Pearl Abyss Q2 2020 Earnings Call

Pearl Abyss held its Q2 2020 earnings presentation for investors yesterday. The main item that struck me was the declining financial numbers the Korean game company posted during a quarter expected to produce higher numbers due to the COVID-19 pandemic. Instead, PA experienced a 1.1% quarter over quarter and 8.4% year over year declines in the second quarter.

Operating profits grew 9.5% from the previous quarter, but still fell 2.3% from Q2 2019. The big decline was in Pearl Abyss' net profits, which declined ₩24.7 billion, or 51.5%, from the first quarter. Pearl Abyss did not explain the reason for the drop in net profits, although a tax hit is not out of the question. We do know that increased operating costs were not the reason for the decline in net profits. Labor costs fell 3.6% as the COVID-19 pandemic inhibited the hiring of new employees.

Eagle eyed individuals may have noticed that the totals for 2019 changed from that disclosed in the Q1 2020 call. Pearl Abyss explained this was due to the accounting changes explained in the Q4 2019 call. The change was required to fall in line with the industry's standard practices.

The source of the revenue drop was Black Desert, specifically Black Desert Mobile. While Pearl Abyss does not break out individual games, the Black Desert IP experienced a ₩7.1 billion ($6 million USD) drop in revenues in the second quarter. The BDM decrease also showed up in the percentage of revenue by platform, with mobile games making up only 43% of PA's sales in Q2 compared to 54% in the first quarter. But all was not bad news for Black Desert. On 24 April, PA began self-publishing the game in Japan, achieving the highest peak concurrent user mark in BDO's 5-year history in the country.

Partially making up for the drop was EVE Online. The game experienced a 31.9% increase in revenue QoQ and a 26.8% increase compared to Q2 2019. The $3.9 million increase brought the total EVE IP revenue up to $16 million for the quarter. While Pearl Abyss credited efforts to shore up the player base as a leading cause of the increase, I would credit both the lockdowns associated with the CONVID-19 pandemic as well as the relaunch of EVE in China on 27 April as larger factors.

Concurrency on Serenity (China), August 5-12, 2020

The EVE IP could provide a bright spot in Q3 as well. EVE Echoes launches globally today, except for China. In response to analysts' questions, Pearl Abyss revealed that the company does not have a launch date for the game in China as CCP/Netease is still trying to get a license.

Overall, Pearl Abyss came out of the call looking good, with the company's stock price jumping 5.8% in morning trading. The market consensus of a ₩37.3 billion operating profit was smashed by the ₩50.1 revealed on the call.

FFXIV Patch 5.3: Expanding The Free Trial

Today Final Fantasy XIV is off-line as Square Enix installs patch 5.3 on the servers. But instead of going into a lot of details about the release, I want to point out the business end of the changes to the game. The FFXIV trial is extending from level 35 to level 60. At the same time, the standard game will now include the Heavensward expansion, which has a level cap of 60.

The expansion of the trial to include the ability to play the Heavensward expansion doesn't, at least in my mind, count as turning FFXIV into some sort of free-to-play or hybrid business model. Square Enix still bans the purchase of items from the cash shop, meaning the only way the company can monetize trial players is to turn them into subscribers. The full list of trial restrictions is below...

• Free Trial Players cannot make in-game micro transactions during the Free Trial.
• Free Trial Players can create only eight (8) playable characters, restricted to one (1) playable character per world.
• Free Trial account characters have their level capped at level thirty five (35).
• Free Trial account characters can obtain only a capped amount of in game currency (GIL).
• Free Trial Players cannot use the "shout", "yell" or "tell" in-game chat options during the Free Trial.
• Free Trial Players cannot access the in-game market board during the Free Trial.
• Free Trial Players cannot trade items with other players during the Free Trial.
• Free Trial Players cannot use the Mogletter service during the Free Trial.
• Free Trial Players cannot hire a retainer character during the Free Trial.
• Free Trial Players can join a Linkshell if invited, but cannot create a new Linkshell during the Free Trial.
• Free Trial Players cannot create or join a Free Company during the Free Trial.
• Free Trial Players can join a party if invited or by using the Duty Finder, but cannot assemble a party during the Free Trial.
• Free Trial Players cannot login to the Lodestone and or any other game forum during the Free Trial.
• Free Trial Players cannot progress past Floor 10 in the Deep Dungeon during the Free Trial.

The 8 character limit shouldn't serve as a problem trying out classes (aka jobs) as a character can have all combat jobs, gathering and crafting classes trained. The bigger restrictions for anyone wanting to play the entire story line for free are the inability to trade with other players or use the market board. Not having the ability to upgrade equipment, especially in the Heavensward content which relies on flying mounts, via the market is big for running the dungeons that are a part of the main scenario quest line. Gathering materials for crafting in levels 50-60 is kind of difficult without the ability to fly.

As the change to the trial is part of an effort to attract players to the game, I should add in a couple of things patch 5.3 brings to FFXIV to make the game more player-friendly. First is the revamp of the 100 quests that were introduced in the patches to A Realm Reborn. Not only were many removed altogether, but more were streamlined to feel less grindy. Also, players can now fly in the old 1-50 level zones (except in cities) in the old ARR content. 

Of interest to newer players, treasure chests in dungeons will no longer drop basically useless items, thus filling up valuable inventory space better reserved for armor and weapons. Especially important for trial players, several of the lower level dungeons will now guarantee players a drop applicable to their combat jobs as long as the player does not possess any of the items. With no access to the market board, the better quality items found in dungeons can help players gear up.

Having completed the Heavensward story and run the Crystal Palace quest line and raids, I fully agree with the take that Final Fantasy XIV is the best MMORPG on the market today. But, I can see how the anime type art style (I'm not really sure FFXIV is an anime game) and forced grouping could turn some people off. If anyone wanted to try the game, the introduction of the new unlimited trial is a good time to start.

Summer War 2020: We Were Promised Explosions

The big summer war of 2020 began 4 weeks ago. We've seen coverage of the war on talk shows and Twitch streams. The EVE Online sub-reddit is full of propaganda. The growing number of systems with Pandemic Horde infrastructure hubs in Fountain and Brave Collective iHubs in Querious mark the progress of PanFam and the Legacy Coalition towards The Imperium's home region of Delve. But the question remains. Where are the ship explosions?

In July, null sec witnessed an average of 10,358 ships explode for various reasons. But despite the start of the war late on 4 July, the total was down from June's average of 10,421 ships lost per day. One cannot explain the slight decrease as a lot less of a decrease than normal, either. The 0.6% drop in wreck creation in 2020 is slightly below the average change from June to July from 2016-2018 of 0.0%. That's right. In EVE's free-to-play, non-Blackout history, null sec averages no decline at the beginning of summer (winter in Australia/New Zealand). In other words, the war is not providing an increase in ship wrecks.

On the ratting front, major wars have two contradictory influences. On the one hand, major conflicts can interfere with ratting, especially if the sides decide to declare total war on each other's rear areas. But, alliances have an incentive to increase ratting in order to improve their systems' activity defense modifiers. In July, null sec saw a 4.1% decrease of NPCs killed, down to 6,200,252 rats per day. The decline, though is in line with the 2016-2018 average decline in NPC kills of 7.5%. Once again, seemingly the "World War" is not affecting all of null sec.

Just looking at the data available on Dotlan, the current war reminds me of the fighting a few years ago in factional warfare. The participants were all happy and thought the action had picked up tremendously. But in reality, all the players gathered to a few points to make the game feel busy.

Is the same thing happening today in null sec? Perhaps not. We still haven't seen the big toys gather to have a critical battle or two. Also, we haven't seen the July monthly economic report yet. The Dotlan data can give a first impression but more is needed. The maps show the fighting is spread out over regions. But how deep is the war? How many ships involved? What are the resources devoted to the conflict? Or, potentially, the resources available to wage the war. But for now, the level of fighting seems not out of line with the normal state of null sec.

Dotlan Makes It Easier To Follow The War

Wollari has done it again. For those who don't know, Wollari is the developer of Dotlan Maps. In a recent move, he went ahead and made following wars in null sec a lot easier to follow.

Back in the dawn of time (before July 2015), territorial control units (TCUs) were important in the sovereignty system. One could follow a war just by watching sovereignty change hands. But with the Aegis release, that changed. Basically, TCUs became little flags on a map and nothing else. The null sec powers ignore the flags and only clean them out after the fighting is over.

The new key structure is the Infrastructure Hub (iHub). The iHub can have various upgrades installed that aid in generating additional PvE content and wealth. Additionally, running the PvE content increases the activity defense multiplier (ADM) in the system.  The iHub is also important, because an alliance cannot deploy cyno jammers in a system without a Cynosural Suppression upgrade installed in the iHub. An infrastructure hub upgrade is also required to place an Ansiblex Jump Gate in a system. A jump gate network gives an alliance great mobility to move forces around the cluster.

The innovation Wollari introduced is the ability to see who owns the iHubs in a region. Before, we could only filter on the sovereignty map, which displayed the TCUs. Let's use Fountain as an example. Before, visiting Dotlan would show users the sov map.

Fountain Sov Map - 30 July 2020

Looking at the sovereignty map, we can see that someone is making a push in the north of Fountain. Also, that space held by The Initiative. is under attack. But switching to the new iHub map tells a clearer picture.

Fountain iHub Map - 30 July 2020

In the north, the systems marked as belonging to Infensus <DUTCH> on the sov map contain iHubs owned by two alliances. The defending alliance is The Bastion <BASTN>, a member of The Imperium. The attacking group is Pandemic Horde <REKTD>, a member of the PanFam coalition currently allied with The Legacy Coalition.

In central Fountain, the sov map just shows that some sort of warfare is happening. Switching to the iHub map shows Pandemic Horde and allies making inroads into the Sphinx constellation, placing iHubs in 4 of the 11 systems.

Trying to watch wars over the past few years has gotten harder with the introduction of the Aegis sovereignty system. With the latest additions to Dotlan, Wollari has made watching the action a bit easier.

Monetizing The War

Last week CCP announced a new package in the cash shop. The "Training Boost Bundle" consists of 1.5 million skill  points and a cerebral accelerator that gives a +8 bonus to all training attributes for 12.5 days. With Biology V trained, that should give up to 25 days of bonused training. All for the low price of $39.99 USD.

I'm not joking about $39.99 being a low price, especially for veteran players with characters possessing over 80 million skill points. Buying and using skill injectors off the market incurs penalties for older characters. So while a new character receives 500,000 skill points per injector, a character with over 80 million skill points only receives 150,000. So for those who wish to purchase 1.5 million skill points with real world currency for a character, based on Wednesday's prices in The Forge, the prices were:

Character with:

• 0 - 5 million skill points: $31.86
• 5 - 50 million skill points: $39.83
• 50 - 80 million skill points: $53.10
• over 80 million skill points: $106.20

PLEX Store Prices

We should also consider the real world money spent to create skill injectors. The skill point farmer needs two things. First, either 500 PLEX or a multiple character training certificate to generate the skill points. Even if purchased for ISK by the farmer, some still has to purchase the PLEX or MCT from CCP for real world currency. Without a training booster like the one that comes with the package, a character can generate enough skill points in 30 days to fill up 3.88 skill injectors. Let's round that figure up to 4 to make future calculations easier. A pack of 1100 PLEX costs $39.99 in the store. As we can see, the amount of PLEX required to create the skill injectors for 50-80 million skill point characters equals the cost of the new skill point package and exceeds that for characters with over 80 million skill points.

Now, we need to take into account the number of skill injectors needed to inject a character with 1.5 million skill points. Here is the breakdown.

Character with:

• 0 - 5 million skill points: 3 injectors
• 5 - 50 million skill points: 4 injectors
• 50 - 80 million skill points: 5 injectors
• over 80 million skill points: 10 injectors

Each skill injector requires a skill extractor to create. Skill point farmers will pay PLEX for what they use. The rate is a standard 140 PLEX per skill extractor. The skill extractors come in packs of 5 for 700 PLEX and 10 for 1400 PLEX.

Skill point farmers generally create more than 20 skill injectors a month, so let's calculate the cost to create 20 skill injectors to make the maths easier. The farmer has to outlay 2500 PLEX (2455 if using MCT on for 3 of the 5 characters) plus another 2800 PLEX for skill extractors (assuming they are not on sale). So the manufacturer's cost to create a skill injector is roughly 265 PLEX. Slightly more when the rounding I performed is removed.

Now, to return to the player who wants to boost his 80 million skill point character. Instead of a skill point farmer spending 2650 PLEX in the NEX store for training time and skill extractors, the new skill package only draws in $39.99. How much is 2650 PLEX in U.S. dollars? CCP sells a package of 2860 PLEX for $99.99.

Honestly, I'm tired of the argument. We went through this issue last June. The ones who really annoy me are the players who thought skill injectors were a good idea back in 2015 and 2016 when CCP possibly could have been persuaded differently. And the players who drive me crazy are the ones who deny that, for all intents and purposes, CCP started selling skill points for real world money back in February 2016. 

As for the "CCP broke their promise" about not selling skill points directly out of the cash shop, I'd ask the complainers to look around. Back in 2015, CCP was an independent games studio. Now, they are owned by Pearl Abyss, a company not exactly known for being shy about their cash shop offerings in Black Desert Online. The cash shop was the number one reason I had for stopping to play that game.

As old players return to EVE to participate in the latest null sec conflict, I can see the appeal of spending $40 to try to catch up to the newest doctrines. I still don't like that type of jump, but time is passing me by. If players are willing to throw money around, I can't blame CCP for trying to scoop some up.

Is EVE's Summer 2020 War The Real Thing?

Over the last two weeks a lot of talk has circulated about the upcoming war between The Imperium and everyone Test Alliance Please Ignore can gather up to fight. Has anyone heard this talk before? More often than not, these wars fizzle out after a few weeks. 

Listening to the leaders of both The Imperium and TEST talk, they plan a war to the death. Do I really believe it? Not really. The two sides, the 8 alliances of The Imperium and the 102 alliances gathered together by TEST, will need to show some sort of real desire to have more than a few slap fights in Paragon Soul, Period Basis, Querious and Cloud Ring. The two sides traded jabs in their meetings, with The Mittani calling TEST, "the final destination for corp-hoppers, turncoats, snitches, grifters, graspers, suck-ups, also-rans, and the irredeemably incompetent", while TEST's progodlegend claimed that EVE is dying due to The Imperium. TEST's other leader, Vily, claimed their assembled force would not make the same mistake they made at the end of the Casino War and would destroy The Imperium.

At this time, the only major effort I've hear either side make was an Imperium effort to knock out TEST's jump bridge network in Paragon Soul. I know that TEST deployed a keepstar someplace before the NIP formally ended, but I'll have to look up where. I also know that one of the systems reinforced by Imperium was G-M4GK. A keepstar deployed in the system would allow The Imperium to project supercapital forces into Esoteria. But besides that, I don't know a lot about the action so far. I'm sure we'll hear something soon. How much is reliable, that's another question.

Thoughts On FFXIV's Beast Tribe Quests

I started playing Final Fantasy XIV on the 50th anniversary of the first landing of men on the moon. I switched to making FFXIV my main game at the beginning of February during the DDOS attacks and subsequent mitigation issues suffered by EVE Online at that time. Being stuck in Rens for nine days led me to play more and more FFXIV and I basically didn't stop once the servers became stable again.

As my first year in Eorzea comes to a close, I thought I'd write a few posts updating my progress and giving some thoughts on various features of the game. Currently I am sitting at the Heavensward quest in the Main Scenario Quest line. I also have white mage leveled to 67, all three gathering classes over level 60, and my lowest crafting class at level 57. One of my current main goals is completing all the beast tribe quests in ARR and Heavensward. 

The first beast tribes were added to FFXIV in patch 2.1. The first set of beast tribes introduced in A Realm Reborn were the Amalj'aa, Kobolds, Sahagin and Sylphs. A crafting based beast tribe, the Ixali, was introduced in patch 2.35. Heavensward added three additional tribes: Vanu Vanu (3.1), Vath (3.2) and the crafting based Moogles (3.3). The content felt like end of expansion filler content, which looking up when Square Enix introduced each tribe seems to confirm.

Why do the content while I'm leveling? Completing each tribes quest line results in making mounts, minions, and dyes available from each tribes' store. The beast tribe vendors are also a source for crafting materials. Since I am into both the crafting and glamour systems, doing the beast tribe daily quests made sense.

The storytelling for each beast tribe quest line is also worth playing. I've found most of the quest lines in FFXIV good so far. The way the beast tribes work is first, do a series of quests to qualify to do the daily quests. Doing daily quests results in reputation gains that lead to different levels of reputation. The game allows for doing 3 quests for a beast tribe per day per quest giver, with a maximum of 12 total beast tribe quests per day. Reaching the next level of reputation unlocks the next story quest. 

The one part of the feature I have not played is the allied beast tribe quests. Once a player reaches max reputation with all the beast tribes in a release, a final quest line appears. In ARR, completing the allied quest lines provides the Sable Death Mask. The Heavensward quest line provides the Moonlift Dance. 

Overall, I like the beast tribe quests. I currently am working on Sahagin quests from ARR and the Moogle and Vanu Vanu quests in Heavensward. The one thing that might slow me down is my desire to continue the MSQ and get to Stormblood. Doing nine quests a day does take some time, even though at this point I can one-shot most of the mobs. But I will at least finish the Moogle quests as those help in leveling my crafting classes.

Project Discovery: COVID Edition

I received the following email about 2 hours ago.

Project Discovery Phase Three

Aid real science from within EVE today 

Greetings Rosewalker,

Project Discovery and citizen science have returned! You are invited to once again join the growing ranks of Capsuleers who have contributed to real world science through a mini-game within EVE Online, the results of which will assist in the understanding of how our bodies react to viruses.

The newest iteration of Project Discovery allows you to analyze data produced by flow cytometers. Using a tracing tool, you will draw polygons around clusters of cells. In doing so, you will participate in analyzing COVID-19 data, as well as other related flow cytometry charts, which will help scientists understand better how our immune systems are impacted by this novel coronavirus.

Today's news article gave a little more detail.

Specifically, you will be demarcating different cell populations present in blood. That data will provide information about how infections and other factors impact immune systems. Your polygons aid scientists in understanding how different cell populations and types are altered through infection.

Log in to EVE Online and check out the detailed in-game Project Discovery tutorial for full details of how to participate and begin aiding the cause of real science once more!

I'll have to check out the COVID version. With the search for exoplanets, I managed to get a Marshal and a heck of a lot of SKINs. I'll also have to check a certain botting forum to read all the complaints that their Project Discovery bots no longer work.

CSM Voting LIve Through June 8th

I originally wasn't going to write about the Council of Stellar Management election now running through 1200 UTC on Monday, 8 June. But when I went to vote last night, I had to do some research in order to figure out how. So, I think I need to help players who wish to vote a hand.

The link to vote is here.

https://community.eveonline.com/community/csm/vote/

Then log in an account and move the tiles up to the voting screen. Players can vote for up to 10 candidates. I should note players do not have to fill out all 10 positions. If someone only likes three candidates, that person should only vote for those three candidates.

Once again, I will bring up one of my pet peeves about the single-transferable vote system used for CSM elections. People out there will tell people they have to fill out all 10 positions. Others will say, if players don't fill out all 10 positions, they are wasting their vote. I've even heard the argument that people who don't fill out all 10 positions are either lazy or stupid. In my mind, people making those arguments are engaged in voter suppression.

I think people don't understand that EVE Online is just a video game. Who has time to research 40 candidates in order to pick out the top 10 candidates they like? The major null sec alliances get around the issue by creating a list, and even links, to use to make their lives easier. But for those in small groups or even playing solo? I've done that type of research over the past 5 years and let me tell you, I'm pretty sure no one does the research on their own.

Some people are still out there producing content for CSM elections. Declarations of War held two candidate panels. But I think this year most of the information will come from CCP. The company posted a dev blog with information about each candidate. 

I'm not going to do the EVE blogger thing of making recommendations. Mostly because I know what I say won't matter. Over the years, starting with the introduction of the STV system, I have watched the rules gradually favor the most organized groups. Who are the largest, most organized groups in EVE? The major null sec alliances.

After last year, I gave up following the elections. The results are basically pre-ordained, except for the last position or two. And that is a hope, not solid analysis. So I voted with my three accounts, and with any luck, Mike Azariah somehow defies the odds and makes it back to the council and the next summit in Reykjavik.

Prices For Russian Players Increasing On 1 July 2020

Today, CCP Games announced an increase in prices for those using the Russian ruble.

On 1 July 2020, there will be an update to the pricing of all products for players paying using the Russian Ruble. The increase in prices will encompass Omega subscription, PLEX, Multiple Character Training, Value Packs, and Daily Alpha Injectors.

The main reason for the update is that the change in currency conversion over the last few years has created an imbalance between the pricing in Rubles compared with the rest of the world. This has resulted in the abuse of current price differences, which has had a negative impact, both in and out of game.

Due to the falling value of the ruble over the past few years, the costs for Russian players (or those paying in rubles) is less than for those using other currencies.

Prices as of 25 May 2020

For example, a one-month subscription (aka one month of Omega time) of 599 rubles costs €7.67, $8.37, or £6.87 compared to the other major currencies CCP accepts as payment.

I do have to note that the price change occurs at the beginning of the third quarter. Pretty standard, I believe, making a major price change in order to keep the accounting simpler. But I'd expect a large drop in players from Russia, or at least the number of Omega accounts.