Korean Developer NCSoft Posts Loss in Q2 2012

NCSoft, developer of popular MMORPG series Lineage and City of Heroes, has posted their financial results for Q2 2012. They show an operating profit loss of ₩7.641 billion KRW (approx. $6.78 million USD) and a net income loss ₩7.263 billion (approx. $6.44 million) compared to profit and income of ₩43.47 billion (approx. $38.56 million) and ₩41.359 billion (approx. $36.69 million), respectively.

The company attributed the loss to larger labour costs “one-time severance pay”; increased marketing costs due to the launch of Blade & Soul in Korea; acquisition of Ntreev Soft, the makers of PANGYA and Trickster Online; and slower sales of items in AION.

In terms of sales, Lineage continues to be the largest contributer to sales with 45% of all game sales. Korea continues to be the dominant market for NCSoft with 70% of sales revenue originating there. Japan and America come to a distant second and third place, respectively.

Analysis: NCSoft doesn’t really go into too much detail on what “one -time severance pay” is. It basically means the final pay for people they’re laying off; ever since they’ve been bought by Nexon, they’ve been shedding employees. In the long run, they’ll have fewer labour costs in the future, but for now, it’s kind of dragging the profits down.

Guild Wars 2 is looming on the horizon, though, and that game would most likely help to balance the budget as it’s a huge release. Guild Wars 2 has no subscription fee, so most of the profit will be upfront with purchases of the retail copy, but it does include the option to buy Gems in-game. Gems are the micro-transaction element of GW2, and as I can attest, the urge to spend “just a couple of bucks; it won’t do any harm; there’s no subscription fee” is overwhelming.

It remains to be seen, however, if the company can diversify away from the Lineage series as it’s far too dependent on that game as well as the Korean market. A funny note: NCSoft makes more money on royalties than they do in North America. Actually, revenue from Taiwan dwarfs that of Europe by over four times.

NCSoft Q2 2012 Financial Results

Mohamed Al Saadoon

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