Why NCsoft Doesn’t Sell Off Its Failures

Adam Martin picked up on my previous entry and expanded it in a fantastic way based on his time there – basically, NCsoft Korea has too much money to bother with small projects, so only big projects are worth considering. I am a complete outsider here – not worked for NCsoft Korea or any other MMO developer – but part of my experience is in business / market analysis and what Martin says feels right. Big companies don’t sweat the small stuff, even if it might be good for them.

... particuarly if you sweep them under a big rug marked "Cancelled".

However, from that business analysis point of view I just thought I’d cover a criticism I’ve seen of NCsoft: why don’t they sell off their failures, make a bit of money back and perhaps even let the game survive? Even the most misshapen MMO apparently have enough fans to try to mount a ‘pass the hat around and we’ll all buy this game‘ attempt. In Ryzom’s case, it almost succeeded. And if the fans can’t afford it, there probably are corporate entities who could afford to pony up the cash to buy a failing MMO. Even the developers of a title might be interested – it is what saved EvE Online, after all. The publisher gets some money back, the game lives on, the players are happy – that’s what matters, right?

No, not really.

Despite being called ‘games’, MMOGs are multi-million dollar service entities. For a dedicated publisher of multiple MMOs, it makes no sense to sell off a failed title for a cents in the dollar when the chance always exists that the new owners will turn the game around and create major competition for you. Again, EvE Online  is the best example of this, going from a failed and almost cancelled title in 2003 to over 300 000 active subscriptions in 2009. Simon & Schuster Interactive probably don’t care (given they no longer exist) but Vivendi probably wouldn’t have minded to hang on to another successful MMO. Or to have killed it and see a portion of those 300k subscribed to something else.

NCsoft doesn’t sell off its failures because it doesn’t make sense to them to do so. Firstly, they can use any failures as a tax write-off and if they go down this path, the larger the cost the better (to a point, obviously). Secondly, they don’t to be creating competition for their own titles further down the line. Finally, someone else turning your failure into their success is just embarrassing. I’m not going to pretend I’m an expert on the cultural impact of embarrassment in Korea, but I suspect that avoiding embarrassment is something NCsoft Korea would attempt to do.

Imagine NCsoft sold Tabula Rasa to an well-known existing MMO developer heading up a venture capitalist consortium. They aren’t going to pay full development costs for the title, only what it is worth now in the market. NCsoft gets cents back on the sale and still has to announce a huge loss (quietly in their P&L statements). The well-known developer gets to work with his studio, turns Tabula Rasa into a 500k+ player MMO, earning rave reviews and kudos. Could you imagine how NCsoft would feel about Brad McQuaid’s Tabula Rasa?

For the record, shooting horses to put them down doesn't have to be seen as fair or right - it's only what is.

MMOGs are NCsoft’s business. If an NCsoft MMO fails (and Tabula Rasa did fail despite extended attempts to let it succeed), they cut it off clean. Players get offered free passes to other NCsoft titles to try to keep them generating revenue. New titles are offered on the horizon to keep players interested in NCsoft products. But if NCsoft can’t get a title to succeed, it doesn’t deserve to live. Giving a failed title the chance to live by selling it off has few upsides – a few extra million dollars back (doesn’t matter on a development debt of $100 million) – but plenty of downsides – increased competition and embarrassment for the company.

To put it as a restaurant analogy: sometimes it looks like you’ve got a good deal by only selling pieces of your restaurant offering to a buyer, but there’s always the chance you’ve just done a deal with Ray Kroc.

And as for the players: if the cancelled game only has 50k players at the end of its life, it doesn’t matter if none of them ever play an NCsoft title again (really, truly never play… not just forum posturing) when a new NCsoft title comes out and attracts 400k players.

For big companies, size matters.

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