Microsoft Picks Up ZeniMax And Bethesda For $7.5 Billion

If I were still playing Elder Scrolls Online I might react to today's news differently. Plus, I never could get into Fallout or Skyrim. So Microsoft's announcement that the company is acquiring ZeniMax Media & Bethesda Softworks left me shrugging. Well, until I saw the price tag of $7.5 billion. 

A lot of people will have profound thoughts about Microsoft vs Sony, etc. Me, I don't like consoles so most of the discussion is just academic. Interesting, but academic with little to no direct impact.

A Look Into The EVE Online Price Increase For UK Players

Last week CCP announced a price increase for players paying in pound sterling.

On 5 October 2020, there will be an update to the pricing of all Omega and Skill Extractor products for players paying using the Pound Sterling (GBP). This is being done in order to bring GBP prices in line with other main currencies (USD/EUR). Active Omega subscriptions will also be affected, and will update automatically after 5 October.

The main reason for the price change is that changes in currency conversion over the past few years have created an imbalance between the pricing in GBP, USD and EUR.

Furthermore, the prices have not changed since 2014, so these must be updated in order to maintain relative consistency across EVE Online's many markets.

Since the announcement, one nagging question stayed in the back of my mind. Why not also update the prices of PLEX?  Then the reason hit me: low value consignment relief.

In May 2012, players in the UK could begin paying for their subscriptions and other purchases in pound sterling instead of euros. At Fanfest 2012, CCP mentioned something about new laws that would allow the company to lower the subscription price for UK players, but not the real world cost of PLEX. The law in question regarded low value consignment relief. At the time, I wrote about the subject:

Even after the pricing change CCP collects more after taxes from U.K. players than from any other country.  How can this be?  The European Union has a regulation called low value consignment relief.  While for most of Europe the amount is €10, in the U.K. any import from a non-EU country like Iceland with a value of £15 or less is exempt from the normal 20% VAT that domestic companies must pay.

By lowering the price of a subscription in the UK, CCP no longer had to collect the 20% value added tax (VAT) on a subscription. However, CCP couldn't lower the price enough to avoid paying VAT on PLEX sales. I believe that was due to the upper limit of €22 on items affected by the rule. With the strength of the pound sterling during the Eurozone debt crisis, the exchange rate could change enough for PLEX to exceed that amount.

Subscription price change for UK, starting 5 Oct 2020

The days of tax avoidance are ending. On 20 July, Her Majesty's Revenue & Customs department published a paper describing how VAT from overseas sales will change in 2021. 

For imports of goods from outside the UK in consignments not exceeding £135 in value (which aligns with the threshold for customs duty liability), we will be moving the point at which VAT is collected from the point of importation to the point of sale. This will mean that UK supply VAT, rather than import VAT, will be due on these consignments.

The new arrangements will also involve the abolition of Low Value Consignment Relief, which relieves import VAT on consignments of goods valued at £15 or less.

Or, in other words, CCP needs to increase the price of the two items that are VAT-free for UK players, the 1-month of Omega time and the single skill extractor. The price of a month of Omega time is increasing 20%, from £9.99 to £11.99. The price of a single extractor is increasing by 25%, from £3.99 to £4.99.

The remainder of the prices for both Omega time and skill extractors were increased to levels near what is charged in US dollars. For example, using the exchange rate listed by Morningstar for 10 September, the new £99.99 price of a year's subscription in the UK is $128.02 USD, or $3 less than what those paying in US currency pay. The current rate of £89.99 equates to $115.22, or $16 less than the US price.

Price of PLEX on Amazon.co.uk, 10 September 2020

Perhaps not surprisingly, PLEX, an item which last had its price adjusted in 2017, is not seeing a price change. The price remains comparable to the US dollar amount, if a bit higher. For instance, the price of PLEX on Amazon.co.uk converts to $43.54, or $3.55 more than the price on Amazon.com.

I also wondered why the prices in the UK were not adjusted in July at the same time CCP increased prices in Russia. I tried to think of any other reasons besides the VAT change that potentially sparked the re-evaluation of pricing in the UK. The date the change takes affect, 5 October, is the first full week of the fourth quarter, but since Pearl Abyss' fiscal year ends on 31 December, the beginning of a new fiscal year is not a reason. I also could not find any evidence of a similar price increase for UK players in Black Desert Online. The closest I could come is that the sale of CCP to Pearl Abyss became final in October 2018. 

Perhaps the simplest explanation is best. CCP was prodded to look at pricing in the UK due to the elimination of low value consignment relief. Whoever is in charge of the pricing looked, realized they could raise the prices on certain items and did so. That the company doesn't have to start paying VAT until January just gives the fourth quarter numbers a minor boost that could help make CCP's books look a little better at the end of the year.

The July 2020 Monthly Economic Report

 Today is the end of August and I am finally writing about EVE Online's Monthly Economic Report (MER) for July 2020. Examining the July MER interests me for two reasons. First is the beginning of what may turn into one of the large conflicts involving tens of thousands of players that EVE is known for. The second is July is the one year anniversary of the beginning of Blackout, or as I like to call the event, Hurricane Hilmar. In today's post, I'll examine both the month over month changes wrought by the current political climate in null security space as well as comparing the year over year performance of the first month of the Blackout.

FFXIV - I Hit The Cactpot

When I'm not digging through EVE Online's monthly economic report, I like to play Final Fantasy XIV. One of the things I do every day is visit the Manderville Gold Saucer. I have to play the mini-cactpot and do either one of the "Leap of Faith" jumping puzzles or "Air Force One" on-rails shooter to start my play session.

The Manderville Gold Saucer, for those who don't play FFXIV, is a very patron friendly casino. Basically, a player would have to work really hard to lose their money. In order to make sure a player doesn't gamble away all his gil, players use a secondary currency called the MGP, or Manderville Gold Saucer Points. Think of the MGP as chips. And players cannot buy MGP if they have over 500 MGP in their possession.

The big game in the Gold Saucer is the Jumbo Cactpot. The game is simple. Players choose a number between 0000 and 9999. Players can purchase up to three tickets per week, with each ticket costing 50 MGP more than the previous. So for three tickets, the cost is 450 MGP. The ultimate prize is over 1 million MGP, with drawings held every Saturday.

Remember how I stated the Gold Saucer is very patron friendly. By buying 3 tickets, the minimum payout a player can receive is 3702 MGP. Is a game really gambling if you can't lose? So, since I can't lose, I play every every week.

And on Saturday, I did it. I hit the Jumbo Cactpot.

Winning the Cactpot, with the free company bonus included

My free company runs the Gold Saucer buff on Saturdays for just such occasions. Including the 10% buff, I received 1.2 million MGP. I already had over 1.2 million MGP from just rolling into the Gold Saucer and not spending any money. At the end of the day yesterday, I was up to 2.5 million MGP.

I now have enough money to buy anything the Gold Saucer has to offer. I already own the two most expensive mounts, so if I wanted to, I could pick up at least three more mounts. But I have a different plan. I'm certain that with the next expansion will come a new selection of goods for the Gold Saucer, including a new mount. So I intend to keep saving up my MGP for the next expansion to buy the new mount on day 1. I've never been rich enough in a game to do anything like that before. 

Putting EVE Online's First Half Of 2020 Numbers In Perspective

Last week's Pearl Abyss earnings call was good news for CCP Games. The Korean game company disclosed to analysts that the EVE intellectual property brought in $16 million USD (₩18.9 billion) in the second quarter and $28 million for the first half of 2020. But the numbers themselves don't tell an interesting story unless put into some sort of context.

From Pearl Abyss Q2 2020 Earnings Call, 13 August 2020

EVE's financial performance so far in 2020 is similar to that in 2015. Five years ago, CCP reported $58.6 million in game sales, which would have included revenue from DUST 514. If the Tranquility server maintains current activity and with two full quarters of revenue from China, EVE Online could conceivably exceed $60 million in sales this year.

While on the subject of CCP's financial history, perhaps a look at 2016, the last year we have a financial report before Pearl Abyss acquired the Icelandic company, is in order. In 2016, CCP received $81 million in game revenue as the company released two virtual reality games for the PC and PS4, EVE: Valkyrie and EVE: Gunjack. The EVE IP will probably not make that much this year, as EVE: Echoes was only released last week and still does not have a license to operate in China. But 2021 looks like the year the Icelandic studio could reach new financial highs.

But a historical context often isn't sexy. So let's compare CCP's income to a competitor that also made news last week. That's right, the fundraising giant Cloud Imperium Games and Star Citizen.

Star Citizen Funding Page As Seen On 18 August 2020 at 2330 UTC

On the same day Pearl Abyss held its earnings call for the second quarter of 2020, MassivelyOP published an article noting that Cloud Imperial Games had surpassed its fundraising total from 2019 of $47.7 million. As of the time of publication of this post, CIG has raised over $49 million this year, not including other sources of income like subscriptions. So unless EVE: Echoes does incredibly well over the next 4 1/2 months, Cloud Imperial Games with two games in alpha will exceed the revenue of the games under the EVE IP in 2020.

Okay, comparing EVE and Star Citizen is a bit of fun. The serious analysis involves how well CCP's games perform compared to what Pearl Abyss thought it was buying in 2018. CCP and EVE started off slow due to licensing issues for the Serenity cluster in China. But the intellectual property is growing now that EVE Online has access to China again. If CCP can continue revenue growth, then I think a lot of people, including players, will wind up rejoicing. We just need to know what positive revenue growth looks like.

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.