GadgetDon

There's upset, and there's upset and confused because there's no reason for the upset.

If they were planning to make a CoH2 with a new engine, why (a) refuse the old Dev team the right to create a CoH2 and (b) why fire the people who know the IP best?

Except why did NCSoft resort to PR-speak? Why no clarity?

And the idea that we need to parse it from PR-speak proves that, for all the claims to the contrary, NCSoft hasn't said why they closed the game and fired everyone with no notice and no indications that changes were necessary, and those who say "we know why they closed it" are saying "well, I've got some speculation about why they closed it and I'm presenting it as fact.

There are investments that can be set up to generate losses way above the original investment. In the US most of those have been banned, it's conceivable that they may still be legal in Korea.

But you have to set them up from the start. Having an existing business that's been bringing in profit as opposed to losses, and shelving it, won't work for those tricks.

The Producers was simple fraud. Whatever I may think of the decisions made by NCSoft, I doubt they're committing simple fraud.

Uwe Bowe took advantages of huge tax advantages in some jurisdictions for making movies. Those tax advantages have been repealed which is why you haven't seen any Uwe Bowe movies for a while, and I'll go on record as supporting that tax increase.

Is it conceivable there's something special in the Korean Tax Code that "if you kill a computer game, you get to deduct every penny spent on the game even if you've previously deducted it but if you sell it no break for you"? Wallace Shawn would call that inconceivable, but I'll grant it's barely within the bounds of possible. But I'm assuming a reasonably rational tax code in Korea.

That's what an explanation looks like. It's specific, says why. Compare that to the releases made by NCSoft and tell me seriously again "Oh yes NCSoft has told us why the game is closing".

You do know that the Batman IP may have not appeared in tv or movies but was appearing in print that whole time it was "laying fallow". More importantly, the history of Warner Brothers is such that its reasonable to believe in the future Warner Brothers will be able to make money from a superhero movie or tv show.

As compared to NCSoft, who has no history of ever making anything from the IP of the games it shuts down, and by their failure to promote the game in their primary market makes it unlikely they'd be able to make a profit with that IP in the future.

And there is no accounting trick that makes CoH worth more as a loss to NCSoft than a sale.

I wrote in detail about book value before, but:

(1) CoH has been around long enough that if it has any book value, it will be low, and the only tax writeoff is the book value of the game.

(2) If you sell an asset below its book value, you pay no income tax on the payment and get a write-off of the difference between book value and the selling price.

(3) If you write off an asset, the tax benefit is tax rate * book value so 1 mil book value 25% income tax means you'll pay 250K less in taxes. Furthermore, you have to write it down over time as it depreciates. If you sell an asset for less than the book value, you get the benefit of the full sales price and get to immediately write off the difference between book value and sales price.

So, selling an item is BETTER than taking the writeoff.

As for a million dollar price to sell the IP, unless you are represented by Dewey, Cheatum, and Howe, legal fees won't be nearly that high unless there is something really tricky being attempted to screw the other guy.

And if you aren't sentimental about those parts, you dispose of them to the highest bidder.

OK, I forgot about "Book value".

Book Value is where you take the investments you've made in an asset, and every account period subtract some off for "depreciation". The depreciation is treated as an expense for the purpose of calculating profit and loss (thus reducing taxes).

I'd be shocked if the book value is very high. Unless you are running a loss on paper, you want to depreciate your assets as quickly as possible for the tax benefit. Unless they've got really incompetent accountants, any payments made to Cryptic during the creation of the game and the payment made to Cryptic to buy the game has been depreciated to zero long ago. The costs of developing the new project(s) probably are adding to the book value of those projects, but presuming that the sale would only be of CoH, not relevant. I suppose an auditor could dig in his heels and require NCSoft to book expenses for creating new issues as investment, but even so the money spent on bug fixing would be expensed as operating expenses and not add to the book value. The upshot is that I suspect the book value of CoH is very low. (Tabula Rasa and Auto Assault would have had significant book value.)

But ok, let's assume there's a million dollar book value for CoH. (Yes, I know they don't use the dollar in their accounting, but I'm an ugly American so will use my currency.) Let's assume they're able to depreciate 100K per year. And just for calculation, let's assume the tax rate is 25%. If so, then every year for the next ten year there's a 100K paper expense for the depreciation. reducing taxable income by 100K and thus reducing amount paid in taxes by 25K. So that's 25K in year one, 25K in year two (present value is 25K/(1+interest rate)), 25K in year three (present value is 25k/((1+interest rate)^2) ), etc. If 500K is pennies, what is 25K?

But instead, they sell for 500K. Book value is 1 million, so there's a paper loss of 500K. That means 500K goes into the account (no taxes on it because the transaction is a net loss) and they pay 125K less in taxes in Year 1. Even if you ignore interest, that's 625K for the sale (500K cash plus 125K in tax savings) vs. 250K for the pure write off (saving 25K in each of ten years). If you don't ignore interest, it's an even better deal. Plus, if they transfer Paragon Studios and had done the deal before everyone had actually lost their jobs (the people of Paragon Studios had remained employees for several weeks after the announcement, due to laws requiring advance notice of major layoffs), they wouldn't have had to pay severance pay and wouldn't be reporting all those firings which will raise their unemployment rate.

There is one caveat. Paper losses, depreciation, and other tax deductions are good if you are paying taxes. If there is no income, depreciation is just makes the loss bigger, and you can't pay less than zero in taxes. So let's assume NCSoft thought they would have a loss for the October-December quarter. The 500K paper loss doesn't give them any tax write-off. But it's still 500K cash for the sale compared to 250K lowered tax expenditures (and the 250K lowered tax expenditures are spread throughout ten years).

OK, I've probably bored everyone as much as I got bored in the classes (there's a reason I went into computer programming after graduation). But the suggestion that there's some tax writeoff advantage is highly unlikely. It would require a high book value for an 8 year old game, a loss in the quarter of the sale, and an accountant who doesn't know how to structure a deal so the loss is spread over several quarters.

There's a difference between boycott and "I hate that NCSoft shut my game down".

Yes, because we've seen the progress done on Tabula Ras 2 and Auto Assault Retuned.

And if you're planning on doing a sequel to a game, the first thing you do is turn down the people who know it best when they say they want to do it and then fire everyone who knows the engine and the IP.

If the CEO really is turning down deals that actually put cash in the pocket for the idea that somehow they'd do a future game and make lots of money (particularly when the people who remember the name "City of Heroes" will be the ones who will remember "Oh yeah, NCSoft is the jackass company that shut them down"), NCSoft has bigger problems than I thought.

Traditionally, there are three types of valuation.

One is present value valuation. You calculate every dollar you'll ever get from it in the future, adjust those future dollars for inflation. Calculating the value this way obviously requires some assumptions be made - what is the future money you'll get from it, what's the interest rate. In 1981 I got a Bachelor of Actuarial Science degree, and I can B.S. about this all day. But sometimes the calculation is easy. The present value of zero future income is zero.

Then there's market value, the greatest price someone is willing to pay. Now, neither you nor I know what offers are coming in, but you seem to be working from the assumption that the highest offer they got was 500K. If so, then the market value of CoH is 500K. (If someone made an offer of 500K on signing the deal and 500K in a year, it would not be a 1M offer, the 500K would be divided by (1+interest rate). If the offer was, say, 500K plus 10% of all gross profits for the first four years, the calculation gets more complex.) (Damn I'm B.S.ing again)

Those are the two monetary forms of valuation. If your sole goal is maximizing assets, those are the two forms you use - and corporations exist to maximize shareholder value. So the only rational reason to turn down an offer for 500K is either you are expecting a higher offer or you expect future income that would exceed 500K. If I was an NCSoft shareholder, I'd want a really good explanation of why it was turned down. Because both with what NCSoft has shown it can do, and its history with other game IP, the argument that there will be an future value without a sale is farfetched. (Frankly, of the games they killed, if they were to pick one to revisit, I'd pick AutoAssault - it's still a mostly open concept, and more easily adopted worldwide.)

Now yes, for individuals, there's also emotional value. As I'm sitting here typing, I have a cat named Odis wandering around on my desk. Future income is probably zero, discounting a potential video sent to America's Funniest Home Videos. Market price would be very low, he's a mixed breed and nothing inherently different from him and a million cats in shelters. But he's my bud and he's not for sale, period. As an individual, I can do that, because it's my money. If, say, the CEO won't sell to save face or he's got some emotional attachment to the games he funded, he's funding his emotion with the shareholder's money, not his.

And you keep saying 500K is pennies. No, it's not. It may not be the biggest inflow of cash - but if someone hacked into their bank account and transferred 500K out, they wouldn't consider it just "pennies" and let it go.

As Tim said, we got up to Atlas Park 33 on Virtue - and then the server just wouldn't let more people log in. People stayed in AP33 after the rally, to keep it alive. On the next server reboot for maintenance, one of the existing staff recreated it (not sure who did it the first time). Since then, after the server reboots for some reason, someone recreates Atlas Park 33 and people stay in there when afk, holding the torch.

This was a few more days than normal, but GM_Lloyd (I think) recreated it.

NCSoft would only be nuts to let that IP go right now for 500K if it believes it'll get more than 500K value from it in the future. (Adjusted for inflation). If NCSoft puts the game on the shelf and never sells, it's worthless. The future income NCSoft gets from it is zero, which makes the present value calculation really simple - zippo. Again, don't spin out any ideas of someday they'll make CoH2, or relaunch CoH, or fund a movie or whatever, it's not in their wheelhouse and even if they try they'll just throw a lot of money away.

If the highest bid they can get now is 500K, it's not going to go up as time passes. Even if, a year down the line, they call the guy who offered 500K and said "We'll take it now" and the guy hems and haws and says "OK, 500K it is" (unlikely) inflation makes that less valuable than 500K now.

And it doesn't matter if they sell the IP for 500K and within a year the guy has made millions. They're still 500K ahead and it's as most ahead as they'll get. Business is about maximizing shareholder value. If NCSoft can maximize their shareholder value by 500K in doing a deal that increases the other guy's shareholder value by ten million, NCSoft has still done a smart deal.

(And if the game is so obviously profitable that anyone could make millions by running it - why the hell did NCSoft want to shut it down. You can't have it both ways, CoH was such a failure that the smart move for NCSoft was to shut it down and deal with all the termination expenses and yet it's such a sure-fire hit for anyone that anything less than a huge offer is ridiculous.)

Except... Mark wasn't in the process of shutting Facebook down and storing it on some backup computer tapes in his safety deposit box, Mark was continuing to improve Facebook and grow it and make it more valuable. Mark believed, rightly, that the present value of the future income from Facebook would exceed 15 million and he was right.

On a shelf, the future value of the CoH IP is zero. Which means an offer of "pennies" is paying over the value of not selling. And there apparently are no better offers or opportunities for the IP lying around.

Um, weren't you saying that a 500K offer was insulting because the customer base would mean they'd make it back instantly? But there's not enough players to make it financially viable. If you're right here, 500K seems like an overly generous offer.

Though I think you're right that much of the damage has been done. Let's assume a sale was going to happen:

Scenario 1. No shutdown announcement. NCSoft and Paragon make a joint statement that Paragon has been bought out by CompanyX (or Paragon Studios is being spun out on its own). Paragon describes all the wonderful things they plan to do on their own. Big noise, lots of excitement. Highest IP valuation possible for the deal.

Scenario 2. Soon after the shutdown announcement, NCSoft and Paragon make a joint statement that Paragon has been bought out by CompanyX. There will be no shutdown. We'll be working out the details of transition, everyone is happy about the new situation and all/most of the employees will be staying on. IP valuation lower than Scenario 1, but probably not much.

Scenario 3. Just before the shutdown, or just after the shutdown, a sale is announced. Those not yet with new jobs will work for the new organization, we "hope" to get some others back. It will take time to set up the new organization, the servers are still shutting down on schedule and we hope to have them up under new management with a month or two. IP valuation plummets because of the lack of confidence in new staff and the players who have moved on.

Scenario 4. Early in 2013, a sale is announced that the IP has been purchased. A new dev team is being put together and we'll try to have the servers up in a few months. The new company better be really well funded to both promote the recreation, run things as the word gets out, and until/unless a CoH 2 is done it'll never hit the levels prior to the announcement. And the value of the IP will make 500K look as unrealistic as 80M is today, but a percentage of future revenue may still pull in money from it.

Any of these scenarios, even Scenario 4, will benefit NCSoft more than the CoH backup tapes sitting on a shelf in the vault next to the Tabula Rasa and Auto Assault backup tapes, which has a value of 0. And no, NCSoft is not going to be able to make money with it in the future. NCSoft lives and dies on the asian market and CoH just isn't a good fit for it, the value of the brand is negative (those who recognize the name "City of Heroes" knows that NCSoft is the ones who killed the game).

When management is unhappy about that, the first thing that happens is big changes. If, say, they'd said "Oh, and everything we said about I25, forget that. We've got an exciting new direction planned..." I'd find it more likely.

Except closing it because it's slowly degrading and not quite measuring up comes with lots of hints and foreshadowing before the bomb hits, and it's no surprise when it happen. This was a huge surprise to the players and the workers.

I'll grant that we were the weakest link in the company so if management decided "somethings got to go" it would be CoH and maybe even that it's surprising there wasn't more of a push to change things.

But there's one thing that absolutely convinces me it wasn't a cold rational decision. If they'd waited just one more month before dropping the boom, GW2 would have been comfortably launched and the copies sold before they had to deal with any backlash from CoH closing. Maybe they didn't expect us to be as noisy as we've been, but it weakens the message of "see how we're a strong powerful company launching this great new game" to say "Oh, and we're closing this other game"

My speculation has been that Someone Important (major shareholder like Nexon, major debt holder) went to the CEO and said "Those last numbers disturb us, do something significant like closing a game to show us you're serious about the situation or else." It explains the rush to close it without any warning, and the lack of a coherent statement about why.

Another bit of speculation I heard is that there have been some shakeups within the company (as shown by the major sale of stock to Nexon), and there was a champion at NCSoft HQ that lost his ability to protect the game. The guy who landed at top - it's not that he had a particular grudge against CoH, but killing the pet project of the guy you just toppled is a way of showing your new strength and maybe a little revenge.

Neither are great reasons (we were closed as a symbol or a pawn), but they seem to explain the "bolt from the blue" as the way humans sometimes act.

And Jonathan Frakes (Riker) directed the episode.

Not sure about Atari and Commodore, but the minimum RAM for an Apple II was 4K (which is 4096 bytes, a K being 1024 which is an even power of 2). When I got one, I splurged and got 16K.

The 6502 processor had a 16 bit memory bus (which meant it capped out at 64K). It basically had two sets of read and write commands, one for page zero, the command was just two bytes long, "command byte" "0-255 address", and one for the rest of RAM, the command was three bytes long, "command" "low byte of address" "hi byte of address". The zero page instructions executed faster, as well as taking less memory to store the instruction. today, the idea of optimizing the code for one byte is laughable, but I once was on a team to create the ROM for a Novation Apple-Cat. 1024 bytes for the ROM. On our first assemble, the ROM was 3K. We'd keep finding tricks to shrink it, I remember a while celebration when we realized every case of "JSR (address); RTS;" could be replaced with "JMP (address)", saving one byte. There were 25 occurrences of that, so we cut 25 bytes in one blow!

Ah, those were the days. Glad they're over, but there was something special about that kind of focused programming for optimization.

Now, if I'm programming and need to allocate a buffer, I think nothing of reserving 32K space.

You see Wallace Shawn and think of Grand Nagus Zek?

I find that inconceivable.

This was my thought in terms of how it could happen. It would be a real point of confusion for Luke, at least until the confrontation. And Leia - remember, Vader tortured her to try to get the location of the rebel base.

And of course if you are secretly a Sith Lord, hiding in plain sight, it would be a great disguise to go do your villainy without revealing exposing your secret.

Which of course would mean that at some point there would be an revealing where the captured Vader's mask was removed.

"Look! It's Senator Smithers!"

"And I would have gotten away with it if it wasn't for those meddling Jedi."

Actually, I think that, for the most part, CoH did fulfill those needs. As for #3 - Both with the original content, and if you follow the hero path (and don't go into First Ward/Night Ward which did force grey upon your character), you rarely had to choose between two not-good choices - at most it was "you can't save everyone". Yes, Praetoria was filled with them, one reason I don't have any Praetorians in my long list of characters.

And as for matters - I don't mean changes the gameworld. I mean, within the story, I was breaking up plots to do terrible things, I was rescuing people who had been kidnapped. Even on the streets, when street sweeping, I'm stopping burglaries or the Vahz from preparing to rip people apart and such.

Did CoH live up 100% of the time to my wants? No. The KIR and MOM trials are far too twitchy for me ("hey, there are these colored areas on the ground you can't step in or you die. Yes, we're using lots of superpowers that cause a light show so you may not be able to see them until it's too late, but you can't step in them. Oh, you're melee and the archvillain is in the middle of one of those. Well... file your nails or something.") First ward is too gray for my tastes. And I remember nerfs to powers because they were overpowered for PVP.

So I'm not expecting 100% consistency on my list from any game. But they need to be part of the design, what the game tries to do, even if they don't always live up to it. CO, for example, has a lot of the items on my list. I'd wish for more instancing, the ability to set a flag that says "automatically reject any request to duel". The main things it falls apart on is the community building tools, mostly in the forums and moderation - there needs to be a moderator watching Millenium City zone chat with ban hammer in hand.

Right now I'm looking at CO and SWTOR as the closest. And while there are some aspects of SWTOR that make me say "I wish CoH had that" (and maybe a few in CO though there's a lot more I find lacking), I find more "I wish this had stuff from CoH".