EQ barly makes profit

[Hardy]

Go ahead and argue what I am about to say, I won't have any come backs, I am telling you what I know:

This year is actually the first year EVER that EQ actually made a profit. They gross over 8 million dollars a year, but they still have to pay server costs and employee costs. So for those that think they Sony is "Stealing" your money, your wrong. They would be loosing MILLIONS of dollars a year if they wasn't doing monthly costs.

Where did I get this info? I got it 2 places: 1) I was in the chat room at server select, seen someone bitching about montly cost, then the GM said that they don't even make a profit off this, and began to explain (what I said above). 2) A news site, not sure the address now, if I find I will post.

[Trumpcard]

This isnt uncommon , many companies operate for years before actually posting a profit. Thats what the terms 'in the red' , operating at a loss, and 'in the black' , operating and turning a profit mean. Many companies will go for years 'in the red' before actually showing real results, they're making more money than they're spending.

With EQ, I would believe it. Figure the costs of at least 20-30 full time employees (California, so average their salaries at 75k), server hosting/maintence costs (probably 1m or so a year, they have alot of servers to maintain), part time employees (online employees, GM's, etc).

I imagine it's a pretty expensive venture. Personally 10$ a month is pretty cheap when you consider how much people play it. You spend more a money going to one 2 hour movie...

Well Sony claim to have an

active global EverQuest subscriber base of more than 430,000 players

So at $10 per month, that would be around $51 Million per year
in subscriptions alone.

Source:

http://sonyonline.com/corp/press_rel...don_ships.html

I remember reading a news article detailing how much Sony made from EQ, but I doubt I can find it now.

[a_Guest03]

$10/mo may be the US rate, but I bet it's significantly different (higher and lower) overseas. Assuming a $10 average isn't a bad idea, though.

Here's a link to a copy of the article that I was referring to. It originally appeared on www.business2.com.

http://groups.google.com/groups?q=ev...4ax.com&rnum=3

Says that EQ subscribers generate $5 million per month for Sony and the gross profit margin on that is 40%. That was back in 2002.

[Merth]

The US charge is $13/month, and that was changed in April 2002, so you can probably assume nearly all current subscriptions are at that rate. That's $67 million US.

Add to that the income from each expansion and the initial software costs for newcomers. I won't pull any numbers out because they'd be wild guesses, but I'm pretty sure that makes the income go up :P

However, I really don't believe that this is the first profitable year for EQ. There's gotta be some green to support the broad investment we see today in MMOG's.

However, I have noticed some recent cost cutting measures in EQ. The most obvious is the expansion marketing - how the heck can I stop that annoying LDON spam advertisement each time I login?

The most interesting is how they are trying to reduce the bandwidth costs, which I can see through the changes they make to the underlying protocol. They missed the boat, though. They could have taken a huge chunk out of their bandwidth, and still maintained their relative hack-free reputation! (relative to diablo 2) Oh well. They need some EQEMu devs!

[DeletedUser]

There are lots of places in the netcode that could be improved to preserve bandwidth, however, you can't risk changing so much in one patch, possibility of an exploit occuring or a bug that could cause serious damage (damaged char profiles, etc.), would be much harder to target if they changed so much. I can tell them right now that their random name generator which I looked over last night is a rather poor way of setting it up, they send the race & gender as int32s, thats ok, but they send the random name as a char[64] instead of just strlen(name), every bit helps I guess?

[Trumpcard]

Image, you nailed it on the head..

One of the big problems in enterprise level applications is that once your architecture is down, changes are very hard and very expensive to make and test. Regression testing will eat you alive if you make widesweeping infrastructural changes, so usually once your product architecture is down, it stays that way except through gradual 'small' changes to minimize impact. Change too much, and you probably broke 20 things you didnt mean to impact. So make small, frontside changes.

The way that changes will usually happen is that someone identifies a bug, a change request is initiated, a developer investigates the issue, codes the fix, unit tests it, pushes it out to integration testing, then QA, the CAT (Test server for EQ), then up to production. Along each step you're testing with multiple test cases, and in big cases, huge numbers of test cases to verify you havent broken or change anything you didnt intend too.

If they're smart, they'll carry the lessons learned on the design and all the things that can't change in EQLive because it's now 'etched in stone' , and apply those design principles to EQ2...

[a_Guest03]

Using standard accounting practices, you can save tax money by claiming a loss much sooner and harder than it happens. Using the GAAP (Generally Accepted Accounting Practices), which is just what it sounds like, and IRS-approved, you can write off a load of depreciation (that's bad, like rotting buildings or server obsolescence) before it happens. Thus, to save a lot of money early on, you claim a bunch of losses that haven't happened yet. You'll be taxed the same overall whether you do it now or do it later. So, because they are doing really well, they can maintain more cash for more expansions while it's a hot market by claiming a loss. The income will be the same in the long run, and actually should help to balance out the costs versus income better.

Their greatest costs come when a mass-migration happens and they are left with hefty costs and reduced income. At this time, they need the cash they conserved by filing early losses, and they can ride out the hard times. When I start my business, I intend on filing early losses allowed under GAAP so that I can conserve cash instead of paying taxes. They will tax me eventually, but I'd like it to be when I'm most prosperous. I'll have the most to give back then. What good is it being taxed on a building that you can no longer afford? Get the tax breaks while the breaks are there!

So Sony's behaviour may contribute to why they have reported losses, when it's obvious that business is good. Never let a quarterly earnings form dictate whether life is good or bad! Business is a flow that you must control, and I'm sure their Comptroller is among the 1000 best in the world at controlling how the money flows.

Imagine that you will be taxed 40% on all profit (total earnings greater than total costs). Imagine that you pay 5% interest on all loans. Rather than pay that tax, and THEN get a loan, you would claim greater losses when you approach the point of being profitable. As a business with a lot of expenses, that additional cash can be used with marketing to utilize fully the bandwidth that you've already purchased, the servers that lay idle, and the employees that aren't helping people. That's how you make money.

Also imagine how many servers they purchased, and how quickly they can claim that they're "obsolete", knowing the current lifespan of a computer. It degrades from a $3000 machine to $200 in a matter of 2 or 3 years, but you can take nearly $1400 in losses the first year, and the rest at the end. There's an equation they follow that works it out perfectly, but I can't remember it now (sorry!). Anyway, if you make $1000000 and don't want to pay taxes on it, just claim the machines are junk and you lose money (awwww, no taxes! Yay!).

I'm sure their accounting practices were planned out to match their business plan to ensure that everything would run smoothly monetarily.

There's your lesson on why you need a good accountant running your finances if you ever start a business. Cash flow kills.

This has been bugging me for a while, but why doesn't a_Guest03 have 5 asses under his name ?

[a_Guest03]

I existed before the asses, and they didn't go back and add them to every old user.

So most users from 2002 are ass-free.

*EDIT* I guess I can't find anyone else who is ass-free. I checked Ariak and Lurker to confirm, and I'm just outright wrong.

I like not having asses, but I'm unsure why I'm the only one I can find.

[astemus]

You also have to remember that this is SONY. They can make fistloads of money, pump it back into higher salaries, general server maintainence (so all of sony's sites, games, etc can use it), and in the end, they're still making more than we can imagine selling you the headphones you're using or even the computer you're playing on.

Of course, I don't pretend to know anything about business, but this seems to make sense :P

I like not having asses, but I'm unsure why I'm the only one I can find.

I think you are the only one I have seen ... that's why I asked

Personally I prefer boards who have post counts turned off, except for Devs, admins, official helpers, etc. I think it helps to cut down spam/pointless posters etc.

But there wouldnt be a need for "The Newbieslayer" then :evil:

Of course we must make an exception for Mattmeck and make him the official Newbieslayer and give him 5 asses now .. I think he has earned it