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

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

Originally posted by Litigator_AB

 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.

Originally posted by Litigator_AB

..  If Plutolife income is included, ...

 

I thought they sold that division a while back?

Originally posted by Unfinished

Originally posted by Litigator_AB

..  If Plutolife income is included, ...

 

 

I thought they sold that division a while back?

They did.  Currently they have AoC and Anarchy Online as their online mmo's.

Originally posted by Unfinished

Originally posted by Litigator_AB

..  If Plutolife income is included, ...

 

 

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?

Originally posted by mk11232

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.

 

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.

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

Originally posted by mk11232  

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.

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.

Originally posted by Crashloop

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?

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.

Originally posted by Litigator_AB

Originally posted by Crashloop

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?

 

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

Originally posted by Jackdog

Originally posted by mk11232  

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.

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.  

Originally posted by Jackdog    

Originally posted by mk11232  

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.

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.

Originally posted by mk11232

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

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.

Originally posted by mk11232

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.

 

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?