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Wednesday, 6 November 2013

CCP Financials - Eve Online (ex China) Revenues

This post continues my series looking at the CCP financial position.  The published CCP Accounts are on this page, and my forecasts are on this page.

In this post, I am looking at the revenues of Eve Online (ex China).

. . . . . my game related conclusion would be that would lead me to conclude that we should expect a lot more effort by CCP to keep new players, including enhanced "carebear" protection.

Any analysis of CCP today will always start with the revenues of Eve Online (ex China).  In 2012 Eve Online (ex China) accounted for 98% of the total revenues of CCP.  For now, Eve Online is the business of CCP.

The revenues of Eve Online is somewhat more complicated that subscribers multiplied by price paid.  Indeed, the main drivers of revenues that I have identified are:

1. the number of subscribers per year: it is not clear what CCP discloses but I suspect in their presentations they disclose the number of subscribers during the year (or the number of subscribers present at the year-end).  And for good measure I had to try and read these of a graph.

2. the average number of months each subscriber stays for: whilst many players have been subscribing for many years I suspect there are many many more who subscribe for 1 or 3 months and then give up.  Therefore, the average number of months each subscriber stays for during a year is important.  Its all very well having 355,000 subscribers but if 100,000 of them are only around for 1 month then that is 100,000 new subscribers that have to be found the following month to keep numbers up.  I have not found any indication from CCP how this looks - so I had to analyse it myself.

3. the price for a 1, 3, 6, 12 month subscription: there are different price points depending on the length of the subscription.  These price points are known.

4. the proportion of 1, 3, 6, 12 month subscriptions purchased by the subscribers: follows on from the above point, we need to determine what proportion of the subscribers take each length of subscription.  I have not found any indication from CCP how this looks - so I had to analyse it myself.

5. the mix of revenues that are Plex sales: Plex sales are in part additional revenues to CCP but they also perhaps replace subscriptions.  The ultimate end buyer of a Plex may start a new account that would not otherwise have been started (so no loss to CCP) or may replace their subscription by buying Plex (like I do) in which case CCP is only slightly better off (by Plex price less Subscription pri
ce).  CCP has disclosed that 20 - 25% of revenues are from Plex in recent times.  Plex sales started in November 2008.

So, starting with the Plex - it does seem the easiest: given the sales started in 2008 I assumed that 10% of revenues in 2008 came from Plex sales (bumper sales in November and December 2008), in 2009 I assumed that Plex sales accounted for 15% of revenues, in 2010 22% of revenues, in 2011 23% of revenues and then in 2012 24% of revenues - as shown in the table below.  I don't have anyway of knowing this for sure.  CCP tells us that Plex accounts for 20 to 25% of revenues.

Eve Online - ex China
2008 2009 2010 2011 2012
Sales mix
Subscriptions 90% 85% 78% 77% 76%
Plex sales 10% 15% 22% 23% 24%
100% 100% 100% 100% 100%
Plex sales 4,166,889 7,767,364 12,470,378 14,293,372 15,062,430
change 86.4% 60.5% 14.6% 5.4%
Price per Plex 19.95 19.95 19.95 19.95 19.95
Number of Plex sold 208,867 389,342 625,082 716,460 755,009
Number per month 17,406 32,445 52,090 59,705 62,917
Additional "accounts" 11% 16% 17% 18%
However, I can do some sense checks.  If I assume the price for a Plex is $19.95 (I know, they can be discounted) then using my assumptions of sales from Plex I can determine the number of Plex sold in 2008 to 2012 and so get a feel for the number per month which would give an indication of the additional accounts that Plex finances (assumes all Plex goes to new accounts in that year - in reality there will be buffer stock and other uses).  In 2010 it looks like 52,090 additional accounts per month = 16% additional accounts, in 2011 59,705 additional accounts = 17% additional accounts and in 2012 62,917 additional accounts = 18% additional accounts.  That seems to look sensible.


and now lets look at the subscription revenues: the table below shows my thinking with my full discussion below it.  The chart below also adds in the Plex sales from above.  Worth remembering, we know the Eve Online revenues for 2008 to 2012, all we are trying to do is break down how the above drivers fit in so we can then extrapolate forwards to 2013 and 2014.


Eve Online - ex China
2008 2009 2010 2011 2012
Number of subscribers 225,000 300,000 320,000 355,000 355,000
change 28.6% 33.3% 6.7% 10.9% 0.0%
average length per subscriber (mths) 12.0 11.0 10.4 10.1 10.1
         
Proportion of payment plans taken
Price per subscription for 1 mth 70% 60% 60% 60% 60%
Price per subscription for 3 mths 30% 30% 30% 30% 30%
Price per subscription for 6 mths 0% 10% 10% 10% 10%
100% 100% 100% 100% 100%
Price per month per plan $
Price per subscription for 1 mth 14.95 14.95 14.95 14.95 14.95
Price per subscription for 3 mths 11.36 11.36 11.36 11.36 11.36
Price per subscription for 6 mths 9.55 9.55 9.55 9.55 9.55
Average subscription 13.87 13.33 13.33 13.33 13.33
Subscription revenues 37,502,004 44,015,060 44,213,158 47,851,724 47,697,693
change 17.4% 0.5% 8.2% -0.3%
Sales mix
Subscriptions 90% 85% 78% 77% 76%
Plex sales 10% 15% 22% 23% 24%
100% 100% 100% 100% 100%
Plex sales 4,166,889 7,767,364 12,470,378 14,293,372 15,062,430
change 86.4% 60.5% 14.6% 5.4%
Price per Plex 19.95 19.95 19.95 19.95 19.95
Number of Plex sold 208,867 389,342 625,082 716,460 755,009
Number per month 17,406 32,445 52,090 59,705 62,917
Additional "accounts" 11% 16% 17% 18%
Total Revenues 41,668,893 51,782,424 56,683,536 62,145,096 62,760,123
change 24.3% 9.5% 9.6% 1.0%
Number of subscribers - we know from the chart issued by CCP, assuming I am reading it correctly!

Again, assuming my Plex sales mixes are correct then there are three key steps to get from Subscriber numbers to revenues: average length of a subscriber x proportion of subscribers going for 1 / 3 / 6 month payment plans x the price of the 1 / 3 / 6 month payment plans.  I have assumed that too small a proportion to matter goes for 12 month plans.

Of course, I don't know the answer to this and I cant find anywhere that CCP has disclosed this so I had to make assumptions.  Furthermore, I assumed the introduction of Plex has altered the proportion of payment plans taken up.  I have assumed that players that were long standing but paid monthly were more likely to buy Plex (they probably gather more ISK in game and so have the most to benefit from using Plex to extend their game time) and so the proportion of payment plans for 1 month fell after 2008.

In all, in 2008 I assumed 70% of subscribers paid monthly and 30% 3 monthly - and the average length of a subscriber was 12 months.  And then in 2009 onwards I assumed this moved to 60% monthly plans, 30% 3 monthly and 10% 6 monthly but that the average length of stay fell to 11 months in 2009, trending down to 10 months by 2012 reflecting the very steep learning curve as players give up.

Worth noting that given the subscriber numbers in 2008 and the price points I really struggled to make the revenues numbers add up - either prices were higher, or Plex was higher priced, or more Plex sold in 2008 than I thought.  I was surprised at how high I had to make the proportion of 1 month payment plans.

I have also not taken into account in price discounts given in pre-expansion periods etc.

Hence, by the end of 2012 I am assuming:

- that the average number of months a subscriber stays for is 10
- that 60% pay monthly / 30% 3 monthly / 10% 6 monthly
- that the monthly price for 1 month is $14.95, 3 months  $11.36 and 6 months $9.55
- that the proportion of revenues that are Plex sales costing $19.95 each is 76%

Therefore, to determine 2013 and 2014 I need to assess the likely subscriber growth and how the above changes.

We already know the 6 month numbers for 2013 and using these I therefore assume subscribers grow by 22% to 433,100 in 2013 followed by 10% growth in 2014 to 476,000.  I assume the average length of stay of a subscriber stays at 10 months as CCP makes efforts to lessen the steep learning curve and more attempts to protect new players.  I assume the pricing points and proportion of 1 / 3 / 6 monthly sales does not change.  And I assume Plex sales are 25% in both 2013 and 2014.  That, therefore, leads to the Eve Online revenues below which then feed into my forecasts on this page.

Eve Online - ex China
2011 2012 2013F 2014F
Number of subscribers 355,000 355,000 433,100 476,410
change 10.9% 0.0% 22.0% 10.0%
average length per subscriber (mths) 10.1 10.1 10.1 10.1
       
mix
Price per subscription for 1 mth 60% 60% 60% 60%
Price per subscription for 3 mths 30% 30% 30% 30%
Price per subscription for 6 mths 10% 10% 10% 10%
100% 100% 100% 100%
Price per month
Price per subscription for 1 mth 14.95 14.95 14.95 14.95
Price per subscription for 3 mths 11.36 11.36 11.36 11.36
Price per subscription for 6 mths 9.55 9.55 9.55 9.55
Average subscription 13.33 13.33 13.33 13.33
Subscription revenues 47,851,724 47,697,693 58,322,675 64,154,943
change 8.2% -0.3% 22.3% 10.0%
Sales mix
Subscriptions 77% 76% 75% 75%
Plex sales 23% 24% 25% 25%
100% 100% 100% 100%
Plex sales 14,293,372 15,062,430 19,440,892 21,384,981
change 14.6% 5.4% 29.1% 10.0%
Price per Plex 19.95 19.95 19.95 19.95
Number of Plex sold 716,460 755,009 974,481 1,071,929
Number per month 59,705 62,917 81,207 89,327
Additional "accounts" 17% 18% 19% 19%
Total Revenues 62,145,096 62,760,123 77,763,567 85,539,924
change 9.6% 1.0% 23.9% 10.0%

 


In all, I expect revenues for Eve Online to grow by 23.9% in 2014 to $77.8m and then by 10.0% in 2014 to $85.5m.

The main driver may look like subscriber growth.  For every additional 1% of subscribers the revenues rise by 0.8% (=$637k).

However, if CCP managed to increase the average subscription length by half a month to 10.6 months then revenues would rise by 5.0% (=$3.8m).

Indeed, if CCP managed to increase the proportion of Plex sales from 25% to 26% of revenues then total revenues would rise by 1.4% (=$1.1m).

Hence, subscriber growth is not the only focus - the more CCP can do to keep new players and convert players to starting new accounts with Plex then the better it is for CCP.

Keeping everyone for half a month longer is better than adding an additional 4,000 new subscribers.

. . . . . . that would lead me to conclude that we should expect a lot more effort by CCP to keep new players, including enhanced "carebear" protection.

6 comments:

  1. It seems like you've made some hidden assumptions which end up dictating your conclusions.

    "Hence, subscriber growth is not the only focus - the more CCP can do to keep new players and convert players to starting new accounts with Plex then the better it is for CCP."

    Every Plex'd account requires two things: 1. Someone grinding ISK ingame and spending that ISK on PLEX, to pay for his account; and 2. Someone paying real money on PLEX to give him ISK for ingame items.

    Obviously, both halves of this equation can be divided incrementally among many people. Now, the question is, is this demand/supply equation more elastic for demand, or for supply? Put another way, is this balance more limited by the supply of PLEX, or the demand for PLEX? You seem to be making a disguised assumption that the best thing for CCP to do, to manipulate this balance, is to entice people to start alts that they will pay for with PLEX. However, I would postulate that the reverse is more likely, that convincing people to pay real money for PLEX is the more difficult task. Absent substantial evidence, that's all we have here, competing hypotheses waiting to be tested.

    And second; ". . . . . . that would lead me to conclude that we should expect a lot more effort by CCP to keep new players, including enhanced "carebear" protection."

    Again, another hidden assumption. You've assumed here that enhanced "carebear" protection will increase new player retention. There's not even enough here to analyze, it's just a mysterious assumption, and I could just as well assume the opposite.

    ReplyDelete
    Replies
    1. Your first point is well made and is something I intend to explore on a later post. There is presumably a balance between how much ISK a Plex gets which therefore entices players to pay real money for Plex vs the affordability of Plex for people like me who spend that ISK on it to extend game time.

      In part - I suspect CCP would want higher ISK cost of Plex to entice real money purchases and CCP can control this by buying the Plex in game for ISK themselves. Those that use Plex to extend game time would merely need to grind more ISK

      Your second point - yes, I am assuming new players quit because of he steep learn curve, high sec ganking, scamming etc - and I am therefore making the assumption that CCP will add more features to protect new players from all this.

      Delete
  2. All your calculations are in dollars, EU players pay 30% more due to exchange rates. So a 20 dollar plex is the same price as a 3 month euro subsciption and your 1 month dollar players could be 3 month euro players.

    ReplyDelete
    Replies
    1. Now that is interesting - thank you for that. I will plug that in and see what changes come up. I know CCP disclose US and European revenues - don't think they disclose the UK revenues which look like they are aligned with the US$ prices. So I will have to make some more assumptions but I think you have just found me an uplift in revenues and so perhaps evidence that either players stay for longer than 10 months on average or take longer than 1 month plans.

      Delete
  3. Are you factoring that CCP will not get the full subscription cost when they bought through 3rd parties like Amazon, Steam, Somer, etc.?

    Also, i think you would have to know the % breakdown of when subscribers leave to get any meaning from the avg length of stay. What % leaves after 1, 3, 12, ++ months to understand which direction CCP will go. Rubicon seems to be the opposite of protecting carebears. Also, what % of carebears pay for their accounts through converting isk to plex versus using cash to subscribe. Are PvP players more valuable to CCP since they spend their isk replacing ships instead of buying plex to play for free?

    Why do you think revenue will grow so much this year and next? I think Test brought in a lot of new blood, but I wonder if a large % left the game when they were demolished.

    p.s. I love your attempt to understand the financials to make predictions.

    ReplyDelete
    Replies
    1. on your first point - at this stage I am not attempting to factor in the discounts or proportion of sales through third parties. I struggled to find any indications of the price CCP gives away or the proportion of sales through third parties.

      on your point on the % breakdown of when subscribers leave - I have attempted to find the average point which I think is 10 months though this may now change once I plug in the new pricing given European players pay more than US and UK players. The way I will try and get this number is by assuming the % breakdown of the player base that pays for 1,3,6 and 12 months in 2008 to 2012 where we have actual numbers and so hopefully that just leaves the average play length of the player base to find.

      I also would struggle to get a view as to who uses plex to extend playtime on carebears vs PVPers.

      on your point on revenue growth - we already have the 6 months to 30 June 2013 which shows revenues from games (so mostly Eve Online) grew from $30.7m in the 6 months to June 2012, to $34.3m in the 6 months to June 2013. My revenue for the full 2013 may be a little high but hopefully not too much.

      For 2014, at this stage I am assuming that only subscribers grow by 10% - and that was a pure guess at this stage!

      Delete

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