The End of Sony Online Entertainment, the Coming of Daybreak

When I first saw this news, my reaction was that today is Groundhog Day and not April Fool’s Day.  Even with Smed’s current love affair with Reddit, that seemed like a questionable source.  But there was the announcement over on the official SOE forums as well.

Dear Players, Partners and Friends,

Today, we are pleased to announce that we have been acquired by Columbus Nova, an investment management firm well known for its success with its existing portfolio of technology, media and entertainment focused companies. This means that effective immediately SOE will operate as an independent game development studio where we will continue to focus on creating exceptional online games for players around the world, and now as a multi-platform gaming company. Yes, that means PlayStation and Xbox, mobile and more!

As part of this transition, SOE will now become Daybreak Game Company. This name embodies who we are as an organization, and is a nod to the passion and dedication of our employees and players. It is also representative of our vision to approach each new day as an opportunity to move gaming forward.

So what exactly does this mean for you? It will be business as usual and all SOE games will continue on their current path of development and operation. In fact, we expect to have even more resources available to us as a result of this acquisition. It also means new exciting developments for our existing IP and games as we can now fully embrace the multi-platform world we are living in.

Our games and players are the heart and soul of our organization, and we are committed to maintaining our portfolio of online games and pushing the limits of where we can take online gaming together.

Thank you for your continued support. See you in game!

The Team at Daybreak

So there it is.  Sony has sold off Sony Online Entertainment to Columbus Nova, an investment group with a vague web site (which is being pounded to hell right now) and, as far as I can tell, no history in video games. (The whole thing is tagged as copyright 2006 FFS.)

[Edit: Cyanbane pointed to another Columbus Nova site.]

SOE_LogoNobody can tell you what the future will hold yet.  There is going to be a long period of just untangling SOE, now known as Daybreak, from their former corporate masters at Sony and Sony Computer Entertainment America before we will really be able to tell where things are heading.

Contrary to the happy tone of that announcement… which, honestly, is the tone they HAVE to take… my own experience with Silicon Valley acquisitions puts this in a dim light.  My gut says that if this follows the common acquisition model, it will eventually mean layoffs and trimming back the product line (PlanetSide will be gone first), while other legacy products will be milked for cash (i.e. expansions and updates will trail off) until they are shuttered (EverQuest, EverQuest II). The company will chase some specific version of the “future” (consoles?), leaving the past behind.  Expect Smed to get his golden parachute exit somewhere around the 18 month mark after finishing his transition work.

Okay, that is pretty dark.  But lets just say that such acquisitions trend unhappy in my world.  Investment firms tend to pillage rather than invest, no matter what their prospectus says.  There is that SOE history to contend with as well.  So many things they have done have SEEMED like good ideas at the time.  (ProSiebenSat.1 anyone?)  But SOE probably didn’t have a choice in the matter, so maybe it won’t be SOE being SOE.

Also, what does the name Daybreak signify?  Is this a zombie thing?  All I know is that there used to be a bar called The Daybreak near my old apartment.  That is going to make for an odd mental image.  Also, picture everything that says “Sony” now saying “Daybreak.”

Coming on top of the Massively shut down, it is making for a hell of a week.

What do you think will happen, knowing as little as we do?

I expect a range of opinions on this.  I will link them below as I find them so I can look at them a year from now to see how we scored.

20 thoughts on “The End of Sony Online Entertainment, the Coming of Daybreak

  1. Wilhelm Arcturus Post author

    @Cuppy – Layoffs confirmed then? Actually, it looks like one of the senior managing partners of Columbus Nova structured a deal to bring Harmonix independent. It does not appear to be part of the Columbus Nova properties.

    @Cyanbane – Ah, cool. Now we can see that Daybreak will be in there with Fiverr on the Columbus Nova list of holdings.


  2. cyanbane

    I think any MMO that was pre-2014 will be shuttered in the coming 12 months. I think they are going to take a good hard look at EQNext and weigh options. I think PS2 and H1Z1 will be pretty successful on consoles.


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  4. Wilhelm Arcturus Post author

    @Spinks – Indeed. Maybe it will be their exit story.

    Plus, what is it with late January/early February and SOE? That is the bad news zone where they announce games closing or raises in Station Access pricing or whatnot. (Doing the month in review had me looking at that sort of thing.)


  5. cuppy

    Wilhelm, no layoffs as far as I can tell. Hopefully not, as I’d like my husband to remain gainfully employed.

    From what I can see, it took 4 years for there to be Harmonix layoffs after their acquisition. Considering a commitment to keeping all their current products operating, along with their commitment to continue launching the un-launched stuff, I can’t imagine them doing a massive layoff because SOE runs pretty lean as it is after the last batch of layoffs they had.


  6. p0tsh0t

    Your dreary Silicon Valley assessment might be optimistic IMHO. A strategic buyer might just run things with the prospect that an acquired company may survive largely intact through benign neglect. Private equity investors however are just that–investors. They compete to raise funds from high net worth individuals and groups, acquire companies in pursuit of a strategy, “add value,” then dump the whole thing on the next willing buyer. Provide a return to their investors, raise a new fund, lather, rinse, repeat.

    Every private equity group investment is predicated on generating a return for its investors within a relatively short period of time– three to five years or so depending on where they are in their fund’s age– during which they engage in “margin expansion” and the oft fruitless pursuit of mythical top line growth. When in doubt, cut, gut and sell before all the air goes out of the balloon.

    “Look folks! Since we acquired X we’ve grown EBITDA by 20% year on year! Dontcha wanna own this?” Of course that was achieved first by killing old products that aren’t pulling their weight, ditching redundant HR, finance and support and remorselessly culling any new project that would eat valuable dollars.

    I suspect turning SOE into a well oiled machine from an investment perspective is going to require quite a lot of oil, and a lot less machine…


  7. Wilhelm Arcturus Post author

    As an annotation to my view from Silicon Valley, I have been through a parallel experience with an equity firm twice in my career. One ended with everybody getting laid off and the other ended with us getting sold to a major competitor… and then almost everybody getting laid off. Add in the various straight up acquisitions by competitors over the years… I did four in five years at one point, while essentially holding the same job… where layoffs were also a thing, and you can understand my dim view.

    I don’t want anybody to get laid off, but my experience is that some sort of layoff is inevitable.


  8. zaphod6502

    I expect a good portion of the remaining SOE staff to be laid off and a number of their games to be closed. Smedley will probably remain a while to act as a transition manager to the game console operation.

    Amazing coincidence that just yesterday I cancelled my Station Account as I do not play any of their games anymore.


  9. evehermit

    I am sure the Columbus Nova investment group will be passionate about making the very best games possible, full of innovative ideas that move the entire genre forward, driven by loyal and enthusiastic staff. I mean, that is the logical outcome when the measurement of success is the highest return to investors over the shortest period of time.


  10. Jidhari

    @evehermit That must be sarcasm.

    As to my view: I share Wilhelm’s basically. In my experience firms like these are not interested in keeping things business as usual. First objective after taking stock is to streamline and restructure. Queue the job cuts.
    I fully expect that they will be shedding titles. First up will be Planetside and whatever random Asian MMO, Daybreak is running. Planetside 2 may survive but probably only in console form. Smed as much as said that they are barely breaking even on that. I would also not be surprised if in the medium term, EQ2 takes a hit. We will probably also see more microtransaction implementation in SOE titles.
    Best case for the future will be some sort of console online gaming focused entity with the PC (EQ) revenues being used to fund it and then wound down. The first Everquest will probably be the only survivor. As for Landmark and EQNext, there is a very real chance they will disappear into the aether unless Daybreak can show something concrete with respect to the vision for the end game product. Considering Landmark’s current directionless malaise, I don’t hold any hope.
    Fingers crossed for the Daybreak employees. It was already a rough 2014.


  11. flosch

    I’ve thankfully had no first-hand experience with that kind of takeover yet, but my first thought when I read this news also was along your lines, Wilhelm. I thought “corporate raiders”, to be exact. Well, I guess, it’s not technically a corporate raid, because it was not a hostile takeover, but they got sold off, but the results might end up being the same.

    If I were working at SOE, I’d check whether my resume is up to date tonight and look for places to send it to.


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  13. Lani

    I always understood the ProSiebenSat.1 thing to be something enforced upon subsidiary SOE as a result of deals made at a hiher level. Neither SOE nor ProSiebenSat.1 were really thrilled about it. With a lot of luck that kind of folltommery will be less of an issue with Daybreak being an Independent studio now.
    I also get this feeling this has been in the works a long time and the cancelling of the ProSiebenSat.1 deal was asctually the first sign or step on the road to Daybreak. The slimming down of SOE’s portfolio last summer also now looks like the reorganising took place before the acquisition rather than after.

    Will be interesting to see what happens next.


  14. UnSubject

    I don’t think SOE / Daybreak is going to see layoffs… yet.

    But the push will be on to get those new games out and generate those new sources of revenue at the same time that management will be learning what things are like outside of Sony’s umbrella.

    It also says that Sony doesn’t see a future in the MMO business, at least from the development side. That’s a big loss of confidence there.


  15. mrrx

    It’s interesting they picked the name “Daybreak”. This suggests the beginning of a new era, like the dawn before the day to come.

    I’m pessimistic on this one too though. I think the appropriate name would be “Sunset”, with darkness to come.


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