New Eden For Sale?

The hot rumor of the day, fanned by a post at Bloomberg, is that CCP is looking to sell out, having a couple of potential bidders lined up, with the value of the deal being rumored at near one billion dollars.

CCPlogo

What does CCP have that is worth a billion dollars?  Let’s see…

  • EVE Online, along with all the hardware to run it in a server farm in England.
  • A contract with a Chinese firm to run EVE Online in China
  • EVE Valkyrie and EVE Gunjack, which run on a variety of devices in the fragmented, kiddie-pool sized market that is VR today
  • The source code for Dust 514
  • A monument by the sea in Reykjavik
  • A bunch of copies of Hættuspil
  • Hilmar’s collection of Lazy Town video tapes
  • The largest stash of Quafe in the known universe
  • Something else?
Hat tip to Rhavas...

An untapped resource?

Basically, EVE Online and the VR titles… and word is that there isn’t much money in making VR titles currently, so unless CCP has some real special tech in that regard, New Eden is the biggest asset.

Meanwhile, CCP also has a couple investors in the form of Novator Partners and General Catalyst Partners.  CCP isn’t in the Daybreak situation of being wholly owned and bent over by an investor, but those two companies aren’t in because they like video games.  They are both invested in order to get paid.  And selling CCP is a way to get paid.

While there is nothing concrete so far… the initial report says that a sale isn’t the only option being explored… there is enough out there to make you believe it could be true.  For example, CCP has been moving operations to the UK.  That makes a bit of sense for an Icelandic company due to logistics.  But if you want to sell a company, it makes a lot more sense for it to be in an international market hub like the UK than the economic backwater that is Iceland.

And then there is the rumor itself, which got floated somewhere for some reason.  Is it a trial balloon to see how the Icelandic government reacts?  An attempt to get a few more bidders primed?  Or did somebody leak that to put pressure on CCP to close a deal?

Of course, in all of this, the big question is about the buyer.  Who is going to put out a billion dollars for CCP and its rather slim list of assets?

My money is on China, and specifically Tencent Holdings Limited, the firm that owns Riot Games.  They have the money for it and the stomach to buy a game like EVE Online.  After all, only League of Legends has a reputation for players worse than EVE Online.  Also, Riot has been the destination for a number of former CCP employees, why shouldn’t the company follow them?

I cannot see a US company like EA or Activision-Blizzard having any interest in CCP, if only because of the reputation EVE Online has.  Maybe some European company like CodeMasters might have some interest, but I don’t think they have the cash laying about.

It could be some other Chinese company.  I could see Perfect World Entertainment showing some interest.  But my knowledge of Chinese companies is sparse enough that I cannot come up with another option that clearly has the money and isn’t tied into some other deal that might make the acquisition awkward.

So that is the hot item of the day.  Who do you think wants to buy CCP, if anybody?

Others covering this topic (to be updated as posts show up):

13 thoughts on “New Eden For Sale?

  1. bhagpuss

    There’s no reason it has to be any company with even a remote interest in gaming. Look who bought RuneScape – a Chinese mining company. Apparently there are some potential changes to the Chinese internal financial regulations that are making it particularly attractive for companies there to spread their assets around right now. It supposedly has nothing to do with anyone actually wanting to get involved in gaming as a business.

    A billion dollars sounds like a lot for those assets though, doesn’t it? An awful lot. Then again, when internet businesses change hands it often looks like someone just picked a number and kept adding zeroes until someone yelled “Stop!”.

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  2. flosch

    It also gives a new angle on the introduction of F2P into EVE. Was it done to boost player numbers to seem healthier for the next couple of months, maybe a year, to attract potential buyers and inflate the selling price? Then again, a serious company (and at the rumored price, you better hope they’re serious, although that certainly hasn’t stopped the occasional blunders in the past) would probably not be blinded by the player numbers alone, taking a close look at subscriptions. All F2P numbers are, are a better look at your potential customer base.

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  3. flosch

    And now that I think about it… maybe a Russian oligarch will buy it? Russians form a large player group, and maybe buying sports clubs is so last decade in those circles?

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  4. bhagpuss

    @flosch As someone who’s been working for a company that was about to go out of business five years ago until it was bought by a Russian billionaire for ineffable reasons that appear to have little to do with making more money I can certainly imagine that happening.

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  5. Jarhead

    you know who needs to release a space game soon? Star Citizen. they could dump all their ship skins, they already sold, into the next version of the eve client. put a sticker on it calling it star citizen and laugh all the way to the bank.

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  6. Luobote Kong

    A couple of things to consider. Firstly, VR is not exclusively a gaming technology. Multiple applications for its use already exist. Some might seem trival like it’s use by property developers but they are gaining traction. Secondly there are a host of VR platforms that the west is unfamiliar with and all of them demand content. And it was content that won the VHS Betamax battle back in the day. I would be surprised if an established gaming house bought CCP. There will be more lucrative opportunities. As for Eve Online, beyond being profitable, I can’t see it having much impact on any decision that gets made. It is a sideshow to the main event.

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  7. Stabs

    Luobote makes an interesting point about VR. Possibly a military company – Boom bitch! could be a hell of a way to train fighter pilots.

    $1bn is silly money and I can’t blame Hilmar and the others for cashing in. There’s no way it will ever get repaid. If we generously assume 250k subs then the company makes $3,750,000 per year. Less than half a percent ROI. There is no chance that the game will suddenly hit Wow levels of popularity, no chance that the IP can be leveraged to make a Hollywood blockbuster and a derivative game – Eve 2.0 or Fantasy Eve doesn’t need this IP to be made. And paying it for the VR expertise also seems weird – you could just poach the staff for a tiny fraction.

    That leaves us with the last possibility – that some venture capital exec has money to spend but nothing to spend it on so is busily creating something similar to the subprime mortgage industry of 2007 or the dot com bubble of 1999. Maybe it’s Quantative Easing money. So CCP will be worth $1bn simply because someone says it is and hopes no one looks under the hood. Imo it’s really worth about $70mn.

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  8. wacko123

    “There’s no way it will ever get repaid. If we generously assume 250k subs then the company makes $3,750,000 per year.”

    It’s per month not per year, Per year would be a bit harsh alone for the server costs :)

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  9. Wilhelm Arcturus Post author

    Let’s build a sand castle of numbers here.

    We’ll call EVE Online’s monthly revenue $4 million a month using Stabs’ subscription number and adding something in for the cash shop. And before you say nobody is buying that many SKINs, look at the Skill Injector market in Jita. Hundreds are listed at any given time and they sell rapidly. Every Skill Injector is brought into the game via a cash transaction; somebody bought a PLEX with ISK , converted it to Aurum to buy an injector, in which case the PLEX is not being used for a subscription, somebody bought Aurum for cash, or somebody bought injectors for cash.

    That gives us $48 million in annual revenue.

    Then there is China. Combined revenues for EVE in and out of China was $67 in 2015. (source) Let’s say that has fallen a bit and call the combined total $60 million in annual revenue for the MMORPG. I do not think that is being at all generous.

    An 8x multiplier on revenues is not unreasonable when buying a company. That is about what Blizzard did for King when it put out $5.9 million to essentially own Candy Crush Saga.

    That would make the EVE Online MMORPG side of the house worth about $480 million, or half of what we are talking about here. So the question is, aside from crazy Russians looking to launder money, how does CCP double that to what we’re talking about now?

    Some VR tech, or even tech that allows them to develop cross-platform VR games could be worth a lot, even if the VR market right now is piddly divided by shit. But it would have to be something very special to be worth all that. Then again, Facebook paid $2 billion for Oculus and they were not making any money at all. People will pay for potential.

    I suppose the one thing I left off the CCP assets list was the TV series that they have been developing out of EVE Online. How much do you suppose a space-born Game of Thrones starring The Mittani is worth?

    @Stabs – Multiply your total valuation times 12, since you were only talking about monthly revenue. That seems pretty generous.

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  10. p0tsh0t

    Start with 5x EBITDA as a baseline and you might have something reasonable. You can’t eat revenue and EVE doesn’t have unicorn characteristics that might make a high multiple justified. Unlikely to hockey stick at this point.

    $60 million rev, assume $20 EBITDA with a 5x multiple gets you 100 million. Double EBITDA and you still have 200 million. Eve isn’t snapchat, or Theranos or Magic Leap or Occulous. It’s more like a gym that goes pew.

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  11. Wilhelm Arcturus Post author

    @p0tsh0t – Waddya mean? As an employee I eat nothing but revenue, right?

    I was trying to find some comparable, no matter how ridiculous, to justify a billion dollars and I couldn’t even get half way there.

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