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Thread: Funcom Q2 report - revenues decrease

  1. #11

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    Quote Originally Posted by Rathothis View Post
    FC's report for Q3/14 is out:
    http://cdn.funcom.com/investor/2014/...Q14_report.pdf

    and here is my updated list of revenue figures:

    Q3/14: USD 2,651k
    Q2/14: USD 3,190k [TSW Tokyo update]
    Q1/14: USD 3,836k
    Q4/13: USD 4,270k
    Q3/13: USD 5,336k
    Q2/13: USD 5,465k
    Q1/13: USD 6,338k
    Q4/12: USD 7,786k
    Q3/12: USD 10,963k [TSW launched]
    Q2/12: USD 2,557k


    A few notes:

    * As I already pointed out in another thread, TSW's book value in FC's most recent annual report (2013) was USD 2,519k, so the additional impairment by USD 1,086k is a rather big thing.
    * Operating expenses in Q3/14 were USD 3,119k - that's a decrease of about USD 500k not only in a year-on-year comparison (i.e., compared to Q3/13), but also compared to Q2/14. Not sure whether this indicates that there have been further cuts, but there is at least some support for this theory ("Investment levels for all current Live Games are constantly being aligned with expected revenue to ensure that they deliver a net contribution to the Company").
    * Of historical interest: FC's revenues are now where they were prior to TSW...
    That's a 2nd quarter report.

  2. #12

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    Quote Originally Posted by Daraios View Post
    Even anarchy online servers are still running and have a positive revenue .
    There will be new content released for AoC so why do you think the server should be shut down ?
    Because Funcom seems to have problems making its payments. They make great games, but didn't have much luck in the past years apparently. And even the most talented, well meaning, established business has to close its doors if there's no money to pay the rent for the building the doors are in. That does include any parts of its business that make a profit.
    Make Hyboria raid again!

    Khaletoheps AoC-Youtube-Channel:
    http://www.youtube.com/user/Khaletohep

    Guides zu Klassen & allen HM-Solo-Inis:
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  3. #13

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    Quote Originally Posted by Khaletohep View Post
    Did Funcom publish what AoC ist worth in their books alone? We could throw some money together maybe...
    Yep they did:

    Quote Originally Posted by Rathothis View Post
    AoC's book value was only USD 247k, but FC noted in their last annual report that "the impairment test performed at the end of the year demonstrated that the recoverable amount of the cash-generating unit Age of Conan exceeds its carrying amount by USD 2,000 thousands" (which they however did not include in their books).

    Source: Annual Report 2013, p. 63 et seq. http://cdn.funcom.com/investor/2014/...ual_Report.pdf
    Rathothis|Tempest of Set || Tigrathes|Dark Templar || Isitnofret|Herald of Xotli
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  4. #14

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    247,000 $!?

    Okay... if 1,000 players pay 247 $ each...
    Make Hyboria raid again!

    Khaletoheps AoC-Youtube-Channel:
    http://www.youtube.com/user/Khaletohep

    Guides zu Klassen & allen HM-Solo-Inis:
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  5. #15

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    Quote Originally Posted by Khaletohep View Post
    247,000 $!?

    Okay... if 1,000 players pay 247 $ each...
    Yes, USD 247k seems rather conservative even taking into account the level of activity in game. They even acknowledged that (see their remark regarding the results of the impairment test).

    I suppose that, if they sold off their assets, they would make more than that on AoC, and less than what is in their books on TSW
    Rathothis|Tempest of Set || Tigrathes|Dark Templar || Isitnofret|Herald of Xotli
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  6. #16

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    Assuming the book value is just player subscriptions/income and using the following assumptions I came up with an estimate of paying player base:
    1. 10% of the player base is month to month ($15/mo)
    2. 15% of the player base has a 3 month sub ($39/3 mo)
    3. 25% of the player base has 6 month subs ($60/6 mo)
    4. 50% of the player base has an annual ($99/yr)
    5. An average player spends an extra $10/ yr

    That solves to a paying population of about 4800 players. This obviously doesn't take into account the time based value of subs, players buying the expansions, etc.

    It also suggests that at an overhead rate of $60/hr for a staff member, AoC would break even with 2 full time staff. And that doesn't take into account the actual cost of running the game servers.

    (I'm an engineer so I may be reading into book value wrong). Overall, that doesn't give me the warm fuzzies. The best hope for AoC is that they're under reporting its value to hide TSW not doing as well (which I don't believe as that usually feels more crowded than hyboria).
    ----
    Kalur - 80 Bear Shaman, Brunstol - 80 Dark Templar, Tallas - 80 Assassin, Gilben - 80 Conquerer, Pangert - 80 Barbarian, Xoltal - 80 Necromancer, Matzui - 80 Herald of Xolti, and a bunch of lower level alts.
    Wiccana -> Set -> Crom

  7. #17

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    Quote Originally Posted by puckstop98 View Post
    Assuming the book value is just player subscriptions/income and using the following assumptions I came up with an estimate of paying player base:
    1. 10% of the player base is month to month ($15/mo)
    2. 15% of the player base has a 3 month sub ($39/3 mo)
    3. 25% of the player base has 6 month subs ($60/6 mo)
    4. 50% of the player base has an annual ($99/yr)
    5. An average player spends an extra $10/ yr

    That solves to a paying population of about 4800 players. This obviously doesn't take into account the time based value of subs, players buying the expansions, etc.

    It also suggests that at an overhead rate of $60/hr for a staff member, AoC would break even with 2 full time staff. And that doesn't take into account the actual cost of running the game servers.

    (I'm an engineer so I may be reading into book value wrong). Overall, that doesn't give me the warm fuzzies. The best hope for AoC is that they're under reporting its value to hide TSW not doing as well (which I don't believe as that usually feels more crowded than hyboria).
    I don't think you can equate the carrying amount (= book value) with the revenues expected over a one-year period, as you seem to do. I'm not an accountant, but if I understand correctly, valuation is based on expected future cash flows (using an appropriate discount rate).
    http://www.iasplus.com/en/standards/ias/ias36

    If that is right, and USD 247k is a reliable estimate of the future cash flows from AoC, the picture is even bleaker than you paint it. But unlike you, I am rather convinced that they are underreporting AoC - the fact that their impairment test yielded result that exceeded the book value by about USD 2 million is pretty telling. On the other hand, the fact that FC were overestimating TSW is now evident, as they just made another very significant impairment. Also, the mere fact that there are more players doesn't tell us anything about revenues, since TSW is a B2P game. Given the development of FC's revenues, the fact that their revenues do not seem to have been affected much by the release of Tokyo, and the slow development cycle even for TSW I wouldn't be surprised if they will have to impair TSW even further in the future. Also, I would be very surprised if, upon a proper allocation of costs to TSW and AoC, AoC wouldn't be considerably more profitable for FC than TSW.

    I suppose our GD would call this financial speculation, but I prefer "educated guess"
    Last edited by Rathothis; 20th November 2014 at 18:01.
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  8. #18

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    I talked to a friend who confirmed your suspicion that I was wrong. Book value, is essentially only the assets that you have. So, if FunCom considers each game it's own entity, AOC has 247k worth of assets after depreciation. This includes cash. Software is tricky because it's not often considered a capital asset (this friend while having an MBA doesn't work in the software industry so grain of salt here too).

    intellectual property and things like licenses tend to be carried under goodwill. If Funcom paid, and I'm totally making up this number, $5M for the Conan and license that would go there.

    Considering the number of servers for AoC and its limited staff, it would make sense the book value would go down every year. It also explains why TSW has a higher book value - they haven't depreciated their assets as much, being newer.

    All in all that makes me feel better. I guess.

    Cash flow projections (using prior quarters as well) might give more insight into subscriptions. And I agree - tsw's b2p model may not be as lucrative as the f2p/p2p model. I had forgotten about that despite buying the game.
    ----
    Kalur - 80 Bear Shaman, Brunstol - 80 Dark Templar, Tallas - 80 Assassin, Gilben - 80 Conquerer, Pangert - 80 Barbarian, Xoltal - 80 Necromancer, Matzui - 80 Herald of Xolti, and a bunch of lower level alts.
    Wiccana -> Set -> Crom

  9. #19

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    Some new cuts, not sure to what extent they affect the live team:

    http://www.funcom.com/investors/upda...turing_process

    Published on 24 December, doesn't feel like a present though.
    Rathothis|Tempest of Set || Tigrathes|Dark Templar || Isitnofret|Herald of Xotli
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  10. #20

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    Q4/2014 report is out:
    http://cdn.funcom.com/investor/2015/...Q14_Report.pdf

    Q4/14: USD 2,939k
    Q3/14: USD 2,651k
    Q2/14: USD 3,190k [TSW Tokyo update]
    Q1/14: USD 3,836k
    Q4/13: USD 4,270k
    Q3/13: USD 5,336k
    Q2/13: USD 5,465k
    Q1/13: USD 6,338k
    Q4/12: USD 7,786k
    Q3/12: USD 10,963k [TSW launched]
    Q2/12: USD 2,557k


    A few notes:

    * FC disclose the revenues attributable to the live portfolio (TSW, AoC and AO). These amounted to USD 2,098k (compared to USD 2,214k in Q3/14) and are described as "stronger than anticipated". This is however described as a seasonal effect, attributed to "higher sales during the holiday season".
    * EBITDA is negative at USD -148k, "due to the general revenue decrease of TSW".
    * KGJI, FC's largest shareholder and creditor, is deferring the maturity of a number of loans and bonds... I'll refrain from political analogies here
    Rathothis|Tempest of Set || Tigrathes|Dark Templar || Isitnofret|Herald of Xotli
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