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1Q 09 update from Olev Sandnes, Funcom CFO. And yes, the results are not good.
Litigator_AB
Member Posts: 311
Funcom is coming in at guidance for Q4 08 and will be "slightly lower" Q1 09. He did not comment past that in the email.
However:
Funcom made 18 million last quarter. Q4 08 guidance was between 8-10 million US. So essentially Funcom lost approximately 50% of its revenue.
I did not get clarification of what slightly lower meant but I'm assuming that means the guidance numbers are going to have an upper limit of the lower limit from Q4 08 with at least a 2 million US window...so I'm expecting 6-8 million USD.
Dismal numbers, but still better than I thought Funcom would do (unless they just technically met expectations...8.2 million USD is pretty woeful. 9.5 million would be more respectable and means they stopped the subscriber bleed.
A lower Q1 09 number is to be expected simply due to the loss of 6 month subscriptions coming off the books.
Questions and comments?
Lit
Comments
Thanks for keeping us posted Lit.
I see more Spin than a washing machine incoming.
And for clarification on what that means to subscription numbers @ 9 million (in the middle of the guidance):
9 million in revenue is not exclusively AoC:
#1: AO: consistently over the last two years ~1 million a quarter. Safe to use that number.
#2: Box sales/direct sales of AoC: This is a catch 22 for fans of the game. If this number/amount is lower there are more subscribers. If this number/amount is higher it means less people were actually paying for subscriptions. That being said it would be very hard to convince me that AoC had stellar sales Sept-Dec. Still, even 50,000 units (50% box sales at 20% box revenue, or $10 --- 50% direct sales at 100% revenue at $40) = $1.25 million US.
#3: That leaves AoC earning 6.75 million US in subscription revenue from Sept-Dec. Monthly that is 2.25 million...at $16 a pop (and I use $16 instead of $15 because Euro subscriptions cost a LOT more and revenue is measured in US dollars). 2.25 million / $16 = 140,000 subscribers, on average, Sept-Dec.
There ya go, 140k. A number to put your hat on...adjust 20,000 subscribers for every million dollars in revenue eitherway. Add 10,000 subscribers if you think AoC sold half as much as my assumption in #2. If you think they sold 100,000 units, subtract 20,000 subscribers. If Plutolife income is included, subtract that money from the revenue equation before you calculate subscriptions. If you try and factor in what Funcom has to pay for servers and the like, don't...that is not subtracted from revenue...it is an expense. Ditto for residuals for subscriptions (the agreement they have with Eidos). That is an expense...the only time revenue doesn't come to them is for initial box sales...which Eidos collects and passes on (common sense, but eluded to in Q3/08 descriptions by Olev).
Lit
that seems right around 120K to 140K subscription base
I guess it will jump up once they add xbox360 sales + expansion
Actually its worse than what you think. Funcom has gone from a high of ~$55 per share to a low of $2.31 over a 52 week span. Currently the stock trades at $4.10 per share but it is expected that it will continue to fall.
Now the good news. Funcom still has Anarchy online and is introducing new booster packs for the game. This is good news as it confirms that the game is still alive and should see some new income for that franchise.
They are working, supposedly, on another mmo called the Secret World which has gained a little traction. It will be interesting to see what they ultimately do with that game after AoC's failed launch. Supposedly it will be launched for both PC and XBox 360 so I'm sure the same game designs in AoC will be implemented into that game to make it console friendly. However the game's development was revealed in 07 which means its probably years off from launch (plus there are no screens or other news for the game)
The real question will be their Q2 09' quarter to really see how the golden egg (AoC) is really doing. I predict that if the Q2 numbers are weak overall (for AoC), the stock will fall below $2 permanently which will utterly cripple their ability to gain future outside financing as they will have a year's worth of data showing their viability in the mmo market. AoC IP will be sold off to shore-up funding for their continuing adventures and Funcom will become a primariliy single-player RPG development (my long term prediction). They had great success with Dreamfall and they should stick with single-player RPG's.
I thought they sold that division a while back?
I thought they sold that division a while back?
They did. Currently they have AoC and Anarchy Online as their online mmo's.
I thought they sold that division a while back?
They did. But it has not been included in its financial reports as of yet. It was supposed to be included as installments over the course of the year...I do not know how they are accounting for it but in Q3 08 they specifically said it was not included. But they also said: "because it was sold in July". It is almost like they are alluding that it was already included? It is a bizarre statement...which is why I do not know how they are accounting for it. We will find out ultimately this quarter.
Needless to say if there is a big 1.5 million dollar revenue increase due to Plutolife and revenue is still only 9 million US, it means AoC has 30,000 less subscribers.
Could have been worse, wasn't expecting them to do awesome in 2008. September to december was pretty much the months where they started to stop bleeding subscriptions. Will be interesting to see Q1 for 2009 when that arrives. Hopefully they will have managed to turn things around a bit in those numbers.
Also the calculation for subscribers does seems to be one of the best and probably most accurate I have seen people do so far.
To OP I assume you have stocks in Funcom since you got this on e-mail and there isn't officially released a q4 financial report on their website yet?
Playing: Battlefield - Bad company (Xbox360) Arma2, DFO (PC)
On my radar: TSW, MO
MMO's played: SWG (pre cu/cu), WoW, AoC, WAR, DFO, Planetside
MMO's that I have tested: Lotro, L2, Aion, Ryzom
Short sell the stock!
Only sources of additional financing for Funcom that I foresee is loan sharks, Norwegian government, or selling off assets at a highly discounted rate.
Funcom has thrown a lot of sunk costs into advertisement and (viral marketing ;p) and especially the game engine.
Now the game engine would probably own for a Diablo or single player RPG game, though I would be sceptical of Funcom's current developers being able to produce fufilling content. Also, would it be posible for Funcom to survive and gain funding for any new projects....it is likely that they would take 3-4 years to be realized.
******************
EDIT:
Now that December has come and gone....it's probably impossible for Funcom to turn anything around as they have zero hype and are competing against the legions of disgruntled X-AoC players communicating with potential customers in other games. - I just played the game it's still empty, with horrible game play mechanics, and not much has changed in 9 months.
Funcom has reviewed all of its assets relevant for
impairment testing. This process has led to
recognition of an impairment loss of around
3,1 MUSD for Age of Conan due to a decrease in
numbers of subscribers for the game. Funcom Q4 10 report.
http://forums.ageofconan.com/showpost.php?p=2926123&postcount=7 500 mains/alts on Tyranny in past 30 days - instead of merge servers let's open a new PvP server, again! http://forums-eu.ageofconan.com/showthread.php?t=106427
that seems right around 120K to 140K subscription base
I guess it will jump up once they add xbox360 sales + expansion
Oh, that isn't really what I meant. It means that from Oct-Dec AoC had on average 140k subscribers.
But realize what I mean by subscriber. It includes anyone who subscribed in June for 6 months. AoC's attrition rate has been around 82% (based on 150k players of 850k sales). If 1 in 20 people subscribed for 6 months (42,500 subscriptions) and they quit at the average retention rate of ~18%...that means there are approximately 35,000 technical subscribers who no longer play and have no intention of playing.
Which means no matter how you slice it...the actual playing population of AoC is 35,000 lower than the 140k number (for that time period).
Of course, adjust for assumptions. If only 2% subscribed for 6 months...the loss is only 15,000. Conversely...if 1 in 10 subscribed for 6 months...you are looking at 70,000 less players.
This argument will be easy to solve though. Because these subscriptions come off the books (essentially) Dec 31st...if this is a major factor it will show up in Q1 09 numbers. Which, by the sounds of the lower guidance (despite higher playing numbers on the servers) is the case.
Q1 08 will be the first look at AoC without so many confounds. It will be very easy to peg actual AoC players within 10,000 in May. Right now we only really get a glimpse of the subscription rate, which is inflated by a small or moderate amount due to activity in June.
Lit
Not to nitpick but the 55, 2.31 and 4.10 are Norwegian kroner not dollars which is about .15 USD rounding up. So that would be 55 NOK, 2.31NOK, and 4.10 NOK. In US dollars that would work out to about $8.09 USD, 34 cents and 59 cents using todays numbers. For our Euro using freinds 55 NOK would be 6.31€, 2.31 NOK = .26€, and 4.10 NOK = .47€.
Aplogies to the OP for any unintentional derail but considering the difference betwee a USD, or any other dollar ( Aussie or Canadian for example) and a NOK I felt the need to clarify.
Also in response to Litigator . I think the subs were pretty steady between and mid January, becasue I think a lot of subscribers hung in there to see if the mergers would make a difference. Post merger I think the PvP population might have remained steady or possibly gained a bit, but that was offset and possibly surpassed by losses on the PvE side of the game.
I miss DAoC
I've been a pain in Olev's butt for a while. I actually had shorted Funcom stock earlier this summer. Quite frankly, Olev never answered me (or at least, stopped answering me) when I used my Canadian emails. I had to be a bit sneaky and get a friend from Helsinki to email him. Apparently he is more fond of Fins. Shrug. I think they realize that most NA inquiries are fake because it is hard to access the Norwegian Stock Market...but they are receptive to Scandanavian correspondence.
I've been a pain in Olev's butt for a while. I actually had shorted Funcom stock earlier this summer. Quite frankly, Olev never answered me (or at least, stopped answering me) when I used my Canadian emails. I had to be a bit sneaky and get a friend from Helsinki to email him. Apparently he is more fond of Fins. Shrug. I think they realize that most NA inquiries are fake because it is hard to access the Norwegian Stock Market...but they are receptive to Scandanavian correspondence.
Sounds weird, but then again I never really looked into the stock market so didn't know the Norwegian stock market was hard to access from the NA. Maybe they just don't trust you lot :P
Playing: Battlefield - Bad company (Xbox360) Arma2, DFO (PC)
On my radar: TSW, MO
MMO's played: SWG (pre cu/cu), WoW, AoC, WAR, DFO, Planetside
MMO's that I have tested: Lotro, L2, Aion, Ryzom
Not to nitpick but the 55, 2.31 and 4.10 are Norwegian kroner not dollars which is about .15 USD rounding up. So that would be 55 NOK, 2.31NOK, and 4.10 NOK. In US dollars that would work out to about $8.09 USD, 34 cents and 59 cents using todays numbers. For our Euro using freinds 55 NOK would be 6.31€, 2.31 NOK = .26€, and 4.10 NOK = .47€.
Aplogies to the OP for any unintentional derail but considering the difference betwee a USD, or any other dollar ( Aussie or Canadian for example) and a NOK I felt the need to clarify.
It's fine. Realize also that Funcom's brief bump up as of late could well be the simple effect of currency changes. The US dollar is stronger than the Kroner and thus the revenue they receive in must look more attractive.
Not to nitpick but the 55, 2.31 and 4.10 are Norwegian kroner not dollars which is about .15 USD rounding up. So that would be 55 NOK, 2.31NOK, and 4.10 NOK. In US dollars that would work out to about $8.09 USD, 34 cents and 59 cents using todays numbers. For our Euro using freinds 55 NOK would be 6.31€, 2.31 NOK = .26€, and 4.10 NOK = .47€.
Aplogies to the OP for any unintentional derail but considering the difference betwee a USD, or any other dollar ( Aussie or Canadian for example) and a NOK I felt the need to clarify.
Also in response to Litigator . I think the subs were pretty steady between and mid January, becasue I think a lot of subscribers hung in there to see if the mergers would make a difference. Post merger I think the PvP population might have remained steady or possibly gained a bit, but that was offset and possibly surpassed by losses on the PvE side of the game.
My apologizes that I placed the stock in dollars v. its natural currency. No malice intended.
As to the previous poster for short selling, that practice is horrible and should never be allowed. I may disagree with a company but setting it up and rooting for its failure is bad practice imho.
understood, and no malice was intended in the correction. I just tend to be real nit picky about numbers since by nature I am a self admitted, and damn proud of it, math and statistics geek LOL
I miss DAoC
My apologizes that I placed the stock in dollars v. its natural currency. No malice intended.
As to the previous poster for short selling, that practice is horrible and should never be allowed. I may disagree with a company but setting it up and rooting for its failure is bad practice imho.
Only inefficient markets allow the average person to buy but not to sell. Short selling allows the market to adjust for people who are too inept to realize that buzz and glitz does not = profit and long term viability.
Short selling allows market forces to adjust the price of equities and to prevent bubbles. It also allows someone to profit on market downturns. Needless to say, a lot of people could have been saved grief if they understood how to short an equity.
The only problem in the system is that it is generally available only to the sophisticated investor. Most people who go to the bank guy to do their investing are out of luck.
Playing through the first 20 levels of AoC, you'd think it WAS a single player RPG.
They budgeted mainstream for a niche game and lost big. Let's hope it can survive with that stigma.
Things look pretty bleak right now. I hope they can see the light at the end of the tunnel and keep the game going. There's just so much potential in what they've made.
PS: Dreamfall was brilliant.
So let me get this straight. A few months ago Funcom said their income was going to decrease by 50%... and now they are saying it will be even less than that?
Nope. Funcom was accurate in their Q4 08 analysis. Funcom's Q1 09 analysis is lower...but they never said anything to the contrary at any point. It means they are hitting the targets they set and are accomodating the changes for the new year.
Again, they said Q1 09 would be lower, but they did not say in what manner they expected it to be lower. That is my hypothesis. I could be wrong. For all I know...they could anticipate earnings to be $100k lower.
Obviously I do not expect that, but I have to respect the vagueness of the statements I received.
Lit
Anarchy Online has a subscriber base of roughly 20k-25k total, that's free and paid players. The booster being released is for high/endgame level players, so that cuts the revenue from that even more so. Other boosters are months away at the least, considering how long it took for them to make one.
Also, in reference to The Secret World, it was known to be "in development" long before 2007. It was announced as "The World" on the Anarchy Online forums back in like '04-'05 ( approximately, it may have been even earlier ), along with screenshots. The same screenshots as the ones used when it was announced to the rest of the world in 2007 as you said, with the Tomb Raider-looking clone holding a samarai sword while running through the city. This was amusing since the screens were identical, except the "new" screens looked more modern graphics-wise than the original dx7 shots. It's development was actually halted/placed on the back burner when they obtained the IP for Age of Crap.
Can you provide a copy or reference to your special mail from Olav so that we can forward it to Oslo stock exchange. They probably want to stop public trade of FC while launching an investigation of the leaked information
.
A CFO can't just send a friendly mail to your helsinki friend and give hints on guiding for Q12009. Thats insider trade and is only likely if mister Olav flirts with the idea of getting jailtime.
Edit: Ohh by the way, I think you forgot Box revenue for 1C company sales of boxes in Russia and Polland. 150000 boxes *50 $ *25%= 1.87 Mill $. Just a minor 2 Mill $ detail
. Ohh and still waiting on a copy of that mail from Olavs mail to your friend in Helsinki.
Funcom Officially lost half their subscribers within the first 3 months, Funcom unofficially lost 3 out of 4 subscribers in the following three months, which 2 sources back, both the financial statements and X fire.
Funcom says they are going to lose half of the revenue in the next quarter...the one coming up........and a lot of that is from 6 month subs,
So now Funcom is expected to have less revenue than projected......can anyone demonstrate how there can be more than 70k subs atm? because in game is dead, even after the merger....and I mean DEAD, the forums are DEAD....the popularity of this game on other game forums DIED. There are people all over in other games, usually MMOs, saying AoC sucks.
SHOW ME SOME LOGICAL EXPLAINATION THAT MORE THAN 75k players SUB!!!!!!!!!! Even after mergers I know from loging in that there are ferer than 20 % of the players that I saw at release on the merged servers and there are fewer merged servers................then factor in the are only 1 or 2 instances now..........OMG there were 7-8 on Doomslayer..........so ya few people play today, so why sub when you don't play?
Everyone knows that super casuals are the only market...but they don't play so why would they pay for subs???
Funcom has reviewed all of its assets relevant for
impairment testing. This process has led to
recognition of an impairment loss of around
3,1 MUSD for Age of Conan due to a decrease in
numbers of subscribers for the game. Funcom Q4 10 report.
http://forums.ageofconan.com/showpost.php?p=2926123&postcount=7 500 mains/alts on Tyranny in past 30 days - instead of merge servers let's open a new PvP server, again! http://forums-eu.ageofconan.com/showthread.php?t=106427
Lit this is a very informative post (as I said in a different, but related post by accident wrote by you-my mistake, but that was a good post too)
I love this kind of information, and this is really good-stuff!
One of the most interesting post Ive read on these boards, you really know your stuff!
Funcom Officially lost half their subscribers within the first 3 months, Funcom unofficially lost 3 out of 4 subscribers in the following three months, which 2 sources back, both the financial statements and X fire.
Well done Sherlock! you just stated something everyone knows
Funcom says they are going to lose half of the revenue in the next quarter...the one coming up........and a lot of that is from 6 month subs,
Where do they say they will loose 50% of the revenue in the next quarter? You might have some information I don't have aparantly so please share.
So now Funcom is expected to have less revenue than projected......can anyone demonstrate how there can be more than 70k subs atm? because in game is dead, even after the merger....and I mean DEAD, the forums are DEAD....the popularity of this game on other game forums DIED. There are people all over in other games, usually MMOs, saying AoC sucks.
There are people in WAR saying WoW and AOC sucks, there are people in WoW saying WAR and AOC sucks, no matter where you look in other MMO's there will be people saying another game sucks. In CS:S you will find people saying BF2 sucks, this doesn't make those games bad, it just shows some people still think enough about the game to actively try and push those games as bad.
SHOW ME SOME LOGICAL EXPLAINATION THAT MORE THAN 75k players SUB!!!!!!!!!! Even after mergers I know from loging in that there are ferer than 20 % of the players that I saw at release on the merged servers and there are fewer merged servers................then factor in the are only 1 or 2 instances now..........OMG there were 7-8 on Doomslayer..........so ya few people play today, so why sub when you don't play?
You wouldn't be able to tell logic if it jumped up and hit you in the face twice. The calculations of OP is by far some of the more proper calculations, 100% exact they won't be, but they are atleast based on something else then nice numbers on a graph.
Everyone knows that super casuals are the only market...but they don't play so why would they pay for subs???
Lol I love how you always try so hard finding things you can take them on. It's funny to watch.Playing: Battlefield - Bad company (Xbox360) Arma2, DFO (PC)
On my radar: TSW, MO
MMO's played: SWG (pre cu/cu), WoW, AoC, WAR, DFO, Planetside
MMO's that I have tested: Lotro, L2, Aion, Ryzom