How to get NCSoft to let go of the IP

[Lock-On]

So in some research on my own, and in looking through the thread on Korean Kibun I think I'm starting to understand the logic behind the decisions that NCSoft is currently making.

First thread, http://www.cohtitan.com/forum/index.php/topic,5450.0.html

Based on that thread I can see 2 issues for NCSoft with letting go of the IP for City of Heroes

• If the IP is sold, and the devs make a better game that steals revenue away from NCSoft, then a significant financial impact could occur for them.
  
• If the IP is sold and a better game is made, NCSoft also loses face for letting a profitable IP get away from them.

As I said in that thread, any solution that doesn't address both of these problems for NCSoft is doomed to failure. 

Second thread: http://www.cohtitan.com/forum/index.php/topic,5449.0.html

In the Korean Kibun thread, there's a lot of great information about how Korean behavior functions and why they're behaving the way they are.  It also helps me to understand the context of the message they put out yesterday, in that it may not have just been about completely awful business speak.  (Though it was completely awful business speak too.)

The number one thing that Tony has done for us that has given us a real chance for success with #Save CoH, has been to keep the message positive.  By refusing to go negative, we've shown the leadership of NCSoft that our Kibun is harmonious (mostly), and that we are seeking a way to resolve the issue at hand in a manner that improves the Kibun of everyone.  In that thread, the poster QuantumHero gave a pitch perfect response to yesterday's message from NCSoft that took Kibun into consideration:

"...please return to the table nsoft.  It is your departure from the effort that shames us all.  To redeem face is to find a solution for we do not accept the name of our world written in red ink.  We must wash that hated color away...that is how we can all restore ourselves to harmony."

This example may be a bit much, but keeping the culture central in our discussion with NCSoft will only help to show them how hard we are striving to find a "harmonious" solution for all.

So how do we go back and solve the 2 problems mentioned above while keeping Kibun in the picture?  One option that occurs off the top of my head, (and please keep in mind, I'm just brainstorming ideas here that may have already been attempted anyway) would be to offer NCSoft some kind of investment stake in the IP after they sell it to the developers (Ideally a non-decision making stake).

Why would we want the company that axed us, investing in us?  And why would they agree to give us money (or just sell the IP to us cheap) after they're shutting it down to supposedly realign their corporate vision?  Well, as an investor in the game, what would NCSoft gain if the game does become successful or even just maintains it's current standings?  First, they get a steady income stream from Paragon (or whatever the dev studio becomes) as an investor for minimal or even no cost (Remember Paragon would still have to buy the IP from them, thus giving them money outright).  To sweeten the deal Paragon could always offer a buyout option such that whatever investment stake NCSoft does make, that Paragon has to buy them out to prevent any loss of revenue on NCSoft's part.  Sort of a fail safe, in case the game tanks.  (Putting all the financial risk on Paragon.)

Second, it gives them the ability to save Kibun and say, we ended our relationship with a game that was not something we wanted, but also created a harmonious relationship between the community of gamers that did want the game, that can last into perpetuity.

Thus hopefully allying the financial concerns as well as providing them a way to maintain a high Kibun with themselves and their clients as well.

Of course, this or some similar option may have been already offered to them and they decided to turn it down because it just wasn't worth the bother to them.  That is why we must continue to focus on the positive aspects of our campaign and keep applying the pressure.  So much so that not finding a way to make everyone happy, ends up damaging their Kibun.  Something that I feel is bound to happen anyway, if they go down their current path.  Let's not even talk about our own harmonious state after such an event.

[voodoogirl]

How would letting the IP go open source affect their kibun?

[Lock-On]

They'd never let it go open source because it's a profitable IP and that would damage them financially.  Thus it would be seen as a poor business decision and damaging to their Kibun.

[DrakeGrimm]

NOW we're getting somewhere. Let's get some more perspectives in on this.

[voodoogirl]

Well, if they manage the Open-Source code and allow people to run their own emulators - then nobody will be making money.

That's like me packaging Open Office into a CD and trying to sell it on Amazon for $14.99

[Segev]

Very well put, Lock-On. Just what I was thinking. ^_^_v

[blue storm]

They could:

- Open source the code and the IP through a foundation. Let the community continue development of the product and run its own masterserver.  If some private shards want to be run, let them do so ! (It will not harm the community of 10 people setup a server for private use. I can pretty much guarantee that they'll also show up on the "official" one where all the crowd is...). Cost for NCSOFT = 0

That foundation could then grant a merchandising license of the IP back to NCSoft so they can make money on merchandising (royalties on card games, t-shirts). no money down for NCSoft, only a profit proportional to the success of the endeavor. or the other way around, they retain the IP and grant a perpetual license to the foundation, and retain the rights for all merchandising...

The foundation could be funded through donations and anyone could get something in exchange of the donations similar to what you have today with the microtransactions...

Compare this with the current situation where they have No COst, but no gain whatsoever to expect, especially since this situation is damaging badly their corporate image...

[Knightward]

I'm liking the train of thought here.  In a less cultural, more business sense, making them a stockholder of sorts looks good in that it appeals to their greed: if another company can run the game better, we still profit!

[Lock-On]

Well, if they manage the Open-Source code and allow people to run their own emulators - then nobody will be making money.

That's like me packaging Open Office into a CD and trying to sell it on Amazon for $14.99

Why would a company that is in the business to make money do something that would specifically make them NO money?  How do you sell them on that?

They could:

- Open source the code and the IP through a foundation. Let the community continue development of the product and run its own masterserver.  If some private shards want to be run, let them do so ! (It will not harm the community of 10 people setup a server for private use. I can pretty much guarantee that they'll also show up on the "official" one where all the crowd is...). Cost for NCSOFT = 0

That foundation could then grant a merchandising license of the IP back to NCSoft so they can make money on merchandising (royalties on card games, t-shirts). no money down for NCSoft, only a profit proportional to the success of the endeavor. or the other way around, they retain the IP and grant a perpetual license to the foundation, and retain the rights for all merchandising...

The foundation could be funded through donations and anyone could get something in exchange of the donations similar to what you have today with the microtransactions...

Compare this with the current situation where they have No COst, but no gain whatsoever to expect, especially since this situation is damaging badly their corporate image...

Who pays for this foundation?  Funded by micro-transactions you say?  What makes this foundation different from a standard business entity then?  If the micro-transactions are being used to pay for the foundation, what pays for the development and updates for the game?  Is the development team part of the foundation?  Why do you call it a foundation then, instead of a development studio?  What viable merchandising options exist for the IP right now that have not already been exploited?  There is no market for t-shirts, action figures, posters, or anything else that I'm aware of.  Why merchandise at all when there is no evidence of a market for it's existence?

And please don't take this as me picking on you, but I'm just trying to understand the actual implications of what you're suggesting and putting it in the context of what does NCSoft have to gain from this.  If you can't answer the two questions I laid out at the beginning of the thread definitively and convincingly to me, I doubt you'll be able to convince an actual NCSoft executive of it either.

How does this solution protect NCSoft's financial stability now and into the future?

How does this solution allow them to improve their Kibun in the eyes of their Korean and US business and customer interests?

[Battle Ant]

I'm sorry but the only thing deciding the fate of CoH is the almighty dollar. If they were worried about saving face, they could have kept the game going and donated what money was being made to charity minus operating costs (servers, maintenance crews, etc). The fans would have been happy, they would have gotten tax write offs and they would been helping people and creating great PR for themselves and their other games. It could have been a WIN for everyone.

Secondly, what better way of saving face than being truthful and actually talking to the community instead of just sending out vague announcements. The whole situation could have been handled much better if they would have just said " We are sorry guys but since x, y, and z, are happening, we do not see any foreseeable solution to  allow us to keep the game running. They don't have to give out trade secrets, just honest answers.

They are hiding behind the community managers.  Even if it is (or was) Zwill's or Hit Streaks' job to relay these messages, NCsoft Corp using these guys as shields from the community outrage because they do not have the balls to speak to us themselves. Being a strong leader means having the courage to make tough decisions when you need to like closing the game but it also means sometime you have to sacrifice your ego to do the right thing. 

[blue storm]

Good questions: It's been a long day here and I probably posted faster than I should have: I don't imply that my posts is the "magical solution that solves all the issues". My point is that they won't lose more by open sourcing the game than by shutting it down. From a pure cash flow standpoint, the solutions are strictly identical one to the other. They get rid of the IP and the opex BUT if they open source the game they increase an intangible asset: goodwill. The course of action they have taken so far has only damaged their corporate image, and they are playing in a field where being labeled a game killer who does not care for its customers is NOT good.
Granted, this is only an intangible asset, but it does have an accounting value...

How about being the white knight and savior of a community be bad for their Kibun ?

You mentioned earlier that it's a profitable IP : how about shutting down the game and leaving the IP dormant be profitable to them ? Sorry, I don't buy the whole I retain it so you won't make money from it talk : open sourcing the game is not about us making money from it)

Open sourcing would be the best thing that could happen from the standpoint of the community... maybe not so from NCSOft standpoint if they expect some $$$ in exchange for the IP. Which leaves us with the crownfunding solution.

[Segev]

I am not trying to be a downer, nor argue at this point, but I am curious: other than the romanticism attached to the concept of "open source," what actually is the benefit to "the community" or the game if it becomes such?

[DrakeGrimm]

I am not trying to be a downer, nor argue at this point, but I am curious: other than the romanticism attached to the concept of "open source," what actually is the benefit to "the community" or the game if it becomes such?

No one could ever 100% kill it. Anybody could, at any moment, pick it back up and work on it again without worrying about who owns what.


...that's about it, really. Which is a -great- benefit, but...yea. Not terribly out-weighing the cons of it.

[Lock-On]

My point is that they won't lose more by open sourcing the game than by shutting it down. From a pure cash flow standpoint, the solutions are strictly identical one to the other.

Actually, this is not true.  You're assuming that NCSoft is interested in it's current cash flow.  In the links in my original post, one of them leads to an article discussing NCSoft's excessive current cash flow and the priorities given that they have more cash right now then they can spend.  That article lead me to conclude that NCSoft doesn't really care about their existing cash flow, but instead about their future cash flow.  Which would explain why they wouldn't seriously consider an offer for the IP right now.  If you have more money then you can spend what good will 10 million more do?  Better to not let the IP escape and come back and bite into your possible future revenues then let it out now.  If you get a second, you should absolutely go and read through those links.  I think they will give you a new perspective on this part and may help to explain why I think that open sourcing the game is looked at by NCSoft as a bad financial move.

Your points on the goodwill issue are excellent which is why it's important to stress them over and over.  And over and over.  They are our only real leverage point, and they are having an effect.

[Lock-On]

No one could ever 100% kill it. Anybody could, at any moment, pick it back up and work on it again without worrying about who owns what.


...that's about it, really. Which is a -great- benefit, but...yea. Not terribly out-weighing the cons of it.

It also violates a basic business rule.  If you have something profitable, why would you give it away?

Wait...that's not a benefit of open-source at all.  Sorry.

[Valjean]

I dont' think NCsoft ever intended to let go of the IP. If you look at their history of not just American games, but Korean games, I don't think they've ever once sold or released any of their IP in the past 10 years.

[Dollhouse]

I dont' think NCsoft ever intended to let go of the IP.

Nor do I. The actual market value of the game (IP and everything..) is almost certainly significantly less than what NCSoft could declare as its valuation for tax purposes. With a very large amount of revenue on the positive side of the balance sheet from the GW2 launch, being able to write off all of the Paragon Studios assets will greatly reduce what woudl otherwise be an enormous tax liability. Why would they sell CoH for a much smaller amount than it's worth as a tax write-off?

[Victoria Victrix]

Nor do I. The actual market value of the game (IP and everything..) is almost certainly significantly less than what NCSoft could declare as its valuation for tax purposes. With a very large amount of revenue on the positive side of the balance sheet from the GW2 launch, being able to write off all of the Paragon Studios assets will greatly reduce what woudl otherwise be an enormous tax liability. Why would they sell CoH for a much smaller amount than it's worth as a tax write-off?

This presupposes that Korean corporate taxes work like American corporate taxes.  I'm not sure they do.

[The White Rager]

So it is just me, or does this largely sum up to 'lets find a win win situation here?' Not that I think that's a bad thing or anything. And of course the devil is in the details.

[Victoria Victrix]

Nor do I. The actual market value of the game (IP and everything..) is almost certainly significantly less than what NCSoft could declare as its valuation for tax purposes. With a very large amount of revenue on the positive side of the balance sheet from the GW2 launch, being able to write off all of the Paragon Studios assets will greatly reduce what woudl otherwise be an enormous tax liability. Why would they sell CoH for a much smaller amount than it's worth as a tax write-off?

Also in American corporate tax law, if you sell something at a loss, you still get to write it off.