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Sunday 26 April 2015

Eve Prosper - a great interview with Dr Eyjo at Fanfest 2015

There is a cracking interview with Dr Eyjo at Fanfest 2015 hosted by Etienne Erquilenne on the blog of Lockefox on his blog at Eve-Prosper.  Lockefox is the host of the most excellent Eve market videos which i believe are a weekly "must watch" to keep up to date with what is happening on the market.

It is not an interview on how to make billions of ISK but more a discussion on the Eve Market itself.

Dr Eyjo used to be the Eve Economist until be joined the University of Akureyri back in June 2014.

I have talked about some of the lectures he has given in past Fanfest's, notably the Eve Online Economy talk in Fanfest 2014 and the Eve Online Economy Talk in Fanfest 2013

At 10:30 in the discussion on Inflation starts (perhaps very relevant for todays real life where yields and inflation are fast heading to zero and below!).  Dr Eyjo also talks about intervening in the market to keep Plex within set limits.

At 14:15 in the discussion moves to the price of Tritanium (described as the minimum wage for miners!).

At 21:50 in we get the killed comment/question from Dr Eyjo "why are people so interested in inflation [in Eve]?"

At 26:00 in Dr Eyjo reckons he could write a ground breaking paper on the Eve Online financial system and how it relates to the real world.

At 31:00 in, with a CCP employee in the room (CCP Quant), it is confirmed that there is no plans to intervene in the Plex market at the moment.  Indeed, the CCP employee referenced that any action is taken with the view to protect CCP (to me, that indicates that if the ISK price of Plex starts to negatively impact the value of Plex bought for US$ then CCP will step in).

At 35:00 there is a joking conversation about charging players for real time access to universal market data (it would be interesting to see if this could work).

At 38:00 in there is a discussion where the CCP employee states that he would want players to get their hands on all the data available within the limits of game design - but he puts in some caveats to protect players and their activities in the game.

Dr Eyjo had access to perhaps all the data he would ever need.

If i had such access, the first questions i would seek at answer are:

1) How much Plex is sitting in hangers
2) How much Plex is sitting in hangers of accounts that have not logged on in 6 months (i.e. Plex that is perhaps permenantly out of the economy)
3) How much Plex is sitting in hangers of active players but not being used (i.e. shows what Plex is being held as an investment)

Sunday 19 April 2015

Eve Online Subscriber numbers (ex China) - i estimate 405k

[a non-ISK making post but one on CCP / Eve Online]

For what it is worth, i believe the CCP subscriber numbers are about 405k (give or take 20k).  Of which 339k pay in cash, and 66k pay using Plex.

Where is this post born from?

The recent podcast episode from Broadcast from the Ninveah pointed me in a post from The Nosy Gamer blog (which i had missed) that attempts to take two snippets of information from CCP to determine the number of subscribers to the game.

Firstly, CCP stated that "Eligible voters cast 36,984 votes, meaning that we have 15% increase since the last year’s election" [actually, that is not new news].

Secondly, CCP stated (in the same place) that "We have also noticed a 3% turnout increase since last year . . . " [that is new news].

From this information several bloggers and commentators have made their estimates as to the current number of Eve Online subscribers.

When was the last time we had decent Subscriber number data?

Two places.

1) the Prospectus issued during 2013 (for the Convertible bond issue) talked of subscriber numbers for the end of 2012.

2) the dev blog post on the CSM8 election results which gave the votes cast by country + Voters as a % of subscribers + % of subscribers back in April 2013.

The Dev Blog is simpler.  For the UK it states there were 5,787 voters representing 11.64% of the vote, giving 13.74% of voters as a % of subscribers and therefore 10.28% of subscribers (not easy to take in!).

The way i am reading that is in the UK there were 42,118 subscribers (=5787/13.74%) and so 409,707 total subscribers (=42,118 / 10.28%).  It seems to work with all the other countries to give me 409,707 players at that time.

Given the stated 49,702 votes, that indicates that 12.1% of the voters voted.

I am pretty sure that includes Plexed accounts - it does agree with work i have done before and reconciles roughly with information in the Prospectus.

Can we get from there to players at the end of 2013?

Work i have done before suggests there were an average of 476.8k players (subs + plex) during 2013.  See at the bottom section of this post for the workings.

Essentially, I have worked from the Eve Online (ex China) revenues, made assumptions for average time of a subscriber / average monthly payment / Plex vs Subs mix to get an answer for the average number of players in the year.

Given that, i assume that the year end number is about 7% higher than the average at 510k because of the upward trajectory in player numbers during the year.

And now to the current Population

We were told last year that the number of voters in the CSM9 election was 31,294.

We were told this year that the number of voters in the CSM10 election was 36,984.

We were told that the increase in turnout was 3%.  Now, the simple maths from all this is that:

[CSM10 voters/Population now] - [CSM9 voters/Population last year] = 3%

or, inputing what we know:

[36,984/Population now] - [31,294/510,000] = 3%

That suggests that the Population now is 404.8k.

My work on getting the 2013 population numbers

Below is the relevant part from my spreadsheet that tries to look at revenues generated from subscribers.

Not easy.  Also, it looks at average number of subs in the year, not year-end.

Almost all of the workings come from the Prospectus in 2013 for the Convertible Bond issuance.

Starting from the top i have:

  • Average number of subs players in the year (excluding Plex players)
  • Average lend of sub (i assume 10 months given the steep learning curve)
  • How the sub players payment periods are split 1 mth / 3 mths / 6 mths
  • Cost per month sub for each period
  • and therefore the effective monthly payment from each sub
  • Gives total Sub revenues for the year
  • Then i make an assumption of how much comes from Plex in the revenues
  • That gives me the total revenues
  • Below that i try and split those Plex sales into players vs investors

Gives me an average number of players in 2013 as 476,750

For the above, i assume the 2013 year end players are 7% higher than the average given an upward trajectory during 2013 = 1.07 x 476,750 = 510k.

As a check, if i assumed 2014 was going to end 10% below my estimate of the average for 2014 then i would get 0.90 x 449,928 = 405k (which agrees with my estimate above).

Eve Online - ex China
2011 2012 2013 2014F
Number of subscribers 355,000 355,000 404,838 383,734
change 10.9% 0.0% 14.0% -5.2%
average length per subscriber (mths) 10.1 10.2 10.1 10.1
10.1 10.2 10.1 9.9
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 48,325,295 54,516,821 51,674,859
change 8.2% 1.0% 12.8% -5.2%
Sales mix
Subscriptions 77% 77% 76% 75%
Plex sales (to play, not hoard) 23% 23% 24% 23%
100% 100% 100% 100%
Plex sales (to play, not hoard) 14,293,372 14,434,828 17,215,838 15,846,957
change 14.6% 1.0% 19.3% -8.0%
Price per Plex 19.95 19.95 19.95 19.95
Number of Plex sold (to play, not hoard) 716,460 723,550 862,949 794,334
Number per month 59,705 60,296 71,912 66,194
Additional "accounts" as a % of Paid accounts 17% 17% 18% 17%
Total Revenues 62,145,096 62,760,123 71,732,659 67,521,816
change 9.6% 1.0% 14.3% -5.9%
Total Accounts + Paid & Plex (average) 414,705 415,296 476,750 449,928

If required, i can go deeper into my workings and thinkings.

[Edit: corrected Typo, Ninveah instead of Nirvana!]

Sunday 12 April 2015

Eve Fanfest 2015: Confessions of an EVE Trillionaire

In this years Eve Fanfest 2015, instead of the usual Eve Economy talk there was a player talking about their route to making 1bn ISK.

Well worth watching:

The player gives a potted history of his route to a trillion ISK over 20 minutes.

At about 3:00 in he talks about how he stumbled into Trading.

At about 3:45 he talks about starting with 20m ISK and making his first billion using Regional Trading.

He talks about his mistakes and rage quitting.  Borrowing 2bn ISk from corp mates (7:00 in).

At 7:40 talks about moving into the Plex market.

At 8:00 talks about using Patch note information to make 9.5bn profit.

At 9:15 talks about what tools he uses.

At 10:20 he talks about going to the (market) forums to borrow ISK using a trusted third party and collateral to invest about 440bn ISK in a project, making 74bn ISK profit.

At 13:00 he talks about Plex prices ending up with the observation that volumes are falling and prices are rising.

At 16:30 in he gives an outline guide on how to set up a strategy given the constraints of Time available / Cost / Risk appetite.

Sunday 5 April 2015

Bond Repayment and a Recapitalisation of CCP?

[this is not an ISK making post but one that focuses on the company CCP]

Convertible Bond Redemption

I have just noticed that CCP has decided to redeem their Convertible Bonds that they issued in mid 2013.

The reason I have only just noticed is that the announcement is in Icelandic and not on the CCP website - that may suggest a bigger matter is underway here, more on that below.

The redemption is not a bad idea given the interest CCP had to pay on the $20m bonds was 7% (I.e $1.4m per year) and this bond was due for repayment in July 2017 anyway.  In today's world of falling yields that is an extremely high rate.

What is interesting though is CCP does not have the ability to repay this $20m (plus any outstanding interest).

Therefore, CCP will need to replace this $20m convertible with new debt.  That is quite normal, most companies roll over their old debt into new debt.

The hope is that CCP will be paying a lower interest rate given how rates have fallen globally (CCP should be able to halve their interest rate) + most of CCPs revenues are not in Iceland ($/Euro/GBP revenues paying $/Euro/GBP debt) + Iceland is getting closer to rejoining the international financial markets anyway.

This whole transaction perhaps explains why the 2014 accounts seem to be later than usual (I.e. not out yet).

Worth noting that the original prospectus allows the bond holders to take shares of CCP instead of repayment.  The redemption notice was given on 27 March 2015 and so the holders have 30 days to notify CCP if they want shares instead of cash.

"Prior to any voluntary prepayment of the Bonds, each registered Bondholder will receive at least thirty (30) calendar days’ advance notice, and during such period will have the right to convert its Bonds to common shares in lieu of the voluntary prepayment."

That may not be a bad idea given how profitable CCP could be if all it did was just Eve Online.  Though I am surprised, therefore, that the 2014 accounts are not out to give the bond holders an idea of how the company currently looks.

Something Bigger going on - like a Recapitalisation?

This all suggests something bigger at CCP, indeed it is possible that CCP is going through a recapitalisation process - an action that companies undertake when their balance sheet is under pressure and they need new capital to continue, either from new or exist shareholders (sounds the most likely action here) or from the banks swapping their debt into equity (sounds unlikely action here).

When i review my forecasts for CCP i was assuming that the revenues in the second half of 2014 were the same as the first half leading to a 6% decline in Eve Online 2014 revenues compared to 2013 revenues, and after China sales a 4% total decline in revenues.  That may prove to be optimistic - but lets stick with it for now.

I then struggled to work out the R&D (a lot going on) but i suspect the company was going to make about $13.8m EBITDA (earnings before interest, tax, depreciation, amortisation) but a total loss of $23.3m.

In all, that would leave the company with a net debt to ebitda ratio of 1.3x.  If it gets to 1.5x then the debt holders start to get more control (i.e. the debt covenants are set at 1.5x ebitda).

The full post i wrote back in September on the CCP financials is here and demonstrates how 2015 will be a tougher year under the current balance sheet structure (i.e. with the $20m convertable bond debt) . . . . . i am though missing a lot of information to make head or tail of all the underlying actions.

I suspect, now that the decision has been taken to effectively cease / reduce spending on World of Darkness and Dust514, the company is in a better position to attract new capital to overcome the gap left in the balance sheet from the above two projects.

My personal view is that Eve Online itself is a very profitable though low growth venture and the surplus cash flows can be used to fund another project.  Unfortunately, World of Darkness and Dust514 did not work out as planned and the company saddled itself with expensive debt in the process which has put it in a tight spot.

I believe the company may be drawing a line under this all, perhaps adding new shareholder funds to the balance sheet and swapping the expensive Convertible Bond debt for cheaper debt.  In doing so, CCP will have a good profit stream from Eve Online, a new venture in Valkyrie and will be pondering what to do with Dust514.

In all, this should be good news for CCP and Eve Online.

[Edit - corrected Dust517 to Dust514]