Looking Back At Five Years Of Pearl Abyss Earnings Calls

Listening in on the Pearl Abyss 4th quarter earnings call for 2023, I noticed something unusual. Unlike in past years, the presentation was missing a look back at data from previous years. Which got me to thinking, "Just how bad were things in Anyang?" I did make some comparisons to 2022 to show the company had another sub-par year.

But then I got to thinking. What if I looked at the data going back to 2019, the first full year CCP Games was owned by Pearl Abyss. The years 2018 and 2019 were great years for the South Korean game company. Black Desert Mobile launched in South Korea, Japan and Taiwan in February 2018. In October, the company finalized the deal for CCP Games, makers of EVE Online. In 2019, Pearl Abyss launched Black Desert Online on the Xbox One in March and the Playstation 4 in August. The company finished the year by launching Black Desert Mobile in North America, Europe, and the rest of Asia in December.

The ₩541.5 billion ($464.9 million) Pearl Abyss year 2019 proved to be Pearl Abyss' high water mark in terms of revenue. The only new game published by PA was EVE: Echoes from CCP Games collaboration with NetEase in China in 2020. The problems with developing Crimson Desert, originally due to launch in Q4 2021, stopped up the development pipeline in South Korea. A second planned game, DokeV, has not yet received major development work.

The lack of new game development is apparent in the 4 years of declining revenue since 2019. The ₩333.5 billion in revenue recorded in 2023 was a 38.4% decline over 4 years. The drop in video game revenue was worse than the chart above shows, as in both 2021 (₩40.8 billion) and 2022 (₩20.2 billion) non-gaming revenue made up a significant portion of corporate income.

Similarly, the South Korean game maker's profits have also tumbled over the last 4 years. The peak profit of ₩150.9 billion ($128.7 million) in 2019 fell 89.8% down to ₩15.4 billion ($12 million) in 2023. Worse, the company recorded a loss in 2022. As for the operating profits, last year's ₩16.4 billion operating loss of probably explains the need of CCP Games to seek outside investors to develop its web3/blockchain game Project Awakening.

Looking at the performance of the intellectual properties, CCP Games and EVE are not to blame for the fall in revenue. Admittedly, 2019 was CCP Games worst year revenue-wise since the $46.5 million recorded in 2008. The Icelandic game studio did have the excuse of not being able to operate in China that year. Once the Serenity server resumed service, along with the launch of EVE: Echoes, in 2020, the EVE IP has averaged a steady ₩73 billion in revenue from 2020 to 2023. Not great, but probably surpassing the expectations of the Pearl Abyss executives in Anyang.

The Black Desert games, on the other hand, have seen revenue fall 47.7%, from ₩483.1 billion ($414.8 million) in 2019 down to ₩252.5 billion ($193.5 million) in 2023. The question is, why?

Looked at by region, revenue from North America and Europe has made up a bigger share of Pearl Abyss' business over the five year period. The share from NA/EU almost doubled, from 28.9% in 2019 to 55.9% in 2023. But the shift has more to do with failures to maintain revenue in South Korean and the rest of Asia as opposed to success in the west. Revenue in South Korea fell 56.1% and in the rest of Asia by 70.2% during the past five years. In the effort to gain market share in North America and Europe, did Pearl Abyss neglect Asia?

In one way, the answer is yes. The biggest fall in revenue comes from mobile games, of which Black Desert Mobile is the clear leader. In 2019, Black Desert Mobile was the clear income driver for Pearl Abyss, bringing in ₩323.5 billion ($376.4 million). For comparison Black Desert Mobile brought in ₩10 billion less than all of Pearl Abyss recorded in revenue for 2023. Last year, BDM and EVE: Echoes combined for ₩49.7 billion, a drop of 84.6% in mobile games revenue over five years.

The revenue by platform chart also shows a problem that fans of the now-cancelled game DUST 514 would recognize. Pearl Abyss launched Black Desert Online on the Xbox One and Playstation 4 in 2019. In 2020, both Microsoft and Sony launched the next generation of consoles. My understanding is that while BDO is playable on the current generation of game consoles, the experience is not as good as playing on the previous generation's hardware. Since 2020, console revenue is down 67%, from ₩54.7 billion ($64.8 million) in 2020 to ₩18 billion ($23.4 million) in 2023. No wonder Pearl Abyss executives on the latest call mentioned upgrading the console experience was a priority in order to improve corporate income.

Stepping back like I have today, I realize just how much Pearl Abyss' failure to deliver Crimson Desert in a timely manner hurt the company. Not only has PA not received any income from the game, but I now believe the plan was to port the game over to mobile, thus reviving a major source of income. 

The delay on Crimson Desert development also impacted the development of DokeV, which cannot enter production until Crimson Desert is finished. And expect DokeV to also receive a port to mobile platforms. 

To top all the problems off, Pearl Abyss probably planned for Crimson Desert development to finish before upgrading Black Desert Online to efficiently run on the current generation of gaming consoles. The problem is, development of Crimson Desert, originally planned to release in the fourth quarter of 2021, is still ongoing.

As I conclude composing this post, I have a question. When the acquisition of CCP Games by Pearl Abyss was going down in 2018, did anyone still in management foresee this situation occurring 5 years later? I say current because, based on some things I heard while in Reykjavik for Fanfest in 2018, some people did. Those people, though, left the company before the sale was announced.