Cloud Imperium Games' 2021 Financial Report

Cloud Imperium Games released its annual financial report for 2021 on the final Friday of 2022. Usually such a release is called a "Friday news dump", designed to release information when the press is unlikely to pay much attention to the news. Doing so in front of a holiday weekend like New Year's is an extra layer of cover. But does the information warrant such hiding? Let's take a look.

The big news is that Cloud Imperium reached $100 million in total revenue for the first time in its history in 2021.  

The company's sales recorded on the counter on the Roberts Space Industries website increased year-over-year (YoY) 12.2% to $86.4 million. In a change from last year, the description of the bar graph has changed from "Total Pledges and Income" in the 2020 report to "Total Sales, Pledges, And Income" this year. The change possibly is an official change in the use of sales instead of pledges beginning in CIG's 2021 fiscal year.

CGI defines pledges/sales as follows:

This line is taken directly from our daily published Funding Stats Counter, showing the net receipts from our backers and customers. The vast majority of sales are of starter pack sales granting access to the Star Citizen Alpha, as well as space ships and digital items immediately delivered and playable in the game. A smaller fraction of sales came from pledges for concept ships, which all come with an included “loaner” ship for immediate use and playability within Star Citizen Alpha. Due to exchange differences and small items that are not included in the counter, such as shipping costs charged on physical goods, the counter does not completely represent all revenue received. Other than subscriptions (referred below) these differences are included in the final income line, to give an accurate representation of total revenue received.

The total earned from selling subscriptions increased 5.9% YoY to just under $5 million. CIG offers two levels of subscriptions which offer a digital magazine, first-wave PTU access, a monthly stipend to rent ships and weapons, discounted physical merchandise as well as discounted access to live events.

All other income sources increased by 45.2% up to $9.4 million for a total of $100.8 million in revenue. The category is described by CIG as below:

The other income line represents partnership income with various hardware and software vendors, sponsorship income, and various local incentives based upon the nature and location of our development and production activities. It also includes any exchange differences as referred above.

Overall, CIG earned $506.2 million from all revenue sources from the founding of the company in April 2012 to the final day of 2021. The breakdown by category is as follows.

• Sales/Pledges: $424.2 million
• Subscriptions: $27.8 million
• All Other Sources: $54.2 million

While CIG experienced record revenues in 2021, the company also spent more money than ever before in its history. Overall, CIG's spending increased year-over-year by 24.2%, with $98.5 million in trading costs and another $2 million in capital expenditures. The $100.5 million in outgoes in 2021 pushed total spending from 2012-2021 up to $501.3 million. The expenditures are divided into six categories.

Salaries and related costs made up the largest category, with $51.2 million spent in 2021. The 16.5% YoY increase does not include all salaries, as the pay of employees in Publishing, Community, and Marketing fall into that category.

The costs are divided into two categories: the United States and the rest of the world. Salaries for the rest of the world increased 24% to $34 million. CIG explained the large percentage increase, more than double that of the 11% employee growth, was due to "most of the increase in Rest of World headcount was only towards the end of that year and thus the costs did not reflect the headcount numbers shown at the end of 2020." Thus, the increase not only reflected inflationary pressures and wage competition, but the effects of the employees added at the tail end of 2020.

In the U.S., development headcount decreased by 8% as production was transferred from North America to Europe. But since the reduction was accomplished through attrition and not layoffs, much of the savings did not occur until the end of the year. Thus, salary costs were still up by 4% over 2020.

Publishing Operations, Community, Events and Marketing made up the second largest category of expenses. At $25.4 million, expenses associated with the category increased by 65.5%. The report described the line item as follows:

These costs are associated with running the game, deploying online services, and providing customer support. It also includes the costs of running our platform, publishing, data hosting, and server costs. It includes sales collection, customer liaison costs, and the costs of our marketing and community events, although, like 2020, these were curtailed in 2021 due to pandemic restrictions. This cost line correlates closely with income and user engagement, and the growth experienced in 2020 accelerated further in 2021, rising 66% to $25.4M.

Other game development costs (overheads) is defined as "...the costs of operating the various studios and including such expenses as office rental and maintenance, travel and accommodation, IT, and other costs not included elsewhere." Spending on the category increased by 34% to $11.7 million from 2020 to 2021. CIG indicates the increased costs occurred near the end of 2021 as the company began to return to the office and travel restrictions eased.

Contracted game development costs increased 55.9% YoY up to $8.7 million. From the outside looking in, the increase appears was necessitated in part by the shift of operations from the United States to Europe.

These represent the costs of contracted services supporting game development work. For 2021 this increased by 56% to $8.65M. External services used by the Rest of the World dropped by 22% to $2.5M as it continued its trend of internalizing the development resources deployed on the games. However, US spend in this area was up by 161% ($3.8M) mainly arising from managing a growing development team based in Canada. This represents the continuing trend in the US of supplementing its core development specialists with external development talent from elsewhere.

While the increase is large, CIG has spent much more in outside game development in the past. In 2015, the company spent $14.1 million, or 28% of its total budget, on such services. In contrast, the company only spent 8.6% of its budget on the category in 2021.

The final trading cost category is General and Admin.  Expenditures falling within this category "represent insurances, accountancy, and other professional and legal fees not apportioned directly into the cost areas identified previously." These costs rose 26.5% YoY to $1.5 million.

Also included in total outgoes are the capital expenditures, which fell 67.6% YoY. CIG explains the concept further in the report:

This represents capital expenditure in areas such as hardware and software, fixtures, fittings, and on offices. Whilst it trends with staff numbers, it is also impacted by hardware renewals, server upgrades and other security and infrastructure purchases. It is included in this accounting as it represents an outlay for the materials required to develop and publish the games. Since the total capital expenditure amount is included here, we do not list the depreciation portion of such expenditure subsequently in the cost analysis.

I don't quite fully believe CIG's explanation for the decline in capex in 2021.

Capex spending in 2021 was $2.0M and was mainly concentrated in the Rest of World territories which grew most during the year. This was $4.1M less than 2020, although the prior year was dominated by the one-off strategic purchase of a perpetual worldwide license for use of the CryEngine. Next year, capex will increase as the world-class offices are fitted out and come fully on-line.

Despite the record revenues recorded in 2021, CIG may have pushed some capex spending to 2022 due to budgetary constraints. The company only recorded a profit of $349,000 on $100.8 million earned.

Overall, the company is in decent financial shape, recording 7 months of operating expenses in the bank at the end of 2021. However, the cushion is provided by the minority investment in CIG from the Calders in 2018 and 2019. Once again we see that the sales recorded on the counter on the development page is not enough to fund the project. While CIG did record an average of $7.2 million in sales each month, $8.4 million was spent in developing and operating the games. Subscriptions and other types of income managed to make up the balance.

I'll conclude the post by giving CIG the final word to describe their view of the 2021 financial report.

The 2021 Accounting shows the Group continued to spend its income on the ongoing development and publishing of the games, as has been the intention from the outset in its goal to deliver a world class gaming and unique social experience for its players and community. The minority investment funds sitting on the balance sheet remain earmarked for future marketing activities as we approach the commercial launch of the games. They also serve the additional purpose of providing financial security to allow longer-term strategic planning, evidenced by the substantial long-term commitment to the upgraded office facilities in the Rest of the World locations made in 2021. These upgrades are not just to accommodate the increased headcount but are designed to create a world-class place for collaboration and innovation.

Cloud Imperium Games Now Has 940 Employees

I originally planned on writing an article about Cloud Imperium's financial report for 2021. The company has neither posted the information on its corporate blog or filed its group of companies' accounts with the UK. But I did run across an article on Asia One published three weeks ago that provided information about the number of employees.

According to CIG's Chief Development Officer Erin Roberts, the company has almost 1000 employees.

"Right now, we have 550 people working out of the UK, we have 150 out of Montreal, we have 120 to 130 in LA, we've got about the same in Texas and Frankfurt's got about another 120... When you're paying for five offices worldwide and development costs and everything that comes with it, then it (the money) gets used."

At the end of 2020, CIG had 695 employees. Doing some napkin math, CIG spent $116,300 per employee in 2020. If that rate of spending applies this year, we can estimate CIG spent approximately $109 million in 2022. Given that the funding page has already recorded over $111 million for the year, 2022 looks to be another profitable year for CIG.

Producer Live Letter #75 - Introducing Patch 6.3

Early this morning Final Fantasy XIV's Producer and Director Naoki Yoshida streamed the75th Letter from the Producer LIVE. Since I have the day off I thought I'd record some of the information.

Perhaps the biggest news was the release date of the patch, named Gods Revel, Lands Tremble. As pretty much expected by now, the release date for Patch 6.3 is 10 January 2023. Patch 6.31 and the new Ultimate Duty, "The Omega Protocol", will release two weeks later on 24 January. The mid-point patch, 6.35, should release sometime around 14 March. Given the date, expect patch 6.4 to launch sometime in mid-May.

The main scenario questline continues as usual. Also in patch 6.3 is the continuation of Tataru's Grand Endeavor. The Tales of Newfound Adventure continues Completing The Four Lords questline from Stormblood is required to do the new quests. Coming in patch 6.35 is the continuation of the Hildibrand questline and updates to the new Manderville weapons. The new tribal quests involving the Loporrits will also appear with patch 6.35.

In addition to the new Ultimate, patch 6.3 introduces a new dungeon, regular trial, alliance raid, and Unreal trial. The dungeon, Lapis Manalis, is integrated into the duty support system and Zero is one of the NPC choices. Yoshi-P did not provide any information about the regular trial. None of the marketing material or the patch trailer includes information about the trial either. The second part of the alliance raid is named Euphrosyne. The Unreal Trial is Containment Bay P1T6. To qualify for the Unreal trial, players must complete Abyssos: The Eighth Circle (Savage)

Square Enix is also introducing the game's third deep dungeon, Eureka Orthos. Completing the 50th floor of Palace of the Dead is required to access Eureka Orthos.

Yoshida did not forget about old content, as the final six 4-character dungeons in the Heavensward MSQ were added to the duty system. Those are The Great Gubal Library (level 59), The Aetherochemical Research Facility (level 60), The Antitower (patch 3.2), Sohr Khai (patch 3.3), Xelphatol (patch 3.4) and Baelsar's Wall (patch 3.5). The only MSQ dungeons remaining are those in Stormblood.

PvP did get some attention in Patch 6.3. Besides the start of PvP Series 3 and Season Five of Crystalline Conflict, players will find a new map for Crystalline Conflict. Named The Clockwork Castletown, the map has the feel of Doma.

For crafters and gatherers, the Splenderous Tools quests open up with patch 6.35. To access the quests, players must complete the "Endwalker" quest as well as the Disciples of Land/Hand quest "The Crystalline Mean" and unlock the Boutique of Splendors by speaking with Mown in Eulmore. A new set of custom deliveries will appear by talking with Anden. In a much needed quality-of-life enhancement, the developers are adding primary fishing locations, preferred bait, and additional conditions to the Fish Log. A new spearfishing spot will open in Upper La Noscea.

The Island Sanctuary is receiving a lot of attention in Patch 6.3. New sanctuary ranks and visions as well as new items rewards are being added as well as new materials, crops, and isleworks handicrafts. The workshop interfaces are also receiving updates.  For those into automation, the devs are adding an option to collect all available yields and leavings at once instead of having to click on 20 individual lines for each. Animals under care will also be eligible for release upon a new animal's capture.

Island sanctuaries will also become more visitor friendly. Players can now save orchestrion settings and visitors will hear the music. Also, visitors arriving at an island sanctuary will produce notifications.

Also coming to Patch 6.3 is a new treasure map that leads to a new portal called The Shifting Gymnasion Agonon found in Elpis. The Gold Saucer is receiving a third course for the Leap of Faith caled Sylphstep.

One pain point the devs are addressing is the lack of housing. Many worlds are receiving 1800 new plots. Each residential areas on those worlds will receive 6 regular wards and 6 subdivisions. Newly created worlds will not have additional housing due to the worlds having available housing already. The worlds are:

• Dynamis Data Center: Hallcarnassus/Maduin/Marilith/Seraph
• Chaos Data Center: Phantom/Sagittarius
• Light Data Center: Alpha/Raiden
• Materia Data Center: Bismarck/Ravana/Sephirot/Sophia/Zurvan

The combat UI is receiving updates to give some functionality available in 3rd party tools. Icons for damage types (physical, magic, and unique) will display in both the Battle log and flying text. Also players can toggle the ability to see the remaining times for buffs and debuffs in the party list.

The glamour system will receive updates come January as well. Players will have a wider range of activities they can do while using fashion accessories like umbrellas. For example, mounting while using a fashion accessory will automatically put the item away. Upon dismounting, the fashion accessory will reappear. Useful for rainy days. Speaking for rainy days, umbrellas will have an option to automatically activate if the rain starts falling, thus keeping the player dry.

The glamour system will also expand to integrate retainers into the feature. When changing the appearance of a retainer, players will no longer have to unequip the retainer. Yes, players will now have the ability to just cast glamours and dye the equipment of retainers. For those who use their retainers to store glamour items, the devs are granting the ability to cast glamour on a character's equipment directly from a retainer's inventory.

The above is not a comprehensive list of changes coming in Patch 6.3 or everything discussed in the Live Letter. But I think most players will find something of interest in what I did mention. The special site was updated with the latest information shortly after the end of the stream. Hopefully players will find something to get excited about when they log in on 10 January.

Down To Two

I finally did it. Yes, I reduced the number of my EVE Online accounts from three down to two. When the price hike hit in the middle of May, I looked at my accounts and realized I didn't need three. I really only had 5 characters with a significant number of skill points. Two of my characters have over 250 million skill points, one has over 100 million, one over 50 million skill points, and a specialized PI character with almost 20 million. A lot of people have multiple accounts for multiboxing, but the days of my little three character mining fleets is behind me. So down to two accounts I went.

Consolidating the accounts wasn't really painful. I just needed to transfer two characters from my third, now Alpha account, to my remaining subscribed accounts. The process does take a couple of days. First, deleting a character takes 10 hours. I can think of a couple of reasons for the delay. First, EVE players have a tendency of getting drunk and doing stupid things in the game. By putting in the delay, a lot of tickets are probably prevented each year from hung-over players requesting a character restoration. The other reason is if someone accesses the account, he characters have a higher chance of survival from a malicious actor hitting the delete key on all the account's characters.

The actual transfer process took longer than expected. I kind of expected the 10-hour transfer period. What never occurred to me was I could only transfer one character at a time from an account. Transferring two characters took a combined total of 20 hours just sitting in queues. Once again, I am not complaining about the inherent reasons for the length of time.

However, getting to the page so I could select the characters to transfer took some patients. I kept timing out. I only timed out three times before I could select a character to transfer. But the next night, I abandoned the effort after 10 attempts. I wound up waking up early the next morning and succeeded after only a couple of attempts.

By taking advantage of the recent sale on 12 months of Omega time, I only spent $280 for my two accounts for one year of game time. During the sale I spent $119.99 for one year of game time for each account plus $20 to transfer a character to each account. The sale saved me $30 per account off the normal $149.90 for 12 months of game time. Unless CCP offers a really good deal on multiple character training, I've probably spent all I need to on EVE unless I go to Fanfest.

A Messaging Battle

Sometimes I feel sorry for CCP's game devs. They work hard to put together an expansion like Uprising. Players received new ships, updated graphics, new types of ship decorations not tied to the cash shop, and an overdue update of the factional warfare system. As expected after an expansion, player activity increased.

Of course, the haters and bitter vets on places like the EVE Online sub-Reddit couldn't admit that CCP did anything positive to increase player interest. Instead, the causes were giveaways like free game time and a login campaign. Nothing to do with all the improvements CCP's game developers put into EVE. 

Then we get to the other extreme.

Good weekend for EVE Online: Uprising! 2nd highest November Daily Active User (DAU) count for the past 6 years (hard to beat 2020).

— CCP Hellmar (@HilmarVeigar) November 14, 2022

Look, I realize Hilmar's tweet was not intended to engage with EVE players. The target of the head of Pearl Abyss' largest western studio was our overlords in Anyang and investors interested in Pearl Abyss stock. EVE players don't deal in questionable statistics like Daily Active Users. To EVE players, the number of people actually playing the game at the same time they do is a lot more important. If the leadership of CCP wants to engage with their player base over activity, they need to discuss statistics like Peak Concurrent Users (PCU) or Average Concurrent Users (ACU). 

From now until Pearl Abyss' Q4 2022 investors call sometime in February 2023 I'll look at several statistics from inside EVE Online to determine which side is correct, the haters or the white knights. I might even post some of them if real life gives me a chance. Right now, I think the white knights are in the lead. Hopefully that is not an unhealthy dose of copium and the positive trends I see will continue until EVE's next major expansion. 

Cloud Imperium Games Records Record $23 Million In Sales In November 2022

In November, Cloud Imperium Games rode the Intergalactic Aerospace Expo to its best revenue month in CIG's 10 year history. Out of the $23 million in sales recorded last month, $21 million came during the last 13 days of November. Overall, CIG reached $105.5 million in sales through the first 11 months of 2022. 

Sometimes putting these numbers into perspective helps. In the second and third quarters of 2022, the EVE IP brought in $27.1 million in revenue. If EVE: Echoes made the same amount in sales in 2022 as it did in 2021, then EVE Online made approximately $22 million during that six month period. So in one month, CIG recorded more in sales than EVE Online did for Pearl Abyss from April to September 2022.

Coming up in December is the expected annual statement from CIG of the company's financial performance for 2021. Unlike last year, we do not have a group of campanies' accounts filing from the UK's Companies House to give a preview of the report. We do know the total revenue for 2021 was at least $86.4 million.

From all sources listed on the Cloud Imperium Games various websites, the company has made $599.3 million in CIG's 10 years of existence. 

• Pledges/Counter: $531.8 (through 30 November 2022)
• Subscriptions: $22.8 million (through 31 December 2020)
• Other income: $44.7 million (through 31 December 2020)

In addition, CIG has received $63.25 in venture capital funding. When the next yearly financial statement comes out in a few weeks, expect to see the combined amount of subscriptions and other income to increase by $10-$12 million.

Cloud Imperium Games Filed A 10:1 Share Split In October

In about 4-5 weeks Cloud Imperium Games is expected to publish financial information covering 2021 on its website. As part of my preparation to write about the article, I searched on the UK's Companies House for filing information on Cloud Imperium UK LTD. While the company has not yet filed its accounts for 2021, I did see a notice of sub-division of shares filed on 10 October 2022.

Posted on Companies House 20 Oct 2022

For an explanation for what a sub-division is in the U.K., I went to CompanyWizard, a company that specializes incorporating new companies in the U.K. A subdivision, or share split, is:

Share splitting is an option open to companies whereby each share will be subdivided into two or more new shares. This means that the individual will hold more shares but each share will have a lower nominal value.

A straightforward split will not change the shareholders’ rights, this means that the voting control and rights to dividends will be unchanged after the split. All that has changed is the number of shares and the nominal value of each share.

Before writing this post, I asked around on why CIG might have conducted a share split. A passage from the CompanyWizard website summarized the answers I received.

The main reason for doing a share split is to improve the liquidity of the company’s shares.

For example, if a company owner has just 1 ordinary share with a nominal value of £1 they cannot sell half a share, but if there were 100 ordinary shares with a nominal value of 1p, the owner could choose to sell 50 shares. In the same way, a new investor might no be comfortable investing £1000 and only receiving one share, however, they may be more comfortable receiving 1000 shares worth £1 each.

Share splits are frequently done by publicly quoted companies because it can reduce the share price in line with the split, but it does not reduce the market value of the company.

"Improving the liquidity of the company's shares" sounds like CIG possibly is seeking additional outside investment into the company. Considering CIG is experiencing the highest revenue in its history in 2022, with sales to exceed well past $100 million, the news might come as a surprise.

The last time CIG conducted a share split was in December 2017, when the stock split from 100 to 1 million shares. The announcement of the Calders' investment in CIG was not made until December 2018. I should note that the appointments of Ezer Klein and Daniel Offner to the CIG board of directors on 23 May 2018 were likely connected to the $46 million investment the Calders made in 2018.

Another possibility is much more benign. With the current inflationary economy in the United Kingdom, which rose at a rate of 11.1% from October 2021 to October 2022, the leadership might have decided to pass out shares instead of big pay raises as compensation. By conducting a 10:1 share split to create over 11 million shares, employees might feel more appreciated at receiving 10 or 20 shares instead of 1 or 2.

Either way, the public is unlikely to find out the truth for a few months, if not for a year or two. For now, we just have a tantalizing filing announcing a 10:1 share split occurred in October.

Blizzard Entertainment And NetEase Parting Ways ... Almost

On Wednesday evening Blizzard Entertainment announced the suspension of services for most of its catalog of games in the People's Republic of China.

IRVINE, Calif.--(BUSINESS WIRE)--Blizzard Entertainment, Inc. announced today that it will be suspending most Blizzard game services in mainland China due to the expiration of the current licensing agreements with NetEase, Inc. on January 23, 2023. This includes World of Warcraft®, Hearthstone®, Warcraft® III: Reforged, Overwatch®, the StarCraft® series, Diablo III®, and Heroes of the Storm®. Diablo Immortal® co-development and publishing is covered under a separate agreement between the two companies.

Blizzard Entertainment has had licensing agreements with NetEase since 2008, covering the publication of these Blizzard titles in China. The two parties have not reached a deal to renew the agreements that is consistent with Blizzard’s operating principles and commitments to players and employees, and the agreements are set to expire in January 2023.

We will suspend new sales in the coming days and Chinese players will be receiving details of how this will work soon. Upcoming releases for World of Warcraft: Dragonflight, Hearthstone: March of the Lich King, and season 2 of Overwatch 2 will proceed later this year.

“We’re immensely grateful for the passion our Chinese community has shown throughout the nearly 20 years we’ve been bringing our games to China through NetEase and other partners,” said Mike Ybarra, president, Blizzard Entertainment. “Their enthusiasm and creativity inspire us, and we are looking for alternatives to bring our games back to players in the future.”

Notably, the latest collaboration between Blizzard and NetEase, Diablo Immortal, falls under a separate agreement and service will continue uninterrupted.

Blizzard has faced switching publishers in China at the end of a contract before. In 2009, Blizzard switched from The9, the original publisher in the PRC, to NetEase following The9's failure to receive approval from the General Administration of Press and Publications (GAPP) for the Wrath of the Lich King expansion.

SHANGHAI, Apr 16, 2009 (BUSINESS WIRE) -- Blizzard Entertainment, Inc. and NetEase.com, Inc. (NASDAQ: NTES) today announced that Blizzard Entertainment(R)'s World of Warcraft(R) will be licensed to an affiliated company of NetEase.com, Inc. in mainland China for a term of 3 years following the expiration of the current license agreement.

Both companies announced a partnership on Blizzard Entertainment's Warcraft(R) III,StarCraft(R) II, and Battle.net(R) gaming platform last summer. Today's announcement further enhances the partnership between Blizzard Entertainment and NetEase and promotes a consistent level of quality and service in mainland China for all Blizzard Entertainment games involved in the partnership.

"We appreciate the enthusiasm that Chinese gamers have shown us over the years, and we've always worked hard, in collaboration with our partners, to ensure that these players receive the same high-quality service and gameplay experiences that we deliver in other regions," said Mike Morhaime, CEO and cofounder of Blizzard Entertainment. "This new agreement with NetEase will support that goal for years to come, and we look forward to collaborating with them on a smooth transition for World of Warcraft moving forward."

"We are excited to be working with Blizzard Entertainment now on World of Warcraft in addition to Warcraft III, StarCraft II, and Battle.net," stated William Ding, CEO of NetEase. "By combining Blizzard Entertainment's expertise in developing world-class games with NetEase's strength in online-game operation in China, I am confident that we will be able to deliver the best gaming experiences in the world to our players."

Of course, the new deal also increased Blizzard Entertainment's bottom line.

According to Wedbush Morgan analyst Michael Pachter, the new contract with NetEase substantially increases Activision Blizzard's royalty rate on revenues from WoW in China. He estimates that with The9, Activision Blizzard collected a 22 percent royalty rate that translates into $50-$55 million annually based on recent subscriber figures. "Although the terms of the new arrangement were not disclosed, we estimate that the royalty rate will increase to at least 55%, and that the new arrangement will generate revenues of over $140 million annually,"

However, only allowing for two months to transfer publishing rights from The9 and NetEase was not enough to prevent a break in service. NetEase became embroiled in a bureaucratic battle between the GAPP and PRC's Ministry of Culture which prevented operation of the game. Despite acquiring the rights to publish WoW in April 2009, NetEase did not receive approval to operate The Burning Crusade, much less Wrath of the Lich King, in the PRC until February 2010. The Wrath of the Lich King finally launched in China on 31 August 2010.

The lengthy approval process for western video games to resume operation in the People's Republic after switching publishers still occurs. In July 2018, CCP Games, operator of EVE Online, switched publishers from Tiancity to NetEase, with NetEase to take over operations on 1 October 2018. But NetEase did not receive approval to operate EVE in the PRC until March 2020. The game relaunched in April 2020.

Given the previous examples of Blizzard's change of publishers for World of Warcraft in 2009 and CCP Games switch in publishers for EVE Online in 2018, we should expect some news of a new Chinese publisher for most of Blizzard's game catalog sometime in the next two weeks. But as for the ability of Chinese players to access their current accounts? Optimistically, that is months away.

Pearl Abyss Q3 2022 Earnings Call

Yesterday Pearl Abyss held an earnings call covering the third quarter of 2022. The South Korean company was able to report operating revenue of ₩97.3 billion, a 3.5% quarter-over-quarter (QoQ) increase and a year-over-year (YoY) increase compared to Q3 2021 of 0.9%. 

After the payment of employee incentives last quarter, Pearl Abyss' operating profit returned to the black, recording a YoY increase of 17.6% up to ₩12 billion. Net profit declined 33.4% from the second quarter as profits were inflated in the previous quarter due to tax refunds.

In the third quarter, gaming revenue from Pearl Abyss' main gaming IPs, Black Desert and EVE, increased 4.5%, to ₩96 billion. Black Desert revenue rose for the third quarter in a row, with quarter-over-quarter growth of 3.1% and YoY growth of 8%. EVE IP revenue grew ₩1.8 billion from Q2 to Q3 2022, from ₩17.6 to ₩19.4 billion. The 10.2% increase was even worthy of a call-out by the Pearl Abyss executives on the call. However, when an analyst asked if the increased EVE revenue was what investors should expect going forward or just a one-time event, the executives ducked the question.

The executives had a good reason to avoid answering the question. Q2 2022 was the first full quarter after the big price hike in May. Pearl Abyss Iceland (more commonly known as CCP Games) converts all revenue to US dollars and reports that number to the company headquarters in Anyang, South Korea. From there, the figure is converted from dollars to won. Using the monetary conversion rates from Xe.com on the last day of the quarter, the EVE IP made $13.6 million in the 3rd quarter, a 0.7% increase over the $13.5 million EVE Online and EVE Echoes took in from April to June 2022.

During the question and answer period, one of the analysts asked about commissions. While sales are up, the amount paid in commissions fell 22.3%, down to ₩16.6 billion. Pearl Abyss explained the decline was in large part due to the decline in mobile game sales. In the 3rd quarter, mobile revenue only made up 16% of Pearl Abyss' gaming revenue. In contrast, PC games now make up 77% of Pearl Abyss sales. Looking back to the first quarter of 2020, mobile games have made up a continuously shrinking part of the company's revenue as Black Desert Mobile continued to shrink. In Q1 2020, mobile games made up 54% (₩71.8 billion) of gaming revenue as opposed to 35% (₩46.5 billion) for PC sales. In Q3 2022, the numbers for mobile sales are 16% (₩15.4 billion) of PA's revenue vs PC sales making up 77% (₩73.9 billion).

A big topic of interest was the status of Crimson Desert. Pearl Abyss in the past stated that upcoming games like DokeV will not be published until Crimson Desert launches. The game was originally planned to have a Winter 2021 release date. However, the CEO refused to commit to releasing a gameplay trailer in the remaining weeks of 2022. He did reveal the company expects to release Crimson Desert sometime in the second half of 2023 and has approximately 50% of PA's 900 developers working on the game.

A rumor brought up by an analyst has hit the DokeV sub-Reddit, so I might as well report on it. One analyst brought up the decline of 59 employees from Q2 to Q3 2022. The loss of developers fell from 977 to 907. The executives tried to explain the drop to the end of an internship program that PA had mentioned on a call earlier in the year. Looking back through the records, the current employee totals are the lowest since Q1 2021.

Another analyst stepped up and asked about a rumor that the core development team for DokeV quit. I don't know where the rumor came from, but it did garner some attention. However, Pearl Abyss is aiming for a release of the game sometime in 2024.

A third game under development, Black Clover, also received some attention. First mentioned on the Q4 2021 earnings call, Black Clover is a game designed for the Japanese market based on the Black Clover IP. Originally announced to launch in the second half of 2022, the game release is now expected sometime in the first half of 2023.

Finally, Pearl Abyss told investors that the company continues work on Web3/blockchain technology in video games. CCP is still the studio working on implementing the tech, but will do so in a new game under development. The executives on the call noted the sustained negative feedback from players led to the decision not to try to introduce things like NFTs into CCP's current games.

The Cyno Is Now Lit

I wound up on r/eve last night reading a post from Katia Sae, the CEO of Signal Cartel. As often happens in a game nearly 20 years old, a player died in real life and the leadership of a player group needed to handle the final details of a players life in a virtual world. 

In EVE Online, players remember the real world dead with a tradition known as a cyno vigil:

Funeral rites are a long-standing tradition in MMORPGs, where player avatars gather together to show respect to fallen friends and enemies alike. In EVE, the tradition often involves what is called a “cyno vigil.” Groups of players gather in a set spot in ships equipped with a cynosural beacon. The in-game purpose of these beacons is to create a signal strong enough for massive capital-class vessels to use as navigation beacons, like a lighthouse shining into a dark night, showing the way home. These beacons ignite the liquid ozone stored in a ship’s hold to create a fire in space visible from light years away, creating a candle blazing in the darkness.

Sometimes hundreds of individual players attend these funerals, each adding their own candle flame to the vigil.

Mourners also attend after equipping their ships with harmless firework launchers, creating dazzling displays of color and noise. These players prefer to express their respects and grief with celebration and extravagance. Some even go as far as to offer their own vessels as a sacrifice in memoriam, either asking their attendees to destroy their ship, or self destructing them in viking-esque rituals.

A poem also exists to commemorate the passing of a player.

Eyes forward, capsuleer, the cyno is not yet lit. 

Consider your modules, your rigs and ammo before you undock, for the cyno is not yet lit. 

Break free of the station and witness the universe before you, For the cyno is not yet lit. 

Set your ship to fly through the vastness while you wait, For the cyno is not yet lit. 

Pay attention, capsuleer, for those who have gone before you call for you to join them. The cyno is now lit.

Perhaps ironically, the first search result on YouTube for They Cyno Is Not Yet Lit points to Katia Sae's channel.

For the cyno vigil for Zinov, a player who succumbed to kidney cancer on 11 October, the Signal Cartel fleet will depart the Zoohen III - Theology Council Tribunal at 1800 EVE time on Sunday, 6 November. The fleet will make its way to the Fallen Capsuleer Memorial at Molea II, Moon 1 for the can placement ceremony. As the fleet doctrine will be Signal's signature (at least in my time in the corp) hugs fleet, attendees should bring lots of fireworks. Afterwords, the fleet will wind up at Assez X - Moon 1 to hold a cyno vigil.