The community manager of Paragon Studios, Andy Belford, detailed the decision in a blog entry.
In a realignment of company focus and publishing support, NCsoft has made the decision to close Paragon Studios. Effective immediately, all development on City of Heroes will cease and we will begin preparations to sunset the world’s first, and best, Super Hero MMORPG before the end of the year. As part of this, all recurring subscription billing and Paragon Market purchasing will be discontinued effective immediately. We will have more information regarding a detailed timeline for the cessation of services and what you can expect in game in the coming weeks.
First developed by Cryptic Studios, City of Heroes was later purchased by NCsoft, which then formed the developer Paragon Studios to continue the development of the MMORPG. Last year, City of Heroes changed to a free-to-play system from its original subscription model in an effort to bring in new players. Approximately eighty employees are said to be affected the closure of Paragon Studios.
Analysis: This is truly a sad event. The old but still popular superhero MMO has provided entertainment for a lot of people since its launch in 2004. Considering that a new powerset had been released on the Paragon Market just ten days ago, it certainly surprises me to hear about this closure. I wouldn’t be surprised if it shocked the employees of the studio themselves.
Despite asking players to not dwell or ask questions about the closure, I’d imagine many would be left wanting some answers. A look at NCsoft’s IR report for August 2012 (see below) reveals that sales have remained consistent and have even increased slightly since this time last year, so it wouldn’t look like there was a problem at first glance. However, once you consider the move to free-to-play that the game took in the same time period, a move that was intended to bring an influx of new players, it would seem that it failed in garnering the extra attention.
Add in the new or pending arrivals of Guild Wars 2 and Blade and Soul, and one can see how this closure wasn’t entirely unforeseeable. Nevertheless, I would take these last few days to visit City of Heroes one last time. My condolences go out to those affected by this closure.