner.  If this happens, the player must then open as many as 90 additional loot boxes, at which point HoYoverse is finally certain to award the prize featured on the Event Banner. 

80. In other words, a consumer may need to open as many as 180 loot boxes, at a cost of $2–3 per loot box (or as much as $360–540 in total), simply to get the prize that HoYoverse features on the Event Banner. 

81. Taken as a whole, HoYoverse’s representations and misleading disclosures serve to convey the message that consumers who purchase loot boxes are more likely to obtain rare prizes than they are in reality.

Well, in this post, figures 9 & 10 are below.

I should note that the deal has not been approved by a judge, although in most cases approval is pretty much a formality if both sides agree to the terms. But in addition to paying $20 million to the federal government, HoYoverse will be:

• Prohibited from allowing children under 16 to purchase loot boxes in their video games without a parent’s affirmative express consent
  
  
• Prohibited from selling loot boxes using virtual currency without providing an option for consumers to purchase them directly with real money
  
  
• Prohibited from misrepresenting loot box odds, prices and features
  
  
• Required to disclose loot box odds and exchange rates for multi-tiered virtual currency
  
  
• Required to delete any personal information previously collected from children under 13 unless they obtain parental consent to retain such data
  
  
• Required to comply with COPPA including its notice and consent requirements.

Now, since today is the day Trump was inaugurated, we need to look at the voting amongst the FTC commissioners on the referrals of the counts to the Department of Justice in the case. Here are the five counts:

• Count I: COPPA Rule
• Count II: Misrepresentations of Lootbox Odds
• Count III: Misrepresentations of Cost of Loot Box Prizes
• Count IV: Unfair Selling and Offering a Multi-Tier Virtual Currency System to Children and Teenagers
• Count V: Unfair Promotion and Sale of Loot Boxes to Children and Teenagers

On the first two counts, the commissioners voted 5-0 to approve referring the counts to the DoJ. But the other three counts were approved on a 3-2 party line vote, with former solicitor general of Virginia Andrew Ferguson and former solicitor general of Utah Melissa Holyoak opposed. I'll just provide a link to Ferguson's statement on the case for his reasoning. I also want to post his dissent to count 5.

Finally, Count V accuses Cognosphere of further unfairness for marketing a loot box system to children and teenagers. I cannot tell whether the Commission here rests its theory on the overly enticing nature of loot boxes as a marketing scheme for children and teenagers, or merely the further unfairness of targeting children and teenagers with the sort of deception alleged in Counts II and III. Either way, I dissent. If this count simply mirrors the allegations of deceptive conduct in Counts II and III, then it adds nothing. And none of our precedents hold that marketing violates the FTC Act when it is too enticing. As I said in November, I will not support novel theories of liability advanced in the final hours of the Biden-Harris Administration. That principle applies to Count V. 

None of this should be taken to mean I favor the loot-box scheme. I do not. But the FTC Act does not authorize us to prohibit unsavory or unseemly business practices. It forbids only unfair or deceptive acts and practices. I do not foreclose the possibility that targeting certain kinds of addictive activities to children and teenagers—such as virtual slot machines in the form of loot boxes—could violate Section 5’s prohibition of unfair acts and practices. But demonstrating such a violation would require us to assemble strong evidence of substantial injury, unavoidability, and the absence of countervailing benefits to consumers or competition. We have not done that here. I therefore dissent from Count V both because the Biden-Harris FTC should not be advancing wholly novel theories as the sun sets on this Administration, and because we do not have the evidence required to demonstrate that marketing loot boxes to children and teenagers categorically violates Section 5. 

That's the rub. How much of this stuff is political and might turn on who's president? How much is getting floated out by an outgoing administration looking to burnish its legacy and/or influence policy even when out of office? 

And how much will occur because of factors outside of video gaming, like the worsening relations between the United States and the People's Republic of China? I didn't go into the fact that while Cognosphere is the publisher for Genshin Impact, the developer is Shanghai-based miHoYo, of which Tencent owns 25.8%. Tencent was recently placed on the Defense Department's list of Chinese military companies.

EDIT: But perhaps most important question is: how will this all affect Honkai: Star Rail? If I read the order correctly, the settlement affects all games that Cognosphere publishes, not just Genshin Impact. Here is the definition of "Covered Product or Service" from the proposed settlement.

“Covered Product or Service” means Genshin Impact or any video game or video game service, such as HoYoLAB, controlled, distributed, or operated, directly or indirectly, by Defendants, marketed, promoted, sold, or otherwise distributed or made available in the United States.  For purposes of this Order, to the extent that, after entry of this Order, Defendants obtains direct or indirect control over a video game or video game service, such video game or video game service becomes a Covered Product or Service ninety (90) days after the date on which Defendants obtained such control.

So the order would also cover Honkai: Star Rail. But I'm just an internet space lawyer. We'll have to see what, if anything, changes.

EVE Online: Revenant's Unannounced Pochven Patch Notes

Yesterday CCP pushed a patch aimed squarely at Pochven to Tranquility. Believe it or not, the region was introduced over 4 years ago in October 2020. Frankly, I know absolutely nothing about the gameplay in Pochven except it has its own special mechanics. I took a look at what the EVE Online sub-Reddit had to say and, as always, I found negativity, which claims the changes will just favor multi-boxers. Knowing that the sub-Reddit is an extremely unreliable source of misinformation, I searched YouTube for opinions. Sure enough, I found someone who lives in Pochven stating how multi-boxers will hate the changes.

So who should I believe? Let's take a quick look.

The first changes involve Observatory Flashpoints. According to the EVE University wiki:

The Observatory Flashpoint is a combat anomaly that can be found in Pochven, intended to be run with a fleet of up to 15 ships. It is functionally unchanged from the Observatory Flashpoints found during Chapter 2 and Chapter 3 of the Triglavian Invasion. Whenever a site is completed, a new site will spawn immediately in another part of Pochven, with a hard limit of three sites in the region at a time.

And the rewards are interesting, with a downscaling function similar to those in incursions.

The site pays a considerable sum of ISK that varies with fleet size, ranging from around 520 million ISK per pilot for a fleet of 5, to around 230 million ISK per pilot for a fleet of 15. Including more than 15 pilots in the payout will greatly reduce total site rewards. In order to be included in the payout, pilots must be in the site, not cloaked, and either apply damage to the Observatory structure or apply remote repairs to another ship which has damaged the structure.

The loot cache can contain skillbooks for Precursor Dreadnought or Capital Precursor Weapon. It can also contain a Zirnitra BPC, Supratidal Entropic Disintegrator BPC, XL Exotic Plasma Charge BPC, or capital component BPC.

So, in theory, a small gang running an Observatory Flashpoint is easy meat if a gang of 30 or so ships sweeps through a system. This is where the patch notes come in.

Observatory Flashpoints:

The following changes aim to counteract the efficiency of over-filling a site by adding a net loss when more than 15 characters are present. The payouts for the site have been adjusted to offset the additional setup time and risk.

• Assault Vector gates now require the use of Observatory Resonance Keys:
  
  
• Each character will need their own key to unlock the gate.
• A key is consumed on use.
• Keys can be bought via NPC sell orders within Pochven stations for 30m ISK each.
• 15x Keys will drop as loot from CONCORD Stellar Observatories.
• Note: Spare keys cannot be sold to NPCs, but can be sold or traded to other characters.
• Gates will become unlocked for all characters 60 seconds after a site is complete.
  
  
• Payouts have been adjusted:
  
  
• The total optimal payout of the site has been increased to 3.3b ISK (from 3b ISK).
• Stellar Surveillance Data will now make up 30% of the optimal reward (from 40%).
• Stellar Surveillance Data now belongs to the new EDENCOM data item group.
• Greatly increased the number of NPC buy orders for Stellar Surveillance Data.
  
  
• Threshold Werposts will now have a significantly longer cooldown between target switches.
• Threshold Werposts will now always attack the same target as each other.

Next come changes to standings requirements. Probably the biggest reason I don't play in Pochven is the standings requirements. They've changed, but not enough for me. Those who actually play in the Triglavian region may have different results.

Standings:

To help make Pochven more accessible, the minimum standings requirements for certain actions have been reduced.

• Fitting and Repair requirements have been reduced to -0.05 (from 1.00 and 2.00, respectively).
• Manufacturing and Corporation Office requirements have been reduced to 3.00 (from 4.00).
• Home system stargate requirements have been reduced to 6.00 (from 7.00).
• Standings will no longer be gained or lost when destroying either type of EDENCOM GunStar.
• Standings will no longer be gained or lost when destroying a Stellar Observation Post site’s Stellar Observatory structure.

The Dazh Liminality Locus is a structure located inside Stellar Fleet Deployment Sites. Apparently CCP made a change that broke some things and needed to correct the site.

System-Wide Effects:

Last month's change to the Dazh Liminality Locus negatively impacted some playstyles in unintended ways, and as such has been softened significantly. The change also incentivized removing system effects which help make Pochven feel unique, so these have now been split off from the structure.

• The Dazh Liminality Locus structure has been reworked:
  
  
• Increased the decloaking pulse cooldown timer to 60 minutes (from 6 minutes).
• Increased the decloaking pulse chance to 60% (from 30%).
• Removed the system-wide buffs and penalties.
  
  
• Added the removed buffs and penalties as permanent system-wide effects within Pochven:
  
  
• Increased the remote repair bonuses to 30% (from 25%).
  
  
• Added a lesser version of the Pochven system-wide effects to Triglavian Minor Victory systems:
  
  
• Reduced the remote repair bonuses to 15%.
• Removed the warp speed penalty.

Looking at the PvE section, I wish I could say I was amazed at all the PvPers interested in doing PvE. But I think we all know that's not what is going on. If CCP makes a change that makes ganking PvE players harder, complaints will result. Which makes determining if a change truly is bad or not.

PVE:

All Acceleration Gates which consume a key per character activating it have been improved:

• When a key is consumed, the gate will remain unlocked for that character for the duration of the site.
  
  
• Note: This persists when a character leaves the location or logs out, but resets after a downtime.
  
  
• No keys will be consumed when activating a gate already unlocked for that character.

Finally comes a couple of changes concerning those who like to bring out capital ships to run PvE content.

Wormhole Capital Escalations:

The following changes hope to refine last November's changes to capital escalation rules.

• A combat site can now escalate at any time before the second wave spawns.
• A combat site will only de-escalate if there is no capital within range after the second wave spawns.

In summary, a combat site will escalate if a capital ship enters within a 100km range of the warp-in point before the second wave spawns. After that spawn, the site will deescalate if no capital is within range. The Drifter Response Battleship will spawn if the site is escalated when the Decloaked Transmission Relay is attacked. Otherwise, the Drifter Recon Battleship will spawn. A beacon appears while the site is escalated to help players keep track of that state.

And a final note. Once again I was blindsided a bit. I didn't look for patch notes yesterday until I went to log in and saw them on the launcher. I guess a win for the launcher team?

Dawntrail Diary: Role Quests

I realize a lot of people are complaining about a lack of things to do in Dawntrail. But I'm taking my now traditional first post-patch break from crafting and gathering to catch up on old content. During Endwalker's patch 6.1 I bought and decorated a cottage. Now during Dawntrail's patch 7.1 I'm catching up on role quests.

Role quests first came out in Shadowbringers as a substitute to the individual job quests we've had from A Realm Reborn through Stormblood. Role quests encourage completionists to level 5 jobs to the level cap as completing all the role quests for an expansion unlocks a special unifying questline. The mechanics are very similar to the alliance tribal quests made available in the last patch of an expansion.

The role quests, as the name implies, focus on roles. I only have four roles (if you count summoner and scholar as different roles) at the level cap of 100 and two additional roles at level 55 or above. The breakdown as of yesterday was:

• Tank: Warrior (level 98)
• Healer: White Mage, Scholar (both level 100)
• Melee DPS: Dragoon (level 57)
• Physical Ranged DPS: Dancer (level 100)
• Magical Ranged DPS: Summoner (level 100)

The people complaining about the lack of content probably look at the list and think I only started playing with Dawntrail. Actually I started on the 50th anniversary of the first manned moon landing, which was July 20, 2019. I just get caught up doing things, like crafting, gathering, and decorating my apartment and cottage. I didn't catch up to current content until patch 5.4, which was around a year-and-a-half. I've passed up doing a lot of content trying to get to the end of the main story questline.

That out of the way, I'm learning completing all the role quests does unlock some things, although I've only unlocked the Shadowbringers content. Completing the final role master quest opened up the Void Quests. Well, it would if I had kept up to date. Here are the things I still need to do in order to start the first Void Quest:

Complete the quests The Diabolical Bismarck and Thok Around the Clock. The quests require clearing both Trial The Limitless Blue (Extreme) and Trial Thok ast Thok (Extreme). The wiki assures me I can complete the quests solo at level 80. I'm waiting until I complete the role quests for all expansions so I should have no problems running them with a well-geared level 100 warrior.

Complete the Warring Triad questline. The wiki indicates I don't have to complete the Warring Triad extreme trials in order to complete the three quests. I do wonder how a level 100 warrior would do with the trials.

I don't know what follows the Endwalker and Dawntrail role quests since I need to level a physical dps job up to the level cap in order to complete both sets. But the Shadowbringers one was done well enough I'm willing to level a physical dps class up to level cap. I know I could have started off with Endwalker's Reaper job but I figured I already had a level 53 dragoon so why not finish the job?

And really, once I get to Stormblood content at level 60, levelling isn't too bad. The alliance society quests (formerly tribal quests) offer decent xp (and great xp in Dawntrail), and doing the quests in Stormblood, Shadowbringers, and Endwalker produce 135 tomestones a day. Just by levelling my characters I'll get additional Manderville weapons. I should have my second Manderville weapon by the end of the weekend.

So that's what I'm currently working on in Final Fantasy XIV. Like I stated at the top, I'd like to have the content completed before the launch of patch 7.2 so I can go back to crafting and gathering full bore again feeling refreshed. After all, sometimes I need to take a break and do something different. Apparently I play slowly enough I can take that break inside the game.

Cloud Imperium's Leadership Musical Chairs: The BoredGamer Leak

Yesterday one of Star Citizen's major news You Tube channels, BoredGamer, released a video with a leak about the restructuring going on over at Cloud Imperium Games. BoredGamer is I think the longest running Star Citizen news channel going back over a decade. He's very bullish on both Star Citizen and Cloud Imperium without straying into white knight territory. In other words, not someone who's going to just throw something negative up for the clicks.

When a guy has a decade's experience and doesn't have a motivation to spread false rumors, I give him a lot more credibility than some rando from the Star Citizen Refunds sub-reddit. I also find the idea of someone inside Cloud Imperium reaching out to BoredGamer a lot more credible than some anonymous source talking to a writer from Insider Gaming as well. Below is the letter shared in the video, which according to the long-time YouTuber was edited to sanitize the content to protect the source's identity.

Good evening,

I've been watching a lot of your videos over the years, and I have always found it fun to hear your speculation regarding the goings-on at CIG. I have consistently compared your speculation with what has actually been going on at the company. I previously worked at Blizzard and I knew a lot of people who moved to that company. People like Tyler Witkin and EKD. So a few things in regard to your recent videos where you mention upper management speculation:

• EKD (Chief People Officer) has not been working with the company since Q4 of last year.
• His direct report (former VP of HR US) was similarly let go shortly after (Q4 also)
  
  
• Carl Jones (formerly the COO, then CSO) may have not left of his own accord, he may have been pushed out by others in his peer group.
  
  
• John [Erskine] has assumed the role of Chief Operations Officer
  
  
• The chief marketing officer, Elliot, is another C-level who has been informed of their termination and is on their way out the door.

The reason that all of these people "appear" to have left on their own accord is because they all signed agreements that were essentially gag orders by the company, where if they speak ill, they lose their departing compensation package.

How much is true? Hard to say, but I did compare the letter to the information I dug up for my previous post on the subject. Let's take the points one by one.

Eric Kieron Davis - EKD is a reference to Eric Kieron Davis, the Chief People Officer. According to Davis' LinkedIn page, the position oversees all people functions and studio operations. Davis joined CIG in April 2015 after working for Blizzard Entertainment for 8 years. According to the information provided to BoredGamer,  Francesca McKibben, the former vice-president of human resources in the U.S., was let go shortly after Davis departed.

The information from BoredGamer's source, if true, narrows down Davis' departure from the company to October 2024. According to McKibben's LinkedIn page, she left CIG in October 2024 and began working as the Senior People & Culture Business Partner for LinkTree in November. Given the speed with which she obtained a new job, I'd assumed she left CIG voluntarily because she'd found a better position.

I have another data point to consider. Looking on CIG's corporate website, the company is not hiring for any positions in either its Austin or Los Angeles locations at this time. If CIG does not have plans to replace Davis and McKibben, I think that strengthens speculation the North American headquarters is moving to Montreal.

Carl Jones - CIG's Chief Strategy Officer announced his departure on LinkedIn on 7 January. The letter speculates he was possibly pushed out. To me, that sounds like office rumors. 

On the other hand, when I watched the Star Citizen 1.0 presentation at CitizenCon in October, I felt like the vision of the Turbulent crew had taken over. Gone were the days of vague gameplay goals to attract players to spend money. In were promises of the type of gameplay Star Citizen would hold when the game reached a commercial release and not the semi-live service experience players currently log into. So Jones leaving due to philosophical differences is not something I would have to stretch too far to believe.

John Erskine - Erskine becoming the Chief Operations Officer is an established fact. But I didn't mention the fact in my first post about the leadership musical chairs because I only went back to the beginning of the fourth quarter of 2024.

"Now hold on," I can hear someone say. "At the beginning of October Erskine was listed as the Chief Publishing Officer on the About page." Very true. But as we are finding out, CIG's corporate About page isn't always kept up to date. Erskine's LinkedIn page indicates he became the COO in September. 

Does that mean anything? I think so, but I'll wait until the conclusion of the post to say what.

Elliott Chin - The full name of the Chief Marketing Officer is Elliott Chin. According to his LinkedIn page, he is still employed at CIG's Los Angeles office. If the headquarters is moving to Montreal and Chin does not want to relocate, that could explain why he is still around. Also, Chin's status as a lame duck, if true, helps explain the office rumors reported in the Insider Gaming article that Sandi Gardiner, the former head of marketing Chin replaced, is coming back to the role.

Now, for the significance of the information coming from BoredGamer's source. According to the Insider Gaming article, Chris Roberts sent out an internal memo on 19 December that the changes started to be implemented in early December. But according to both to the source and my own research, the changes actually began in October. Or perhaps the Insider Gaming article was only referring to Jones, Davis, and Chin as the "at least three executives with a combined experience of around 25 years" affected. The three's combined experience at CIG is 25 years and 10 months.

Quite frankly, I'm not sure exactly how negative the game of leadership musical chairs going on at Cloud Imperium really is. I think change was inevitable once CIG acquired the rest of Turbulent back in July 2023. Looking at all the information available, the possibility exists we had an old guard verses Turbulent battle occur and the newcomers from Canada won. Whether players like the new vison represented by Star Citizen 1.0 really will determine how these moves are judged.

Oh, and if the moves result is significant workforce reductions later in the year. That's important too.

CIoud Imperium Late Again Submitting Its Accounts To UK Companies House

What is going on at Cloud Imperium Games? Specifically, at Cloud Imperium UK LTD. On 7 January the company filed paperwork indicating Dr. Martin Franz, Cloud Imperium's General Consul, was no longer acting as the company's corporate secretary. Then on Friday, 10 January, I noticed UK Companies House had tagged Cloud Imperium UK LTD as not having submitted its financial accounts for 2023.

As seen at 1400 UTC on 13 Jan 2025

To review recent history the 2023 accounts are the third consecutive set of accounts to be turned in late to UK Companies house. The 2021 accounts were stamped as arriving on 3 January 2023, the first workday of the year. I didn't say anything at the time because Cloud Imperium UK could have submitted the paperwork on time and the government just didn't process the accounts in a timely manner.

The 2022 accounts, on the other hand, caused some concern. I first reported on the late filing in January 2024 with the idea that the late appointment of Dr. Franz in December 2023 might have delayed the filing. Turns out the filing, delayed until 3 March, was probably delayed due to discrepancies found by Cloud Imperium's new auditing firm. One of the discrepancies is a contingent liability Cloud Imperium did not have the funds to cover. And, given the company's known financial performance in 2024, presumably still doesn't.

Which is why the resignation of Dr. Franz last week raised red flags. Sure, Cloud Imperium losing its general consul at this time with all the other senior people leaving would cause some concerns. But the corporate secretary walking away with the filing of all the accounts currently two weeks late? I wonder if Dr. Franz didn't want to go through whatever happened with the 2022 accounts.

One other condition is different now than back in 2024. CIG published its 2022 financials on 2 January 2024. Sure, the paperwork was late to the government, but the company was still open about its finances, right? But this year, I highly doubt the company will publish a 2023 financial report until the auditors from PwC (assuming CIG uses the same firm from last year) finish their review. But the company will probably publish its 2023 financials before submitting the accounts to Companies House. So the quicker we see the financial information on the CIG corporate website, the better the situation probably is.

Look, I get it. Cloud Imperium Games is special. Through the end of 2024, the company had brought in over a confirmed $931 million through its founding in April 2012 when outside investments are included. The gameplay itself will revolutionize the industry. Chris Roberts is a genius. But CIG still needs to file their financial paperwork on time.

A Look At The Active ISK Delta In December 2024

With a new year comes a look back at the past one. With the first full month after the Revenant expansion's launch in the books, the time has come to not only look at the Active ISK Delta in December, but for the entire year of 2024 as well.

From the December 2024 Monthly Economic Report

The Active ISK Delta is the net effect on the New Eden monetary supply of players leaving and returning to the game. The Active ISK Delta also includes any reductions due to any and all GM actions. In December, 64.3 trillion ISK left the economy from the movement of players into and out of the game. The change made the Active ISK Delta the biggest ISK sink in the New Eden economy for the second month in a row, dwarfing the 25.9 trillion ISK removed from the economy through transaction taxes.

Data from the last 24 MERs

Now, 64.3 trillion ISK seems like a rather large about of ISK. But the amount only represented a decrease of 2.6% of the total amount of money in the economy at the beginning of the month. Even with that amount leaving with departing players, the money supply still managed to grow 10.4 trillion ISK. I think for those worried about inflation, and the dev team's possible reaction to high inflation, the money supply growing only 0.4% is good news.

Data from 8 years of MERs

Normally I perform a year-over-year comparison. The December 2024 Active ISK Delta showed a 6.5% decline in ISK leaving the game compared to December 2023. But perhaps more importantly a new trend was established for the month of December. Looking back at the first 3 years of the Alpha/Omega era, the Active ISK Delta was positive, indicating players returning to the game. The pattern broke in 2020. No, I am not going to blame the debut of the Winter Nexus event that year. But for the three Decembers of the Second Expansion Era which began with the Uprising expansion, the Active ISK Delta was within plus or minus 5% of 66 trillion ISK. I will point to the reintroduction of yearly expansions in November as a major influence on that statistic, however.

Data going back 7 years

Looking at the entire quarter I think may show the popularity of the Havoc expansion of 2023 versus 2024's Revenant expansion. Since 2022 the fourth quarter encompasses the run-up to an expansion, the month the expansion launches, and then the first month of play afterwards. In the final quarter of 2023, player movement in and out of the game was a net ISK faucet, with an Active ISK Delta of 32.7 trillion ISK. In 2024, the faucet became a sink with players removing 88.4 trillion ISK from the New Eden economy on their way out the door.

The raw numbers are misleading

Of course we have to look at the full year numbers, and 2024 set a record with 509.3 trillion ISK removed from the economy due to players leaving the game. But I thought the number was very skewed, especially after discovering that the amount of ISK in the New Eden economy grew by 139.6% from the beginning of 2017 to the end of 2024. So I decided to look at the numbers slightly differently.

Percentage of ISK departing game by year

And hey, look at that. When taking into account the growth of the money supply, 2024 doesn't look so bad after all. If fact, the 24.2% of the money supply that left the New Eden economy due to players moving in and out of EVE Online is slightly lower than the yearly average of 24.5% from 2017 to 2021. Perhaps more of interest, the year with two low-sec content heavy expansions only saw 9.1% of the ISK leave with players in 2023.

Lately I find writing these Active ISK Delta posts a little boring and wonder if the effort is worth doing. Then I get to the end of the year and get to pour over the data and produce an article where I learn something from the analysis. But if I am going to continue, I need to start taking inflation more into account, don't I?

Cloud Imperium's Leadership Musical Chairs At The End Of 2024

This is a story that began on 20 December 2024. Insider Gaming, a publication which apparently has sources inside Cloud Imperium Games, came out with a story about a shake-up in corporate leadership. I decided to pass up on the story until more information came out. Well, more information came out as the story interested more inquiring minds (okay, I'm very nosy!) than mine.

Here's the guts of the story according to Insider Gaming.

At the time of writing, Insider Gaming has heard of at least three executives with a combined experience of around 25 years at Cloud Imperium Games who have had their positions terminated. It’s said that announcements of their departures will be announced in due time.

In an internal announcement to employees, Chris Roberts said, To achieve this laser focus [of meeting the release of SQ42 and Star Citizen 1.0], it is more important than ever to ensure we have high-performing and efficient teams working throughout the company. In order to achieve this, I have had to make changes to the structure of our teams from the very top of the company and downwards to ensure we have the right people in the right roles, working in person as much as possible from our most critical year yet.”

When the story came out, a small Star Citizen YouTuber, Camural, noticed that Roger Godfrey, the lead producer of Cloud Imperium's Core Technology Group, issued a post announcing he left the company the day after CIG launched the preview version of Alpha 4.0.

An update on my role at Cloud Imperium Games:https://t.co/Wm734zlKa9

— Roger Godfrey (@roger_godfrey) December 20, 2024

Given that Godfrey does not appear under an NDA to not to talk about his departure from CIG, I don't think the vague references in the Insider Gaming story referred to the long time CIG employee, so I pushed the story to the side until more information became available.

Today another Camural video popped up on my YouTube feed, this time about the departure of CIG's Chief Strategy Officer, Carl Jones. According to LinkedIn, Jones was hired in 2014, before former Crytek developers were scooped up by CIG when Crytek experienced major financial problems in 2016. While Insider Gaming noted he had been removed from the corporate About page sometime around 21 December, Jones didn't announce his departure on LinkedIn until Monday.

Carl Jones departure announcement

At this point I decided to do a little snooping around and found that Dr. Martin Franz had resigned as the corporate secretary for Cloud Imperium Games on 7 January. The move is a bit unexpected as Franz is the General Consul for Cloud Imperium. He took over the job from Ortwin Freyermuth at the beginning of June 2023 and according to his LinkedIn page was CIG's general European consul from 2017 to 2023. Submissions to UK Companies House indicate Franz was appointed the corporate secretary to replace Freyermuth in that role in December 2023.

From UK Companies House

Among the duties of a corporate secretary is ensuring that the company complies with legal requirements by filing annual returns at Companies House. These returns include financial statements, directors’ reports, and auditors’ reports. As of the writing of this post, those returns were still not posted to Companies House for 2023, which throws a wrinkle into the whole matter I was not expecting.

As of the writing of this post, Franz still serves as Cloud Imperium's top legal officer.

Looking back to the beginning of Q4 2024 I saw two other people removed from the corporate About page between 4 October and 4 December, both working out of the Los Angeles office. The first was Francesca McKibben, the vice-president of human resources in the U.S. Her departure seems normal as she left CIG in October to begin working as the Senior People & Culture Business Partner for LinkedTree in November, also in Los Angeles. One remarkable fact is McKibben had worked for over 10 years at CIG, beginning as the human resource manager from April 2014 to November 2015 who established the HR department at CIG.

The second person from the Los Angels office is a little more interesting. Eric Kieron Davis is the Chief People Officer for Cloud Imperium. According to Davis' LinkedIn page, the position oversees all people functions and studio operations. Davis joined CIG in April 2015 after working for Blizzard Entertainment for 8 years. Perhaps more importantly to this story is that while Davis was removed from the About page 1-3 months ago, his LinkedIn page still lists him as working for Cloud Imperium. Sort of like how Carl Jones didn't make any announcement of leaving the company until Monday.

If we discuss all the faces that left (or are possibly leaving) CIG, we do need to cover the one new face on the About page: Claire Buffet. With as much press as Turbulent co-founders Benoit Beausejour and Marc Beaudet have received since CIG acquired the company in 2023, I'm a little surprised Buffet hasn't received a little more attention. A 16-year veteran of Turbulent, she became a partner at the company in January 2013 and the company's vice president of strategy and creation in November 2019. Currently she is Cloud Imperium's vice president in charge of Canadian operations.

At this point a little speculation is in order. If a restructuring is truly underway, I would foresee Claire Buffet moving up from VP of Canadian Operations to VP of North American Operations, with the Montreal, Toronto, and Austin studios falling under her domain. 

What about the Los Angeles facility? I could foresee the facility closing, with Chief Marketing Officer Elliot Chin and Vice President of US Finance Brian Stich moving from Los Angeles to Toronto. Also, Stich would receive the title Vice President of North American Finance. Toronto seems a good compromise location as the two Americans could still live in the U.S. and commute into work from the Detroit suburbs if they wanted.

For now, that's all I have. But when I saw a video about the departure of a member of Cloud Imperium's C-Suite Tuesday morning, I didn't expect to write a thousand word post. Since I seem to know a lot about the subject already I'll keep an eye out for updates.

U.S. Places Tencent On List Of Chinese Military Companies

Sometimes geopolitics doesn't care if all someone wants to do is play video games. Case in point: today's news that the outgoing Biden administration has placed Tencent Holdings, the owners of WeChat, on the U.S. military's list of Chinese military companies.

After a quick search, CNBC had what I thought was the best explanation of what just happened.

The National Defence Authorization Act of 2024 says that the DoD will be prohibited from procuring goods or services directly from entities on the list in June 2026, and indirectly from June 2027.

In response to the decision, Tencent said in a statement that its inclusion on the list was “clearly a mistake.”

“We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business,” the company added. CATL also called the designation “a mistake” in a response, saying it “is not engaged in any military related activities.”

Tencent has a good chance of managing to secure its exclusion from the list through U.S. courts due to the company’s business model, which primarily revolves around social networking and online gaming, said Ivan Su, senior equity analyst at Morningstar.

Perhaps not, but Tencent shares were down nearly 8% in both Hong Kong and Wall Street following the news.

So why does a blog focusing on MMORPGs care about what the outgoing U.S. administration does? Because unlike World of Warcraft and EVE Online which are published in the People's Republic of China by NetEase, our overlords in Anyang decided to partner with Tencent to publish Black Desert Online in mainland China. Back in August, I noted how swiftly Black Desert Online won approval to operate in the People's Republic once Pearl Abyss switched to Tencent as its Chinese partner: 9 days. 

Now, Pearl Abyss is in much better shape than a lot of other game companies, which are partly or wholly owned by the Chinese tech giant. Those companies include:

Riot Games: In 2011, Tencent went from being Riot's publishing partner to owner. Currently Tencent owns 100% of the League of Legends maker.

Grinding Gear Games: Back in 2018, Tencent picked up an 80% share of the maker of Path of Exile.

Epic Games: The developer of not only Fortnight but Unreal Engine became a partner of Tencent in June 2012, with the Chinese company purchasing 40% of Epic Games. Oh, and did I mention the Epic Games store?

Larian Studios: Yes, I know Baldur's Gate 3 is a single-player RPG. But with Tencent owning a 30% stake, I had to include Larian on the list.

Inclusion on the list does not impose any penalties except for not doing business with the Pentagon, but may open the door for further action if the incoming Trump administration wants to rachet up the on-going trade war between the U.S. and the People's Republic. Usually when it comes to China and video games, I watch what the Chinese bureaucracy does. Now I may have to pay closer attention to Washington D.C. as well. 

Cloud Imperium Is Late With Its 2023 Financial Information

I am sitting in my bunker in an undisclosed location waiting on Cloud Imperium Games to release financial information related to the year 2023. For all of the company's vaunted transparency, CIG does tend to hang onto financial information until any revelations become old news. I guess as long as all investors in the company have the information and CIG isn't hiding information from potential investors, no harm, no foul.

Now comes the "but". But one of the reasons for CIG to post a financial report like it has every year since the first tranche of Calder investment money arrived in 2018 is to make sure potential investors can do their due diligence before making investment plans. I would have stated "every December since 2018," but last year the company waited until 2 January 2024 to post the public financial report for 2022 on its corporate website. And this year CIG will post the information later still.

The year 2023 had a big question. Did Cloud Imperium expand too fast? According to the 2022 financial report, CIG's workforce headcount went from 860 at the end of 2022 to over 1100 at the end of 2023. As best as I can tell, the added labor costs would have added between $21 million and $26 million to CIG's 2023 budget. Add in that cash shop sales in 2023 only increased by $4 million and one has to wonder how much money CIG lost in 2023. After all, in 2022 Cloud Imperium's financial report only showed a profit of $1.3 million.

A conspiracy theorist would jump on the evidence so far and shout to the world Chris Roberts is trying to hide how badly CIG is doing by hiding the evidence from players. I'm not such a theorist, however. I will admit the theory fits Occam's razor in that, all other things being equal, the simplest explanation is usually the best explanation for a phenomenon.

I do have two facts on my side suggesting all other things are not equal. The first is CIG has still not submitted its group of companies accounts with UK Companies House. For the 2022 accounts, CIG did not file until 3 March 2024. The second is the mid-year acquisition of Turbulent for $CA 9.8 million ($USD 7.4 million) plus stocks.

While Occam's razor is a fine principle to live by, many times Hanlon's razor applies. We saw an example last year with the late submission of the 2022 accounts. Turns out, amongst a host of issues, the new auditors found an accounting mistake stretching back 5 years. And honestly, I'm not too surprised at the lateness of the 2023 reports due to the complications the Turbulent sale brought to the situation. If the auditors from PriceWaterhouseCooper are not tearing their hair out trying to explain things to CIG, I'd be surprised. After all, the possibility exists the Calders' put option for both 2025 and 2028 are causing friction and delays.

I do need to conclude with a poke at the creators who may try to excuse publishing the financial data in January as "business as normal." I actually watched a YouTube video where the commentator attempted to tell the audience this. So for my own sanity I will record the publication dates of previous financial reports on CIG's corporate website here, along with handy links to save people, including myself, time.

• Years 2012-2017 - December 20, 2018
• Year 2018 - December 20, 2019
• Year 2019 - December 23, 2020
• Year 2020 - December 22, 2021
• Year 2021 - December 30, 2022
• Year 2022 - January 2, 2024

And while I'm on a history kick, here are the dates going back to 2015 for the submission of accounts to Companies House. The dates are the dates posted to the Companies House website, so the days submitted are usually 5 working days earlier.

• Thru 31 December 2015 - 5 January 2017
• Thru 31 December 2016 - 24 October 2017
• Thru 31 December 2017 - 26 October 2018
• Thru 31 December 2018 - 10 October 2019
• Thru 31 December 2019 - 6 January 2021
• Thru 31 December 2020 - 14 October 2021
• Thru 31 December 2021 - 10 January 2023
• Thru 31 December 2022 - 11 March 2024

And since the time in the UK is now past 6pm on a Friday, I feel pretty safe in posting this article now. So from my bunker in an undisclosed location, I'll keep waiting for the financial information I need to close out 2023.

A Look At EVE Online Activity In December 2024

Another year is in the books. I think EVE Online had a so-so year. While much better than two years ago, 2024 kind of sputtered, with revenue growth coming from the new SKINR system rather than attracting more players to the game. Perhaps I'm wrong and my perceptions of the game are off since nowadays I do more planetary interaction and hauling gameplay than anything else. So let's jump into the latest available statistics and take a look.

First up is Jester's full year graph on average concurrent users. At the end of 2023 the graph showed a rise in the fourth quarter of the year up to around 23,000 ACU. Last year saw the number of accounts logged in hang around the 23,000 mark except during the summer. After a year in which Viridian did very well, the summer slump returned in 2024. And after an expansion bump, the ACU returned to around 23,000 at the end of 2024. The one noticeable difference is that in December 2023 the trend was increasing while at the end of 2024 the trend was decreasing.

Data from Dotlan Maps

Performing a month-over-month comparison, one would hope ship explosions would increase in the first full month after an expansion. The only security band in known space to see an increase was in low sec. First, the decrease in the other two bands might indicate a lack of interest in the new content in Revenant, with some players returning to low sec. Second, perhaps my disinterest in Winter Nexus isn't a minority opinion after all, especially with so many SKINR materials sprinkled throughout the event. And finally, perhaps especially true in null sec, players were taking a break before the big un-bluing of the major coalitions from each other beginning on New Year's Day.

Data from Dotlan Maps

Looking back to December 2023, the trends were increasing everywhere except for killing NPCs in high sec and other players in low security space. With two expansions in 2024 more focused on null sec than anywhere else, the dip in player-owned ship explosions in low sec was expected. But the year-over-year, as well as month-over-month drop in NPC deaths in high sec might indicate an issue or two with this year's Winter Nexus event.

Data from Dotlan Maps

Speaking of looking back in time, what about the explosions for the entire year? As one might expect, numbers of explosions were up across the board except in low sec. While the PvE changes took hold from 18 months of low sec heavy expansions, player ship deaths did drop by 5.5%. Still, the number of NPCs killed by null sec players increased by one-third in 2024 compared to 2023. The downward trends at the end of 2024 are a concern, but just looking at the year as a whole the growth looked good. Or, in other words, we had another year of, "Yeah, but..."