Late Stage Capitalism Ruining Things: EverQuest Edition

My post yesterday about Enad Global 7’s Q1 2023 financial results found me closing with the comment:

The joys of being a modest sized public company registered in Sweden I suppose, because if some Wall Street investment group was running the show they would be demanding stock buy backs and stripping it for quick cash boosts without thought towards the long term.

Of course, the universe had to immediately punish me for my hubris.

Enad Global 7

News popped up in my feed almost immediately about Alta Fox Capital Management sending a list of demands to the EG7 board of directors that they increase shareholder value now.

As I have opined before, most recently in a post about Blizzard and mergers, capital management firms are the new robber barons seeking a return to the gilded age, where the rich few basked in opulent luxury while workers lived in penury, with nothing to fall back if injured or in old age.  It is the time of the company store and Pinkertons and troops being set on workers seeking a living wage.

Capital management firms seek only immediate returns and dramatic increasing in shareholder value.  They have taken many a stable and profitable business and forced them into mergers or sold them off in pieces to maximize their return right then and there, with no thought to anything but their own bottom line.

Working in Silicon Valley and having been at several companies that have been thus maltreated… and having seen many other going through similar upheavals… I can tell you that the public, the customers, and the employees all suffer to enrich a very few.

Despite the lies told that these mergers will benefit the public via lower prices and more consumer choices, that is never the outcome.  The ideal merger is one that creates a monopoly that can then set prices however high the company sees fit.  Remember Mylan, which acquired the EpiPen rights?  It was already a $50 device to deliver an estimated $1 in drugs.  Having the exclusive right, they jacked the price so high that even the government noticed and stepped in, making them drop the price down to $600 for a two pack, a mere six fold increase in cost imposed on consumers simply because they could.

If you want a reason why we cannot have nice things, the words “capital management” should suffice.  Every public company is subject to their demands… though they make sure that senior management and the board of directors get paid off so they’ll cooperate.  They take care of their own and screw the rest of us.

Anyway, enough ranting.  What did Alta Fox demand that EG7 do?

• Relist the Stock on a United States Exchange. Relisting in the United States would allow the Company to aggressively buy back shares at an attractive free cash flow yield, which is not allowed with the current Swedish listing. Even an up-listing in Sweden to allow buybacks would be better than the status quo.

If EG7 relists in the US then they would no longer be subject to the laws of Sweden, which has much more stringent consumer protections.  They certainly tip their hand as to what they want out of this by offering a side option in Sweden where the company is allowed to do stock buybacks, which is the common course in the US.

• Initiate a Recurring Dividend. This would immediately turn the Company’s valuation multiple into a dividend yield. We estimate EG7 could easily pay a 10%+ dividend on the current share price while still properly reinvesting and maintaining a net cash balance sheet.

This one is just straight up “give us the fucking money!”  Pay enormous dividends while mouthing sweet words about still being able to reinvest.  Reinvestment is never allowed.

• Run a Formal Strategic Review Process, Including a Sale of the Entire Company. We estimate multiple acquirers could pay a material premium to current prices and still have EG7 be a highly accretive transaction. Several peers were recently acquired for double-digit EBITDA multiples (SCPL and ROVIO), which we believe further highlights EG7’s valuation disconnect at ~4x EBITDA today.

Sell the company to some bigger fish we already own piece of, because that is a double win.  First they get whatever inflated price they can gin up… which will  first mean laying off a lot of staff to make the balance sheet look extra tasty.  Then, when they get that payout, the purchasing company will continue to reward them with stock buybacks.

This is all just naked greed with only one outcome in mind, and it has nothing to do with video games.  If they could increase shareholder value by 0.5% but shutting down all of the Daybreak titles, they would do it in a heartbeat.  They have no interest in the long term, just what they can grab today.

I used to be a firm believer in market capitalism, but Wall Street has spent the last 50 years figuring out how to min/max the system so they win and everybody else loses.  They get the money, the tax breaks, the loopholes, buy and sell supreme court justices, and are never called to account.

As with the Gilded Age, this is how you end up generating a progressive movement, where socialism isn’t a word you use for anything you don’t like.  This is how you get the working class to vote you out of office… unless you can keep them distracted by non-issues like where trans people can go to the bathroom or teaching history that isn’t just jingoistic lies.

The only upside in this Alta Fox demand is that if they had the voting power to do it, it would already be under way.  They hold 6% of the company currently and they’re trying to find some allies… and get a quick boost in stock price, because their fellow robber barons know what all these code words really mean.  It will be piggies to the trough and demands for more slop.

Related:

• Business Wire – Alta Fox Issues Letter to the Board of Directors of EG7 Regarding the Urgent Need to Explore Strategic Alternatives
• Reuters – Enad Global 7 stock jumps after US activist investor pushes for sale
• Massively OP – An investor group is trying to mangle Daybreak’s EG7 for shareholder payouts
• GamesIndustry.biz – Shareholders call for a sale of EG7

My Singing Monsters Continues to Dominate Enad Global 7 Revenue in Q1 2023

The Enad Global 7 financials dropped last week and, as was the case in Q4 2022, Big Blue Bubble’s title My Singing Monsters was the big draw for the company.

Enad Global 7

The investor’s report for Q1 2023 said the following about My Singing Monsters:

MSM delivered elevated performance throughout the quarter. As of the end of Q1, MSM had amassed 8.5 billion hashtags, 268 million video views, and 1.9 million followers on TikTok, continuing to expand its fanbase.

I still am unsure how the game, which has been around since 2012, took off late last year or if the social media coverage was the trigger or just an effect of the suddenly popularity.

So once again, Daybreak is relegated to second place in earnings when it comes to the EG7 games business segment.

Q1 2023 – Games segment revenue

It isn’t that Daybreak is failing to deliver.  Its titles remain as solid as ever.  It is just that My Singing Monsters has lit up and is suddenly way more popular than it has ever been over the last decade.

Daybreak remains solid while BBB was suddenly more than 4x expected

And BBB’s income has a lot higher margins, even before the big jump in sales, which probably reflects the difference in effort to support essentially one mobile/PC title versus running, supporting, and creating new content for half a dozen MMOs.

EG7 cautions that it may not stay that way, but says that it expects that its baseline performance will remain elevated going forward.  My Singing Monsters is one key brands that the company owns, the list of which was given as:

• EverQuest, considered to be one of the three most iconic fantasy MMO brands in the world together with World of Warcraft and Ultima Online.
• H1Z1, the very first battle royale game that was credited as one of the inspirations for Fortnite, with over 40 million life-to-date (LTD) registrations.
• My Singing Monsters, which has over 135 million (LTD) registrations on mobile and PC, reaching top 10 in over 100 countries in the App Store games category and the No. 1 spot in more than 15 countries 10 years after its release.

I am still not sure how they can put H1Z1 on that list with a straight face.  They are doing nothing with it, have announced no plans to do anything with it, and appear to be just waiting for some sort of magic to happen.   I supposed lightning striking My Singing Monsters gives them hope.

Aside from the caution about My Singing Monsters, when it came to Daybreak the report mostly emphasized the EverQuest 24th anniversary, the DC Universe Online 12th anniversary, and next year’s 25th and 20th anniversaries for EverQuest and EverQuest II respectively.

Mention of other Daybreak titles was limited to pointing out that some of them represented strong licensed IP opportunities.  Lord of the Rings Online, specifically, received no special mention.  The timing of the earnings release put it before Amazon’s announcement that they are working on a Middle-earth MMO of their own once more, so there was no expectation that we would hear anything about that.  It may, however, get some notice with the Q2 2023 results.

Overall it was a positive report.  It opened with record earnings.  Also the company reports it remains debt free, has cash on hand, and is focused on long term profitability.  The joys of being a modest sized public company registered in Sweden I suppose, because if some Wall Street investment group was running the show they would be demanding stock buy backs and stripping it for quick cash boosts without thought towards the long term.

Related:

• Enad Global 7 – Investor Relations Page
• Enad Global 7 – Q1 2023 Presentation
• Enad Global 7 – Q1 2022 Financial Report
• Massively OP – EG7 pulled in a record $54M last quarter
• MMO Bomb – Daybreak And Standing Stone Parent Company Boasts $54 Million In Revenue

Enad Global 7 Celebrates My Singing Monsters in their Q4 2022 Financials

When I get around to talking about Enad Global 7 and their financials, I am usually quick to point out that the place has effectively become Daybreak Sweden, what with the old Daybreak owners expanding control of the board and putting one of their own in the role of CEO.

His acting career continues

And, of course, the fact that revenue from the gaming side of the business has been pretty heavily dominated by Daybreak in the past has helped sell me on that point of view.  They’re running the show in part because they bring in the cash, being responsible for about 75% of the revenue most quarters.

But in the Q4 2022 financials a new hero arose.  The Big Blue Bubble studio and its My Singing Monsters franchise has exploded over the last year, delivering amazing growth and the revenue that comes with that sort of thing.

Much reason to sing!

I may never have heard about My Singing Monsters outside of these financial reports, but clearly word is getting around somewhere.  Is this another TikTok phenomena?

You can see in their 2022 earnings summary that Q4 just exploded for Big Blue Bubble.

Big Blue Bubble Goes Wild

Meanwhile, the Daybreak chart… and while EG7 keeps talking about all the studios they have, the do consistently roll Darkpaw Games, Dimension Ink, Standing Stone, and Rogue Planet up into under the Daybreak banner… tells a somewhat different tale.

Daybreak 2022 revenue numbers

Daybreak stayed ahead, contributing more to the revenue side of things than Big Blue Bubble, but when it came to profit BBB was at a screaming 60% margin while Daybreak had a meager 21% margin, which is kind of low for a software as a service company, and down from past quarters where it was closer to 30%.

Oh, and even their total revenue dropped in Q4 2022, which I find surprising because Q4 is when at least some of the Daybreak studios launch their paid expansions, so it is when money is spent on games like EQ, EQII, and LOTRO as well as bringing people back as subscribers to see the new content.

In the report they try and wave away the situation by mentioning unfavorable comparisons to conditions during the pandemic, which were extremely favorable for many video games, but that seems unlikely.  So while Daybreak brought in 47% of the revenue, when it came to profit Big Blue Bubble was the champ.

Q4 2022 Game Studio Revenue

Of course, I have no sense of how big the My Singing Monsters mania really is.  Was Q4 a quirk?  Dare we wonder if it was a… *cough*… bubble?  Or was it just the start of the My Singing Monsters era?

We will have to wait until we see the Q1 2023 financials in May to get a sense of how durable this performance was.

Meanwhile, Daybreak, despite the margins crunch it saw in Q4, has a pretty steady track record of financial performance.  Big Blue Bubble had a big quarter, but that only brought it in line with what Daybreak has been delivering for a while now.

So in the financial report and presentation the company still calls out all the IPs that Daybreak has to back them up.  They even keep mentioning H1Z1 on the original IP list, wistfully mentioning how it kicked off this whole battle royale thing as though they feel if they keep bringing it up in conversation we’ll suddenly decide to give it another try.  H1Z1 isn’t completely dead, just mostly dead.  But there is no Miracle Max around to revive it.

But now Big Blue Bubble and My Singing Monsters has earned its place on the list of valuable IPs that the company has.

Overall, it was a good quarter and a good year for EG7 despite the fact that the Russian invasion of Ukraine forced them to divest from one of their key service subsidiaries, Innova, getting jsut 32 million out of a company they paid 109 million for previously.  Then there was Daybreak fumbling on the Marvel super hero MMO thing, which was an opportunity they’ll not likely get again.

The company came out with 559 million in Q4 2022 revenue and 1,865.9 million for the whole of 2022, both number up substantially from 2021.  I haven’t bothered to put a currency unit on those numbers because they’re in Swedish Krona (SEK), but the ratio is about 10 SEK to 1 USD, so just move the decimal point over one place the left and you’re at a close approximation of the dollar value.

The company also highlighted that following aspects of the business:

• Debt free
  
• Strong liquidity with SEK 304 million of Net Cash balance as of December 31
  
• Clean balance sheet after the write–down of assets with potential downside risks
  
• Solid momentum to kick off 2023

Having no debt during a time of rising interest rates and cash in the bank is a pretty good way to start the year, especially after some of the rough patches in the last year.

Related:

• Enad Global 7 – Investor Relations Page
• Enad Global 7 – Year End and Q4 2022 Presentation
• Enad Global 7 – Year End and Q4 2022 Financial Report
• Massively OP – EG7 Q4 2022: Revenues are up thanks to mobile as LOTRO sees ‘mainstream resurgence’

Friday Bullet Points while Twitter Burns

It has been a good couple of weeks to drop bad news while Elon Musk’s gross mishandling of Twitter has been grabbing all the attention on the tech front.  You might not have noticed Facebook or Amazon or some other tech firms laying off thousands.

Going around the Twitterverse

And this week’s Twitter fiasco was Elon’s great loyalty oath campaign.  The remaining employees had to sign the oath or, if the refused, be laid off.  Some huge percentage of the survivors are said to have not signed, leaving critical systems unattended.  This caused Elon to panic about sabotage or something and he had the offices closed and the employees locked out like the unhinged oligarch he aspires to be.

Twitter isn’t down, and there is no plan to shut it down, but if some technical hiccup brings it offline, getting it back up and running might not be easy.

Last night on Twitter was like the end of high school, with everybody signing each other’s yearbooks and promising to keep in touch.    It is still up today, but the threat looms.

But there are other things going on in the world, and not even all of it is bad.  Most of these items I learned about on Twitter, but I am reluctant to link there now.  I don’t need any more dead links on the site.

• Blizzard and NetEase Part Ways

This was telegraphed in the Activision Blizzard Q3 2022 financials, but it feels like there should have been more emphasis on it if the collapse of the relationship was going to be announced a week later.  But the other shoe dropped this week with a press release.

NetEase is Blizzard’s partner in China, which means more than you might think.  Doing business in China means working with a company there as a joint venture (a term which always reminds me of late Soviet perestroika) where the local partner holds a controlling interest.

NetEase controls the business that runs games like World of Warcraft and OverWatch in China.  If you fall out with your partner you have to find a new one, which can be a convoluted mess in any circumstances, but much more so if it needs the approval of a totalitarian government.

Blizzard has been through this before, so if they want to keep doing business in China they need to find somebody new to work with.  Meanwhile, the deal with NetEase expires on January 23, 2023, after which point most Blizzard games will be turned off in China.  Diablo Immortal, which was made under a different agreement is the exception in this.  The horrible cash grab Diablo mobile game will remain active.

As for why this has come about, NetEase, following the example of its governments diplomatic policy, is aggressively blaming Blizzard and one individual in particular for the parting.  I don’t doubt Bobby Kotick is a jerk, but I don’t see any evidence that NetEase is somehow the victim in all of this.

• EVE Online FanFest 2023 Announced

CCP has staked out the dates for EVE FanFest 2023, which will celebrate the 20th anniversary of EVE Online.  And it is going to be… in September?

Yes, the dates are September 21-23 in Iceland, which will put Fanfest a good four months past the games 20th birthday, but when you’re booking an event big enough to show a blip on the countries MER I suppose you have to work with multiple factors in order to find a viable time slot.

Early bird tickets are already on sale and should be much easier to obtain that Taylor Swift tickets.

• CCP Embraces a Bullshit Metric

When is a bullshit metric even more bullshit?  When you use only at its peak without giving any context.  I have criticized Blizzard for moving from subscriber numbers to MAUs as a transparent attempt to hide the actual state of WoW from investors, but at least they give us a number every quarter so you have some context.

So when CCP CEO Hilmar Petursson came out and said that EVE Online had hits its second highest DAU count since 2016, there were layers of BS to unpack.  To start with, CCP never tells us MAU or DAU numbers, so how do we know?  Was the day a lot better, a little better, not really better at all?

The game is clearly seeing more players.  The daily concurrent user graph over at EVE Offline shows that.  The expansion has sparked fresh interest.  But those graphs also show the peak concurrent for 2022 landed in January during the Doctor Who event.  So what is going on?

Well, as I noted, CCP had a login event with the expansion and gave away 7 days of Omega time to all players, which is a double incentive to login, because you need to do so in order to claim your prizes.  So last Sunday may have been a good day, but was it really a “best in the last six years” sort of day?  I suspect not.

Anyway, glad the game is doing good, but talking about numbers you won’t share in front of a crowd armed with spreadsheets is always a risky move.

• Enad Global 7 Q3 2022 Financials

Things continue to look good for EG7.  Daybreak continues to dominate revenues on the video game side of the house.  Daybreak executives continue to run the show.  Things are going well.

However, the presentation itself was somewhat terse compared to previous ones.  Few insights and no future statements or handy graphs about upcoming titles.  Just the bare minimum to get by this time around.  Which is fine.  But that doesn’t give me much to build a post around.

• Pokemon Violet and Scarlet Launch

Hey, it is also a Pokemon launch day, as Pokemon Violet and Pokemon Scarlet go on sale today!

New Pokemon to catch, a new land to explore, and a new adventure to complete!

Nintendo very much has a cycle nailed down for these launches, landing just before Thanksgiving in the US which heralds the start of the holiday shopping season here.  Plenty of time for parents and grandparents to buy copies for the kids that haven’t gone out and bought it on day one already.  And, of course, lots of holiday free time during which to play.

This time around I am not joining in.  My daughter and I played the Pokemon Diamond & Pearl remakes last year, and they were a lot of fun.  But I am not feeling it for another new title.

• Valheim Mistlands Preview

Finally, the dev team working on Valheim have a game play preview video for the Mistlands biome that we have all been so (im)patiently waiting for.  But we’re going to have to wait for it too, because the video doesn’t unlock until November 22nd.  Dammit!

I hope there is a launch date in there, but I guess we won’t know until next week.

Anyway, that is what I had piled up for Friday.  Bring on the weekend.

Friday Bullet Points about Enad Global 7 and Q2 2022

Nobody said I couldn’t do a Friday bullet points post about just one topic, so here I am.  Future me will no doubt like this post.  And the topic of the day is going to be Enad Global 7, their Q2 2022 financials, and a few related tidibits.

Enad Global 7

There are a few sources of information about their earnings and I will list out all the links at the bottom of the post for those looking for more.

• Hey We Made More Money

Enad Global 7 reported some serious year over year returns, though that number is helped along by the fact that Q2 2021 wasn’t lighting anybody on fire.  Still, the numbers look good and have been on the rise since that low point.

EG7 – Q2 2022 Net Revenue

Games seem to be taking on a bigger role in the revenue mix, which was about split with services a year ago.  Also, it is about 10 SEK to the USD right now, so you can just divide by ten to get the approximate value in dollars.  I guess that works for Euros now that there is parity between the Euro and the dollar.  For GB Pounds, though, you’re on your own there.

When we look at the game revenue it looks like Daybreak rules the roost, bringing in 75% of that particular pie.

EG7 – Q2 2022 Game Revenue Segments

• LOTRO hits a Recent High

The EG7 future game plan still rides a lot on Lord of the Rings Online, referencing Amazon’s Middle-earth saga and the coming revamp in the middle term plans.

EG7 – Q2 2022 Looking Forward

They also mentioned that the 15th anniversary of the game raised number of players logging into the game to its highest level since 2016.  It is hard for me to judge exactly what that means.  Sure, more is always better, but was 2016 a benchmark year?  A high water mark of some sort?  Or just a point on the graph downward from the initial free to play conversion numbers?

Left unmentioned was whether the recent acquisition of the Tolkien IP rights by the Embracer Group would have any impact on the future plans for the game.

• Norrath Expansions

Not that I doubted there would be expansions for EverQuest and EverQuest II.  They are there in the game roadmaps for the year.  But it is nice to get that in writing from the company.  Daybreak… I mean EG7… has changed their minds on things suddenly in the past.

In addition, in the Q&A transcript, the following was said about the expansions:

And the upcoming annual expansion packs for EverQuest and EverQuest II, large updates that perform well every year.

They perform well every year, eh?  That financial insight we got from EG7 before the acquisition, that was cut off in 2020 before the expansions for either title shipped.  I wonder how much that would have boosted their numbers.

• Done with Acquisitions for Now

The word “organic” comes up a lot in their presentation and the investors call.  Organic growth refers to growing the revenue for their current titles and services, as opposed to driving it up by acquiring other companies.

During the investor call they didn’t say that more acquisitions were out of the question, but they did declare it was a very different market than it was over the last couple of years, so it sounds like they’re not going to be pursing other companies the way they did in 2020 and 2021.

Instead, they will be focused on growing the current titles… and becoming some sort of consulting business or something.

• Reverse Merger Complete

Finally, one of the big announcements on the agenda was the ascension of Jason Epstein, the second largest shareholder in the company, the the position of chairman of the board, where he will take a more active roll in the overall running of the company.  Meanwhile, Ji Ham continues to hone his dramatic talents as Acting CEO of Enad Global 7.

I speculated last month that Daybreak was in the process of completing a reverse merger, that the company that was acquired was going to end up owning the company that did the buying.

This is what the end game of such a move looks like, with the players in the former taking over key positions in the latter.

All I can says is, “Epstein, you magnificent bastard!”  I did not, however, read his book.

Related:

• EG7 – Q2 2022 Financials Presentation
• Market Screener – Interim Report for Q2 2022
• Yahoo – Transcript of the earnings call
• Embracer Group – Announcement of the Middle-earth Enterprises acquisition
• Massively OP – EG7 Q2 2022 – Daybreak’s Jason Epstein is now chairman of the board

Friday Bullet Points about Lord of the Rings Online

Here we are at  Friday and once more it is bullet points on my mind.  But I am going to do future me a favor this time and keep it all focused on a single title.  This time around it is some tidbits about Lord of the Rings Online, ostensibly, according to my post on Monday, one of the five titles that I post about most around here.

• Remastering Efforts

It has been more than a year and a half since Enad Global 7 acquired Daybreak, which included Standing Stone, and the announcement that the company was looking into doing a console version of Lord of the Rings Online.

That idea seemed like a huge lift back then… and it still does today.  I decided at one point that they would really have to build a new version from the ground up for consoles, and made that one of my predictions for 2022.

But we got word this past week that SSG is working on something of a remaster of the game’s graphics and user interface.  And I applaud that.  The fifteen year old game very much feels its age.  The UI was clunky and icons indistinct back when it launched, and in the age of wide screen monitors, it really looks bad when you try to scale up individual UI components.

The problem here is that it sounds like a superficial make over that will fall far short of what it would need to get the game onto consoles.  But maybe they have other plans for that as they are in a period of staffing up to tackle the challenges of a fifteen year old game that has suffered from no small amount of neglect.

Related:

• Massively OP – Lord of the Rings Online is working on ‘remastered’ graphics
• YouTube – Q&A with Severlin – The Lord of the Rings Online

I hope this ends up with an improved experience.

• Anor Transfers as the First Legendary Server Shuts Down

The LOTRO Legendary server Anor is reaching the end of its time and will be sailing west at the end of the month.  Launched back in late 2018, it was SSG’s first try at a fresh start, nostalgia focused special server.  Readers of the blog may recall that I dove right in and played through the initial content and into Moria before the experience fell by the wayside.

Oversell much?

While I didn’t keep up with it after Moria, I found the initial content experience quite fun and will probably give it a try again some day… once they get that remaster thing above in gear because I have a wide screen monitor now and the UI looks like garbage on it… distractingly so.

But that is another tale.  For now, Anor is going away and if you want to keep your characters from that server you will be able to transfer them off between now and the end of the year.

A FAQ has been posted, which opens with:

The Legendary World of Anor will be closing to public log-in on August 31st, 2022, with the world formally becoming unavailable for log in after our regular weekly restart on the 31st. Through the end of the year free character and shared item transfers will remain available from Anor to any other non-Legendary game world. After December 31st, 2022, the Anor game world will be closed permanently, and any remaining characters will not be able to be transferred or accessed.

I do wonder at SSG’s in ability to do a server merge, the way that EverQuest does when its special servers reach the end of their lives and everybody ends up on the Vox server.  No doubt another example of the clunky nature of LOTRO‘s development.

I have one character I want to save from Anor, I just have to figure out where I ought to put him.

• Echoes of a Cease and Desist

Also in the news over the last month or so was the private/pirate LOTRO server Echoes of Angmar, which was attempting to piece together the game as it existed in its early days. (Web site archived here in case it goes missing soon.)

A distant echo of a lost time

Having played the game from beta and through its launch, I am not sure I see the appeal.  Maybe my glasses are lacking in sufficient rose tinting, or maybe I like my nostalgia in a light form with some things, like that map of the Old Forest, available to hand.

But who am I to judge?  I have often said that there is no feature so bad that it isn’t somebody’s favorite thing in a game.

Because it was in the news it attracted the attention of Middle-earth Enterprises, which looks after the works of the late Dr. Tolkien and the related copyrights and licensing agreements.  They sent out a cease and desist letter to the team:

Dear Echoes of Angmar team,

We have noted the Echoes of Angmar game that you have posted and we appreciate and share your enthusiasm for the Tolkien works, and specifically for the developers and creators of the epic MMO, The Lord of the Rings Online. Judging from your website and Discord, you are individuals who possess a boundless enthusiasm for LOTRO, J.R.R. Tolkien, The Hobbit, and The Lord of the Rings. We’re here to acknowledge your enthusiasm, and thank you for your fandom. Unfortunately, we, as trademark holders and stewards of the Tolkien works, more often than we’d like, must deliver some potentially difficult news. As your business is using the Tolkien works and trademarks in an unauthorized manner without benefit of a license, we must ask you to cease.

As stewards of the Tolkien works, we take our role very seriously in order to protect the works for all time, on behalf of fans everywhere. As owners of the intellectual property rights, we are charged with protecting those rights both morally and legally. Unfortunately, Echoes of Angmar uses specific content from the books and from our Licensee for The Lord of the Rings Online without the benefit of a license. Honestly, it breaks our hearts to post letters like this one. It is not uncommon for fans to create things reflecting an affection for the Tolkien works. It is thus with a heavy heart that we must ask that you immediately cease all of your unauthorized use of Echoes of Angmar, and all other Tolkien-related IP on all platforms, including Discord, Youtube and on https://www.echoesofangmar.com/.

We welcome the opportunity to answer any questions you may have on the subject, and wish you all the best in your future duly authorized endeavors.

Kind regards,

Middle-earth Enterprises

I have seen a number of comments about the gentle and even conciliatory tone of this letter, relative to what one sees coming from the likes of Nintendo or Square Enix or Blizzard or Disney when somebody is running loose with their copyrighted material.

And it is true, this is a kinder and gentler approach.  And perhaps that will mollify some fans, as no doubt the company has to issue this sort of thing on a reasonably regular basis.  But the results are the same in the end.  Their heart may be heavy, but not heavy enough to balance out the weight of the pocketbook that keeps them all paid.

So it goes.

Related:

• Contains Moderate Peril – Middle-earth Enterprises and Echoes of Angmar
• Massively OP – Middle-earth Enterprises sends cease-and-desist letter to LOTRO rogue server project

The Daybreak Reverse Acquisition

I mentioned this in a comment a week or so back in the bullet points post where I covered Robin Flodin being bought out of Enad Global 7, but I figured it deserved a bit more exploration.

Enad Global 7

It has been a little over 18 months since Enad Global 7, a publicly held company based in Sweden, purchased Daybreak for $260 million.  That purchase, and the bright enthusiasm of EG7’s then CEO Robin Flodin gave fans of Daybreak’s games hope that more time and money would be spent on them to keep the current and viable.  Plans were announced.

Of course, EG7 didn’t just hand the mysterious, possibly Russian owners of Daybreak a check and send them on their way.  While some of the of the deal was in cash, a chunk of EG7’s stock was handed over to close the deal, giving some of the Daybreak principles an equity stake in the acquiring company.

The company moved along, and the news every quarter showed how big of a deal Daybreak was in the EG7 portfolio when it came to game revenue.

Q3 2021 vs Q4 2021 Games Revenue

Services remained a big chunk of revenue, so it wasn’t all Daybreak.  But a lot of that came from Innova… and, well, that went away in the fallout from the Russian invasion of Ukraine.

And then last summer we got news that Robin Flodin was out as CEO of EG7, allegedly due to him being able to answer a question correctly on a news report, just ahead of the Q2 2021 financials announcement.  That announcement included the news that Ji Ham, formerly acting CEO of the independent Daybreak would be stepping up to become acting CEO of EG7, replacing the deposed Flodin.

We also got a look into who the big stockholders in EG7 were when it came to the board of directors.

EG7 board and management ownership stakes – August 2021

In third place on the list was Jason Epstein of Daybreak.  First place was the founder of Innova, and we don’t know where he or his share stand since EG7 divested itself of the company.

Then, at the end of May, Robin Flodin was bought out, with several board members purchasing the remaining 2,446,592 he had in the company.  The statement at the time read as follows:

On May 25, 2022, the EG7 executive team and select board members purchased 2,446,592 shares, representing 2.8% of outstanding shares, from Robin Flodin, the former CEO of EG7. The purchase price was SEK 16.25 per share and amounted to almost SEK 40 million. After this transaction, Mr. Flodin will no longer be a shareholder in the company. The purchasing group was led by Jason Epstein, a current board member and the proposed new chairman of the board who acquired 1.1 million shares; Ji Ham, the acting CEO, acquired 900,000 shares, doubling his stake; and Alexander Albedj, the current chairman of the board, acquired 250,000 shares. Additional participants in the group included the deputy CEO and CFO, IR-responsible and independent board members.

The chief beneficiary was Jason Epstein, who acquired 1.1 million of those shares, followed by Ji Ham, who gained 900,000 shares for himself, boosting the ownership stake of those board members who previously owned Daybreak considerably.

What slipped by my on my initial read was this tidbit in the middle of that paragraph in reference to Mr. Epstein:

a current board member and the proposed new chairman of the board

Jason Epstein may very well be announced as the chairman of the board of directors when we get the next financials update at some point next month.  That, along with Ji Ham remaining in the CEO role, acting or otherwise, means that the management of the previously independent Daybreak now holds the two top positions at Enad Global 7.

Kind of strange, isn’t it?  Maybe?  Maybe not.

It seems quite possible, in hindsight, that Daybreak let itself be acquired by EG7 at least in part to turn a privately held asset into a publicly held company, saving themselves the problem of having to do an IPO in what has been something of a crazy market for the last few years.

And before you dismiss that, if you look up Reverse Takeover, you will find more than a few recognizable companies have done this before.  And if you discount IPOs as a motive, you can find an even bigger list of companies being acquired only to take over the purchasing company.  Palm and Handspring come to mind, where the founders of Palm left, founded Handspring, got themselves acquired by Palm, and ended up running Palm again.  And then they sold out to HP who destroyed the whole thing, as they tend to do.  Seriously, Palm was ahead of Apple on any number of fronts and managed to fumble that lead.

Anyway, does this mean anything to the actual titles in Daybreak’s stable?  Probably not.

I noted a few times that despite Daybreak’s poor PR skills and attempts to gaslight us all wholesale about things like who actually owned the company, that titles like EverQuest and EverQuest II seemed to thrive during the Daybreak era, settling into regular and predictable routines of new content and updates.

Things at Daybreak were not perfect.  They failed to launch a successful new title during their entire tenure as stewards of the house that SOE built, a tradition that has carried on at EG7 with the cancellation of the unnamed Marvel IP title.

So there is no “ah ha!” or “gotcha!” in this, just some observations that make me wonder where EG7 will head now that it seems to be run by the team that brought you all that was Daybreak.

Friday Bullet Points about Daybreak, 64-bit, and the End of the Drunder Server

It is Friday and I don’t have anything worth a full post, so here are a few tidbits mostly about Daybreak.

• 64-bit EverQuest II

I was actually thinking about writing a full post about this, but there isn’t that much to say at this point.  Server and client have been upgraded to 64-bit, which was pretty much necessary to ensure the long term viability of the game.

There wasn’t a lot of fanfare around the launch.  It just showed up at the top of the patch notes and got a short news item on the site.  But they have done 64-bit upgrades for the other titles in the Daybreak stable already, so it doesn’t seem all that exciting.

The system requirements for the game have changed, and if you’re still running on 32-bit Windows XP then your days of playing the game are over until you upgrade.  But otherwise, just another day at Daybreak.

• Drunder Goes Under

It seems like ages ago when Daybreak announced the unique “special” server that was Drunder.

Fortress of Drunder is included on the Drunder server

It was almost seven years ago when they hit on the idea of collecting all the problem children together. Anybody busted for breaking the game’s rules wasn’t to be banned, they were to be banished to the Drunder server.  There they could hang out with all their fellow miscreants and reflect on their crimes.  Also, they would get no customer service support and would have to pay a subscription to keep playing.  It was a strange idea.  I wrote a whole post about it when they announced it, with links out to like posts.

Well, the Drunder era is over.  It was announced on the forums that the server was no more.

We are announcing today that Drunder has been retired. This also means all accounts associated with Drunder will no longer be accessible.

It was strange to think that somebody might continue to play, or even subscribe, when they had been banished.  But if somebody was doing so, they can play no longer as their accounts are not longer accessible.

In an ironic twist, the forum message ends with:

Please contact Customer Service with all questions or concerns here: https://help.daybreakgames.com/

Since they were not supposed to get any customer support once banished, I wonder what they should expect now?  Or if there was anybody left to expect anything in any case.  I have a feeling that if the server was active with still paying customers it wouldn’t have gotten the chop.

Related Coverage:

• Massively OP
• MMO Fallout

It seems they banned Daybreak accounts and not just the EverQuest II access.  Oh, Daybreak.

• Robin Flodin Paid Off

This isn’t strictly a Daybreak thing, and it happened more than a month ago at this point, but it has been in my notes to bring up at some point.  Robin Floodin, one time CEO of Enad Global 7 and the enthusiastic face of the company that bought out Daybreak, was bought out of the company.  Per the statement published back at the end of May:

On May 25, 2022, the EG7 executive team and select board members purchased 2,446,592 shares, representing 2.8% of outstanding shares, from Robin Flodin, the former CEO of EG7. The purchase price was SEK 16.25 per share and amounted to almost SEK 40 million. After this transaction, Mr. Flodin will no longer be a shareholder in the company. The purchasing group was led by Jason Epstein, a current board member and the proposed new chairman of the board who acquired 1.1 million shares; Ji Ham, the acting CEO, acquired 900,000 shares, doubling his stake; and Alexander Albedj, the current chairman of the board, acquired 250,000 shares. Additional participants in the group included the deputy CEO and CFO, IR-responsible and independent board members.

A nice payday for Mr. Flodin I suppose, but it does make one wonder if Enad Global 7 really acquired Daybreak or if it is ending up the other way around.  As noted over at MMO Fallout, “acting” CEO Ji Ham doesn’t appear to have an replacement waiting in the wings many months after taking on the center stage role.  One might begin to think that it is less an act and more a fait accompli.

Enad Global 7 Cancels Its Daybreak Marvel MMO Project

Say farewell to any dreams about a Marvel Universe Online landing with Enad Global 7, as they announced in a press release that they were giving up on the project and writing of the money invested in it so far.

Enad Global 7

The press release was short and to the point and surprisingly not released at 4pm on Friday afternoon.  But they had an earnings announcement to do, and you have to get the bad news out with that.  The actual text for posterity:

EG7 plans to reinvest Marvel development resources across multiple long-term projects

EG7 today announced it will be discontinuing the development of the Marvel project at Daybreak Games. Based on the re-evaluation of the development risk profile, size of investment, and the long-term product portfolio strategy for the group, the board has decided to change the development priorities and reallocate resources within the group to focus on alternative long-term projects. The company had planned to invest more than SEK 500 million in the Marvel project over the next three years. The company will now diversify this investment across multiple, smaller size projects within the group, including the previously announced major upgrades to The Lord of the Rings Online and DC Universe Online, and new game opportunities with our first party, original IPs. Along with this reallocation, the company expects a write down of approximately SEK 230 million in project related assets in Q2 2022. As one of the long-term investments, the change to the Marvel project plan will not impact near to medium term revenues and profits other than the balance sheet and P&L impact related to the write-down.

You will note the not very subtle spin about investing in other projects… projects they already said they were investing in previously.  Does that mean they are investing more in things like LOTRO and DCUO?  I don’t know.  Maybe?

The assumed reason for the cancellation of the project is the departure of Dimensional Ink studio head Jack Emmert, whose history with super hero MMOs is the stuff of legend.

EG7 even called him out

His leaving, along with whoever he took with him to go work at NetEase, was apparently enough to scuttle the project.  That is always a hazard if a project depends on specific individuals.

This is pretty much a calamity for Daybreak as it continues their lifetime streak of bringing no new projects to launch since the SOE era.  Seriously, H1Z1, EverQuest Next, and Landmark were all under way before Daybreak, so the sum total of Daybreak initiatives looks like the spectacular failure of PlanetSide Arena.

Not only that, but the Marvel project might have been the most widely covered thing that Daybreak has ever announced.  My Google alerts about the company were lit up for days following the tease that they were making a Marvel IP based MMO.

Of course, what I was already calling Marvel Universe Online should have been a slam dunk.  DC Universe Online is already the most popular title in their stable and generates the most gross revenue. (EverQuest, so very cheap to maintain, and such a pillar of the genre, matches it for net profits though.)  Daybreak would have had to go really, really wrong to mess this up.

And yet, here we are.

Then there was the Q1 2022 quarterly report, where they noted income was up year over year, largely through acquisitions, the stock price was down, Daybreak is still the largest single contributor towards revenue, Ji Ham is still acting CEO, and that Innova, a Russian company, is no longer an issue, double pinkie swear.

There wasn’t a lot of new in there, so I won’t spend a lot of time on it, save for this slide.

EQ7 Q1 2022 – Looking Forward

You can see they are still betting on a boost from Amazon’s second age Middle-earth show and that they still want to invest in the things they have said they wanted to invest in previously.  At least H1Z1 isn’t being promoted quite so vigorously… and I say that only because they appear to have no plan for it, so they shouldn’t be promoting it.

So it goes.  The high hopes of 18 months ago seem to have fallen, sapped by the reality of Daybreak at the gaming industry in general.

Related:

• EG7 – Press Release
• EG7 – Q1 2022 Financials Presentation
• Massively OP – EG7 Q1 2022 financials: EG7 has canceled Daybreak’s Marvel MMORPG
• MMO Fallout – Daybreak has Cancelled its Marvel Game

Friday Bullet Points on a Chilly Spring Saturday

[This was supposed to be yesterday’s post, but then I woke up to a big news event, so it is a day late.]

It is cold out, considering it is spring here in California.  It has even rained here in the last 24 hours.  I am wearing a sweatshirt and jeans, which isn’t exactly the gear of arctic explorers, but by this late in April I have generally been well into the “I will wear shorts every day until I have finished off the Halloween candy” state of affairs that working from home forever has brought me to.

Not that the weather has anything to do with the rest of this post, but I needed a headline and the weather will serve when nothing else comes to mind.  So on with another bullet points post or items I thought worth noting but which weren’t worth a whole post on their own.

Enad Global 7

• EG7 Dropping Russia

On the trend with western companies bailing from Russia after its brutal invasion of Ukraine, Enad Global 7 has announced that they will selling off their Innova subsidiary to the management of the team for a total of 32 million Euros, quite a haircut for the company considering they shelled out 109 million Euros for the company when they closed the deal for it a little over a year ago.  Innova was primarily acquired because they held the license to run a number of MMOs in the EU and Russia.  The current state of the Ukraine conflict puts Innova in a tough spot.

Meanwhile EG7 also announced that they would Toadman Interactive, another acquired studio, would be relocated from its current location in Russia to somewhere in the EU.

Database evolution

• EVE Online Database History

CCP has posted another of the dev blogs that makes them a standout on the communications front in the industry.  Every time I think that they could do better, I have to remind myself how poorly the industry handles this sort of thing.

New database server upgrades have arrived and that has prompted the team to write a history of the databases of EVE Online, spanning from the early days when they had to solve lag problems with people just warping across systems, to being able to cope with 100 vs 100 fights, to the monster servers that they have today which make the original 2003 game look as powerful as a digital watch by comparison. (Though I still think digital watches wee a pretty neat idea.)

Anyway, if this is your sort of thing… and I am all over these sorts of posts… you can find the whole thing on CCPs news site here.

A new drama generator

• RimWorld is Legal in Australia Again

It was noted previously that, after the Ideology expansion for RimWorld landed, it seemed like maybe the thought of feminist nudist cannibals was too much for the faint hearts in Canberra.

And that could have been it, though the whole thing came up due to the fact that there was a console version of the game on the horizon, which was what got the Classification Review Board taking a look at RimWorld again.  And they didn’t like what they saw, so flagged it as “Refused Classification” which made it unsalable down under.

That was undone earlier this week… on 4/20 if you think there is any significance in that… allowing the people of Australian to once again purchase RimWorld or redeem Steam keys for the game.

And, speaking of console support, RimWorld also announced that the game now has full support for Steam Deck, so perhaps that was what triggered the whole thing.

The return of the classic

• Diablo II Resurrected Gets Ladders and more

Diablo II Resurrected has gotten its 2.4 patch, which is the biggest update the game has received in a long long time.

The lead story for the update is the unlock of the ladder seasons for those who want a competitive Diablo II experience, but there is so much more in the update such as class updates, mercenary fixes, new rune words, new Horadric Cube recipes, quality of life updates, and even some new levels of legacy graphics emulation for those who play with the old school look.

The great thing is that Blizzard has gone all in on this 22 year old game to make it better and fix things that has been problems for decades.  The sad thing is that this might be the peak of Diablo news this year unless Diablo Immortal is a lot better than I suspect it will be.

Playable Worlds

• Playable Worlds gets $25 Million in Funding

Finally, news got out this week that Playable Worlds, Raph Koster’s sandbox cloud MMO venture, managed to pick up $25 million in financing for the project from a group that includes Korean video game publisher Kakao Games Corp.

That got Raph Koster to speak a bit more about the vision for the title:

“It’s about having environments that are more alive,” Koster said. “Players can affect things that evolve and change rather than being static. Most games build their maps out of static meshes. Ours are dynamic and come down on the fly from the server. It’s about enabling worlds to feel more alive. That’s really what it comes down to.”

“Offering truly and fully persistent shared environments and massive scale is something else that is really important to us,” Koster said. “These aren’t just theme parks that you ride through, right? Where the developers are the ones who are in control. Giving full persistence also unlocks the ability for players to have far more impact. If you chop down a tree, it is permanently gone from the world for everybody.”

Specifics about the project were not forthcoming.

And we have heard a vision like this before, with the EverQuest Next project, which was eventually shelved by Daybreak, in part because of the processing requirements such a dynamic and player changeable world entailed.