$800k/month profit? I think you mean revenue?

[RogerWilco]

My point is specifically about the $800k/month profit number. I see the posts I quoted mentioned a lot as the "proof" that CoH was making this much profit and NCsoft killed a game that was printing them money.

From the publicly available numbers, I suspect strongly that the numbers in VV/ML's post are not profit numbers, but revenue.

I think CoH can be run at a profit, especially with a staff of 20-30 people. I want to avoid that people put this number out there as I think it's wrong. I don't think we have a profit number, and given that some things like bandwidth and server bills we probably shared between all the games hosted in Austin, it might be hard to come up with a detailed number.

[Knightslayer]

I spent way more with CoH Freedom than I did beforehand; not that I am complaining mind you. It used to be that being F2P meant you were shutting down, but if you look at alot of the MMOs out there - microtransactions are what are helping save them. I personally liked CoH Freedom as it gave me more flexibility and options than before.

Yep, same here.

I'm rambling. In short: I believe subscriptions were a necessary part of maintaining steady CoH profit margins, with or without the market.

And there is a reason F2P grew so quickly, pretty much dominating the market as "payment" model - DDO went from being a game that was about to go bankrupt to being one of the biggest moneymakers of that year, triggering the whole rise of the F2P model on the western markets.
Perfect World is a publisher that has nothing but F2P games (AFAIK), and they keep adding new titles to their assortment all the time, Turbine converted their LotRo to F2P shortly after DDO's conversation worked out so well for them.
CoH pretty much needed the F2P conversion for several reasons; 1) Tons of people out there had already tried it and didn't like it, meaning they would be unwilling to hand out more money to see if the game changed. 2) The game's age, lots of people would be unwilling to try a game that old if they had to pay money upfront.
Not to mention... who was it that said the game was flourishing since Freedom's launch, War Witch herself?

[Victoria Victrix]

Yep, same here.

Not to mention... who was it that said the game was flourishing since Freedom's launch, War Witch herself?

Yes, to me personally.  Black Friday, almost her second line of chat to me was a kind of wail I "heard" all the way across the country.  "We were doing so WELL!"

[DrakeGrimm]

Yes, to me personally.  Black Friday, almost her second line of chat to me was a kind of wail I "heard" all the way across the country.  "We were doing so WELL!"

...yeah. I don't get this one bit. It hurts my brain, from a logic standpoint.

[Mantic]

CoH pretty much needed the F2P conversion for several reasons; 1) Tons of people out there had already tried it and didn't like it, meaning they would be unwilling to hand out more money to see if the game changed. 2) The game's age, lots of people would be unwilling to try a game that old if they had to pay money upfront.

You quoted me, and you seem to be arguing with me... but were you a Freemium player or were you a VIP who was also buying points?

I believe the subscriptions were needed, and all those players who looked at Freemium, particularly when the "loyalty" program was not repeated, as a way of saving their money last summer possibly cut into CoH profits enough to convince a few distant bean counters that the whole thing was going downhill.

Also, CoH had a free trial before. Looky-loos had their in, already (as many times as they could make free e-mail accounts). Expecting a huge influx of new players with money to blow just because the game was F2P strikes me as unrealistic. New players looking for a free lunch, however, were nice to have as PUG filler.

[RogerWilco]

Yes, to me personally.  Black Friday, almost her second line of chat to me was a kind of wail I "heard" all the way across the country.  "We were doing so WELL!"

Could you answer the question I pose in this thread. Please.

[Hedgefund]

I'm with Roger 100%.  When I see "Paragon had a profit of 800k USD per month" my first thought is "you  do not understand the most basic financial concepts".  Such as Profit = Revenue - Expenses.  Roger showed definitively that the revenues were ~2.5M USD per quarter, or ~833k per month.  So please, NEVER say the game was making 800k/month, it doesn't help your cause.

[Knightslayer]

You quoted me, and you seem to be arguing with me... but were you a Freemium player or were you a VIP who was also buying points?

I've actually been both. (and also a freemium that bought points at some point) Though mostly VIP, I had re-subscribed almost two months before the sunsetting was announced.
And the surge in activity was indeed also a nice benefit of the F2P conversion.
But no, not arguing, just pointing some things out - without actual numbers to show how much the game was making prior to the F2P conversion and afterwards it'd be pretty pointless, and you're entirely entitled to prefer the standard subscription model.
I don't believe however that staying subscription based would've averted the current situation.

[Segev]

I want to try tackling this again, just because my numbers from yesterday are bothering me.

Going back to $300/square foot/year, let's assume that each of the 80 employees has a 225 square foot cubicle (15 feet on a side) in which to work, and add 5x(40*15)=3000 square feet for an aisle down the middle. That's a very rough estimate, and any number of geometrical arrangements could alter it, but I'm going to run with it for the moment.

So 80*225=18,000 square feet + 3,000 square feet = 21,000 square feet or there-abouts for the size of Paragon Studios's physical location. At $300/square foot/year, that's $6.3 million per year just to rend office space. $800k/month is $9.6 million/year. They'd have $3.3 million/year left over to run their company and make profits after just paying for office space.

For just a moment, let's pretend their operating costs are entirely due to labor. This is obviously false, but it will give us a starting point for estimating maximum possible average salary. $3.3 million/80 = $41,250 per employee (per year).

That's...not very much for them to live on in California. And that's imagining that they don't have other operating costs like running the server farm or buying office supplies or the like. I hope they're all single!

[RogerWilco]

I want to try tackling this again, just because my numbers from yesterday are bothering me.

Going back to $300/square foot/year, let's assume that each of the 80 employees has a 225 square foot cubicle (15 feet on a side) in which to work, and add 5x(40*15)=3000 square feet for an aisle down the middle. That's a very rough estimate, and any number of geometrical arrangements could alter it, but I'm going to run with it for the moment.

So 80*225=18,000 square feet + 3,000 square feet = 21,000 square feet or there-abouts for the size of Paragon Studios's physical location. At $300/square foot/year, that's $6.3 million per year just to rend office space. $800k/month is $9.6 million/year. They'd have $3.3 million/year left over to run their company and make profits after just paying for office space.

Those numbers sound really high.

For that kind of money you can build an office. Seriously, my current employer is building an office for 100 people for about 9 million euros. Right now.

If I look at a list like this: http://www.loopnet.com/California/Mountain-View_Office-Space-For-Lease/
I see ranges from about $12-$40, not $300. For cubicle sizes I see 50-100 Sq. ft. reported. Let's assume PS wasn't in the high end of the scale, and it didn't look to roomy in the webcasts, but taking into account aisles and meetingrooms, I'd guess $25 x 100sq. ft. x 80  = $200,000 per year, maybe $250k or $300k. Certainly not $6+ million a year.

I know for a fact that running a 22 man software company in 2005 took about 1.4 million dollars. Total. Add inflation and California, and PS would be in the $8-10 million range. Depending on what you include, it could be half a million more or less, but I would be really surprised if it wasn't in that range.
It's likely that NCsoft could have kept a smaller PS afloat on CoH for a while, but it would not have the money for The Secret Project or CoH2 if revenue would at all go down from the $800/month we saw since Freedom, unless money came in from corporate, which is losing money.

I'm speculating here, but it could well have been that PS needed money from NCsoft to keep The Secret Project going and NCsoft didn't want to focus on that because Wildstar, GW2, B&S and such looked more promissing. Maybe it was just too far in the future and they needed a quick hit now. This would then leave the choice of slowly letting CoH die with a much smaller staff, or shutting the whole PS down. Given current numbers at NCsoft, there might have been an urge to do something drastic and go for the last option.

It will be interesting to see what number they will report as revenue for Q3 for CoH.

[downix]

I want to try tackling this again, just because my numbers from yesterday are bothering me.

Going back to $300/square foot/year, let's assume that each of the 80 employees has a 225 square foot cubicle (15 feet on a side) in which to work, and add 5x(40*15)=3000 square feet for an aisle down the middle. That's a very rough estimate, and any number of geometrical arrangements could alter it, but I'm going to run with it for the moment.

largest cubicle I've ever worked in was 64 square foot. Most were 36.

So 80*225=18,000 square feet + 3,000 square feet = 21,000 square feet or there-abouts for the size of Paragon Studios's physical location. At $300/square foot/year, that's $6.3 million per year just to rend office space. $800k/month is $9.6 million/year. They'd have $3.3 million/year left over to run their company and make profits after just paying for office space.

And using real world cubicles, most likely 36 square feet, the whole math is thrown off. Now you are talking 80x36=2880 square feet, let's round that to 3,000 + 3,000 square feet = 6,000 square feet. If they were paying the highest price for office space in the area, which was $288 square feet per year (most averaged for far less, but let us assume NCSoft used the creme de la creme) you are still coming in at significantly less, only $1,800,000.

For just a moment, let's pretend their operating costs are entirely due to labor. This is obviously false, but it will give us a starting point for estimating maximum possible average salary. $3.3 million/80 = $41,250 per employee (per year).

That's...not very much for them to live on in California. And that's imagining that they don't have other operating costs like running the server farm or buying office supplies or the like. I hope they're all single!

A simple adjustment and now their overhead goes to 15% of total revenue instead of 78%. And if they were smarter about a leasing location, closer to the $40/year range, then office space is negligible.

[Segev]

Okay, I looked at that site to get the $300/sq. ft. value I was using. I must have misparsed the graphs something fierce or totally mis-recalled the values. ^^;

That DOES sound a lot more reasonable; thanks for re-checking the numbers.

Hm. 64 square foot cubicle is 8 feet on a side. That DOES sound more likely than 15 feet on a side. What I get for eyeballing without actually using my arms to measure. I'm not sure what I was thinking when I was doing that math.

[downix]

Okay, I looked at that site to get the $300/sq. ft. value I was using. I must have misparsed the graphs something fierce or totally mis-recalled the values. ^^;

That DOES sound a lot more reasonable; thanks for re-checking the numbers.

Hm. 64 square foot cubicle is 8 feet on a side. That DOES sound more likely than 15 feet on a side. What I get for eyeballing without actually using my arms to measure. I'm not sure what I was thinking when I was doing that math.

Most of the ones I've ever worked in were 6' on a side, only the double-cube with two people in it were 8' on a side. Here's info on cubicle sizes:
http://www.360officefurniture.com/cubicle-sizes.htm

[RogerWilco]

Most of the ones I've ever worked in were 6' on a side, only the double-cube with two people in it were 8' on a side. Here's info on cubicle sizes:
http://www.360officefurniture.com/cubicle-sizes.htm

PS seemed to have offices that were shared with a few coworkers, at least from the webcast it looked that way. Now I'm not so good with these weird length and surface area units you use to I have a hard time estimating how many square feet those would be. It looked like maybe 20 to 25 sq. metres, so 200-250 sq. ft for 3 or 4 people. Including hallways, conference rooms and such, my guess of 100 sq. ft. per employee still seems reasonable.

[Segev]

I've never worked in a cubicle that I could touch opposite walls of simultaneously. I am six feet tall, and have therefore about a 6 foot fingertip-to-fingertip maximum extent. Having (now that others mentioned more reasonable sizes) eyeballed the distance from my fintertips to the walls when I'm as centered as possible, it would seem to be an 8x8 cubicle that I'm in right now.

Others have been comparably sized. One other at the company for which I am currently working, and one at a wholly unrelated company.

[UberGuy]

Cubes where I have worked the last 12 years have been steadily shrinking. They used to be 6' on a side for "line" folks, 8' on a side for managers who didn't rate a full office. Those started shrinking, and they also got rid of manager cubes. These days, a lot people don't even get a full cube unless it's shared between multiple people - a lot of them get something like 4'wide desks lined up side-by-side with dividers between them. (In other words, it's not even a cube.)

I'm going to guess how much space companies give out for employees has a lot to do with a combination of how flush with disposable income the company feels, how much they value the happiness of "line" workers, and probably other more obscure factors. Basically, without asking an (ex) PS employee, we probably have no idea what the "typical" cube size was.

[Segev]

Well, going with a much-more-reasonable but-apparently-still-somewhat-generous 64 square feet per cubicle and $40/sq. ft./year, we come out with 80x64x$40 = $204,800/year for cubicles and...well, let's just add half that again for manager offices and walkway space (acknowledging that these are luxuriously large manager offices, given that they're including 64 sq. ft. that would be part of a cubicle). So call it $307,200/year for their offices.

That leaves plenty of room for operating expenses and salaries and the like. Profits could be pretty significant, depending how much the operating expenses are. As a total-guess ballpark figure, let's pretend it's $3 million/year for operating expenses. Things like server maintenance, replacement parts, new computers, office supplies, travel expenses, advertising, etc. So we're at $3.31 million/year costs before employee salaries, out of $9.6 million/year revenue. $6.29 million left to pay salaries and account for any profits.

$6.29 million divided by 80 employees, if we assume they just had salaries and no profits, would be $78,625/year in salaries. Actually rather high, but perhaps not for an average salary when one includes management. Cut another $1million out as estimated profits, just for grins, and average employee salary comes out to about $66,125/year. I don't know CoL in CA, but that's fairly decently middle class, I think.

[TonyV]

True, but then... Cable TV started out with the same intentions. Pay for access so no commercials. And look how well THAT worked out... 

Just a quick unrelated side note...  I see this claim a lot, but cable television did not start out with that intention.  Originally, cable television was used to simply relay the same broadcast stations--commercials and all--to areas where signals normally could reach.  If you were really far away from a broadcast tower, lived in a valley, etc., then you'd consider getting cable television because the only alternative was snow with little to no picture.

Eventually, people started making channels specifically for cable television with no broadcast equivalent.  For example, ESPN and CNN have always had commercials.  You also started seeing the rise of "premium" channels like HBO and Showtime, which you paid extra for on top of your normal cable bill specifically for the privilege of not having to watch commercials.  Also, there are public access channels that are nominally "commercial-free" in that they don't run standard interstitial spots like the big networks do, but most of them willingly and routinely sell blocks of time from 30 minute to several hours to commercial companies, which then use those blocks to run infomercials.

Anyway, point is, cable television has always had commercials.  Only specific channels were advertised as being commercial-free; channels that usually carried (and still carry) a premium price on top of regular cable service.

But I digress...

Everyone I've talked to, people I consider reliable sources, have said that the game was doing very well, that it was well beyond self-sustaining financially.  This wasn't about money, it really is about long term goals and resource allocation.

[downix]

Well, going with a much-more-reasonable but-apparently-still-somewhat-generous 64 square feet per cubicle and $40/sq. ft./year, we come out with 80x64x$40 = $204,800/year for cubicles and...well, let's just add half that again for manager offices and walkway space (acknowledging that these are luxuriously large manager offices, given that they're including 64 sq. ft. that would be part of a cubicle). So call it $307,200/year for their offices.

That leaves plenty of room for operating expenses and salaries and the like. Profits could be pretty significant, depending how much the operating expenses are. As a total-guess ballpark figure, let's pretend it's $3 million/year for operating expenses. Things like server maintenance, replacement parts, new computers, office supplies, travel expenses, advertising, etc. So we're at $3.31 million/year costs before employee salaries, out of $9.6 million/year revenue. $6.29 million left to pay salaries and account for any profits.

$6.29 million divided by 80 employees, if we assume they just had salaries and no profits, would be $78,625/year in salaries. Actually rather high, but perhaps not for an average salary when one includes management. Cut another $1million out as estimated profits, just for grins, and average employee salary comes out to about $66,125/year. I don't know CoL in CA, but that's fairly decently middle class, I think.

Not all workers were for CoX either. The studio was working on other titles. So if studying the issue, it looked that CoXws paying for future growth as well. Even if it was only breaking even it represented future profits with minimal infusion. If slicing off those and just running CoX as a minimal supported product like Guild Wats and Lineage we are able to drop staff to 15. Add in server consolidation and it could easily be profitable.

Edit: fixed opening quote tag - eabrace

[Segev]

Dropping down to only 15 employees and keeping their salaries in the low six-figure range (decidedly luxurious for non-high-end management), it gets extremely profitable. Under the assumptions downix made about the other 65 employees.