Sony Online Entertainment And The CCP Rumor

"Chief Executive Officer Howard Stringer has been pursuing the strategy of connecting Sony's network of videogames, movies and music to its hardware products, deeming it essential to the company's survival and competition with Apple Inc.'s lineup of devices connected to its iTunes library and store. "

The Wall Street Journal, 21 June 2011

With Eve News continuing to push the "Sony purchasing a share of CCP" story, now might be a good time for me to go back to my gaming roots and give a few thoughts on the situation.  I'm not too happy with their coverage so here are some facts that may or may not interest players of Eve Online.

First, Sony is not doing so well.  The Wall Street Journal reported last week that Sony is looking at an eighth straight year of losses in their mainstay television business.  And that is leading to investors looking at the company and saying "meh".

"Fund managers and analysts say Sony has lost appeal because they don't see an obvious engine for strong profits. Even after Japan's quake recovery, 'it's hard to see what will drive Sony's earnings growth,' said Tsuyoshi Kawata, head of global investment strategy at brokerage SMBC Nikko Securities. "

If Sony is looking for an obvious engine, and Sony management is attempting to leverage services involving video games into encouraging hardware sales, then Sony Online Entertainment is a key component of that strategy.  But a quick look shows that SOE is not doing that well.

First off, the recent hacking attack on the PlayStation Network also resulted in SOE shutting down its servers for 12 days and granting all of their subscribers 30 days free game time (plus the length of the downtime) as compensation.  Thirty days free game time is millions of dollars in lost revenue.  But that was just the latest in a series of blows the online game division suffered recently.  As expected, Star Wars: Galaxies will close down in December.  Everyone expects Vanguard, with no development staff dedicated to the game, to close soon.  Pirates of the Burning Seas went free-to-play last November.  Even EverQuest 2, SOE's flagship property, experienced server merges beginning last November.  Even with its latest games Free Realms, Clone Wars Adventures, the F2P EQ2 Extended and DC Universe Online generating revenue, SOE was forced to lay off 35 employees in July 2010 and then at the end of March 2011 announced it was laying off 205 employees and cancelling development of The Agency.

SOE does have two games, Planetside Next and the next version of EverQuest under development, with Planetside Next rumored to be announced at this year's SOE Fan Faire.  But will this new game along with a price reduction from $29.99 to $19.99 for Station Access accounts drive up the kinds of profits SOE needs?  Or would they want to, perhaps, purchase an interest in a successful MMORPG?  Perhaps one that has more subscriptions than any currently in the SOE stable of games (with the possible exception of DCUO)?

Would they?  I believe so.  And SOE CEO John Smedley's answer to a question in a Massively.com interview left some people wondering if he was targeting CCP.

Massively: So you don't think that sandboxes (and sandbox systems) are dead for SOE? Will you ever make a new sandbox with SWG's pioneering features?

Smedley: The answer is... stay tuned on the subject of sandboxes. We're super excited about the future of sandbox gaming. Let me just leave it at that!

Personally, I don't think Smed was referring to CCP and Eve Online.  I think he was referring to one of the upcoming games although I very well could be wrong.  I find it hard to believe CCP would want to sell Sony a major interest in their company.  However, I do think Sony could come in though the back door.

The back door's name is Bjorgolfur Thor, one of CCP's biggest if not the biggest shareholder.  Rumored to have ties to the Russian mafia, Bjorgolfur Thor was heavily involved in the Icelandic banking collapse in 2008.  To say he made a mess of it is putting it mildly.

"In 2002 father and son Björgólfurs in partnership with Magnús Jónsson acquired Landsbanki for ISK 11.8 billion, a part of the sum they got for selling a beer brewery in Russia. Now, six years later, the IceSave deposit accounts have caused a severe international dispute with the British, Icelandic interests are linked to the al-Qaeda terrorist organisation and the Talibans, and furious Brits demand that each and every Icelander must guarantee millions of krónur. "

Bjorgolfur went from being Iceland's first dollar billionaire to struggling to make deals to save his home.  And here are the details.

"Bjorgolfsson and his investment company Novator have been undergoing extensive debt refinancing and partial pay offs recently – among others to Deutsche Bank, Barclays and the resolution committees of Glitnir, Landsbanki, Straumur and Kaupthing. The debt amounts to ISK 1,200 billion (USD 9.79 billion), Visir.is reports – the majority of which connected to Actavis, which announced its successful refinancing yesterday.

"The refinancing deal sees Bjorgolfur Thor remain a shareholder in Actavis, the Polish telecommunications company Play, CCP and Verne Holding. But all his personal assets are included in the deal, according to a statement. The returns on his assets and their value if and when sold, will go towards debt payment. "

So Bjorgolfur may be looking to sell off his position in CCP.  Since CCP is a privately-owned company, I don't know what the rules are on selling the shares to others is in Iceland.

Now, I'd like to put on my tin foil hat for a bit.  With the announcement at E3 that DUST 514 will be a Playstation 3 exclusive title, CCP has entered into a relationship with Sony Computer Entertainment, the division of Sony responsible for console gaming.  Don't you think Sony would like a little more control in the relationship, especially given their strategy of using software and services to sell their hardware?  And wouldn't such a purchase make those unimpressed investors sit up and take notice?

Let me remove the tin foil hat and say something about the Eve News coverage.  Maybe they really do have a source inside CCP.  Everyone knows how badly CCP is leaking news lately.  And I know how much news about Eve Online has descended into tabloid journalism.  But would it be too much to ask for them to do a little research and provide supporting evidence to back up their claims?  Just because Eve News 24 is breaking news stories doesn't mean that Eve News should just start throwing out the latest gossip.

TL;DR - Eve News is lazy.  The facts that could support the story are interesting, so their obvious troll is not so obvious after all.

Related Post: CCP Partners With Nexon and SOE's Community Address