On Tuesday morning Seoul time, Pearl Abyss held its earnings call for the second quarter of 2023. The South Korean video game maker posted revenues of ₩78.4 billion ($59.6 million). The amount was an 8.6% decline from the first quarter of 2023 and a year-over-year (YoY) drop of 16.6% compared to Q2 2022.
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| From the Q2 2023 PA Investors Presentation |
A bigger issue than declining revenues was the profits turned to losses again. In Q2, Pearl Abyss experienced an operating loss of ₩14.1 billion ($10.7 million) and net loss of ₩4.4 billion ($3.3 million) for the months of April, May, and June. For the first half of 2023, Pearl Abyss posted an operating loss of ₩13 billion ($9.9 million) but was in the black with a net profit of ₩5 billion ($3.8 million). The second quarter of the year was also the second time in the last 3 quarters Pearl Abyss has posted a net loss. In Q4 2022 the South Korean company posted a loss of ₩100.3 billion ($73.8 million).
The executives on the call explained the losses were caused by two factors. The lesser reason seemed caused by the time of year. This is the third year in a row Pearl Abyss has experienced an operating loss in the second quarter. In 2021, Pearl Abyss experienced a Q2 operating loss of ₩6 billion ($5.3 million) and in Q2 2022 the company lost another ₩4.2 billion ($3.3 million).
The biggest reason the executives claimed, however, was the stiff competition Black Desert Online faced on consoles and Black Desert Mobile experienced on mobile devices. Despite the Land of the Morning Light expansion, a new class (Maegu) on consoles and a new zone (Everfrost) and class (Guardian) on mobile, sales dropped in the second quarter by 16.3%, down to ₩56.5 billion ($42.9 million). Year-over-year, Black Desert IP sales dropped 24%.
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| From the Q2 2023 PA Investors Presentation |
The bright spot for Pearl Abyss was the financial performance of the EVE IP. Sales for the quarter clocked in at ₩20.2 billion ($15.4 million), a 19.5% increase over the first quarter of 2023 and a 14.8% increase year-over-year increase. The only other quarter the EVE IP brought in over ₩20 billion in revenue while owned by Pearl Abyss was the third quarter of 2020 when the game brought in ₩21.3 billion. Even taking into account the devaluation of the won vs the dollar, revenue in April, May, and June equaled the total posted in the last quarter of 2021 when talk of NFTs and play-to-earn mechanics were first uttered by CCP leadership.
When asked why EVE and its Viridian expansion was able to succeed in an environment where Black Desert struggled, the Pearl Abyss executives said that EVE did not face any competition. Perhaps the statement did not translate well, but the feeling expressed was that EVE had an easy time and its success shouldn't have been a surprise.
Once again, the investment analysts on the call wanted to know about the future of Pearl Abyss' two new intellectual properties, Crimson Desert and DokeV. While Crimson Desert is not only supposed to launch in the second half of 2023 but show game footage at GamesCon, the analysts sounded a bit skeptical. When asked point blank whether Crimson Desert would launch in 2023, the executives hedged in their answer and stated they would do their best to ensure the game launched as soon as possible. The launch date slipping into 2024 seems a distinct possibility.
Finally, the rumors about core development staff for DokeV leaving Pearl Abyss back in 2022 still has an analyst from JPMorgan concerned. At least, I could not find any other negative stories about the game floating around the English-language gaming press. The executives said that they were concentrating on finishing up Crimson Desert and they expected that since DokeV and Crimson Desert would share the same game engine, DokeV would be developed fairly quickly.
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