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 price).  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.