Funcom Posts Fourth Quarter '08 Loss

One look at Funcom's year-end fiscal results, and it would be easy to think a raging barbarian had taken a barbed club to the Norwegian game company's profit genie. In reporting its earnings results today, Funcom revealed revenues of $39.9 million for the full year, thanks to sales of its massively multiplayer online role-playing game Age of Conan, which launched in May. However, Funcom also saw earnings after taxes dip to losses of $33.8 million in 2008, from a $2.16 million gain in 2007.

At primary fault for Funcom's plunging income was a $22.8 million impairment charge that the game maker suffered during its fourth fiscal quarter. In Funcom's words, the bulk of the charge was "to reflect the impairment of intangible assets, mainly on the Age of Conan asset to reflect lower level of revenues than anticipated at the time of capitalization."

During the October-December period, Funcom said revenues amounted to $8.66 million, though the aforementioned charge pushed its earnings after taxes to a loss of $30.8 million. Despite the disappointing results, the publisher said it remains in a secure cash position, with $39.3 million in the bank through December 31.

Along with announcing its dubious earnings today, Funcom said that it would be parting ways with its current chief financial officer, Olav Sandnes. The executive, who signed on with Funcom in 2006, will remain in his position until the company appoints a new CFO. According to Funcom, Sandnes plans to "take up a new position in a different industry."

Looking to the future, Funcom remains optimistic in light of its uneven 2008 performance, thanks to a heartening stabilization in Age of Conan's player base. While Funcom did not provide an update on Age of Conan's subscription levels (which stood at 415,000 as of August), it did say that the MMOG's player base has stabilized in 2009. The game maker also noted that average subscription periods have improved in the New Year, with player activity also on the rise.

Funcom notes, however, that Age of Conan's prospects for future growth remain "relatively uncertain," despite continued investment in the game. Excluding customer service, 120 people are currently at work on the MMOG, and Funcom has a number of in-game enhancements slated to be rolled out throughout the course of 2009. In a bid to lure in new players, the company also revealed plans to introduce a free trial period in the coming months. No mention was made of the status of the Xbox 360 version of the game.

In January, Funcom announced plans to consolidate Age of Conan's user base, slashing its total server count from 49 to 18. The MMOG also saw the departure of game director Gaute Godager, who resigned from his position after expressing irreconcilable "dissatisfaction" over portions of the game.

Last numbers from FC says that AoC: HB has little less then 100k players and that they have minus 2M euros budget last month! this is a very bad thing and if they dont do something to attrack players to this game, they will close it!

If the close the servers we all going to play the new online starwars game.
http://www.swtor.com/

Well FC has in developement two other MMORPG's that aren't bringing in any money but are having developement costs, they're supposed to lose money at this developement stage.

yeah ruvi may the force be with us

if they close AoC, they will close that after year and a half so...

i'm not gona play any game that has anything to do with FC after AoC!

Ruvi wrote:

If the close the servers we all going to play the new online starwars game.
http://www.swtor.com/

I already plan to do that, Ruvi...

cool

Relax guys, FC's cash reserve is large and the operating loss wasnt too big last Q. The fact that they are reducing the assumed future value of aoc does not mean they are going bankrupt in the near future. The company's CEO stated clearly both now and 3 months ago that tha FC wouldnt be needing external financing in 2009 at all. And then, after presenting Q4 results, he bought for himself a ton of FC shares. But still, word needs to be spread about AOC's improvements to increase the player base so the game can increase its revenues and secure its future.

I agree Helgrim. FC got cash reserve and AoC still brings inn money to keep it floating as is with normal updates (at least some money). AoC cost less each month for FC as well cause of the server merges, so less servers, bandwitdth, hardware updates or repleacing broken hardware etc will cost less money than before.

I think that the update 1.05 will bring game mechanics that a lot of earlier players har sought for and do want in the game. As 1.05 has been launched and that the balance and bug problems have been solved with small updates or 1.05.1 or 1.05.2 etc I do think that FC will see wait to see if player base is raising. Then they wil probably launch a "come back to Hyboria for 10 days free" as a freebee to get people to check out the game then.

Lets cross our fingers and hope that the Player Base will raise to at least 200K in the next 6 months or so.

Yes, for those who read it all, it's a fictional loss, or loss of projected avenue. Doesn't keep them from letting the financial director "go." Hopefully, they will get more realistic about their projected income in the future.

Regarding the parture of the FC financial director(FD) got 3 reason I guess.

1. The FD felt he needed something else to do and thus quitted by his own terms.
2. FC made preassure that he did not do the job good enough, so fire or go freely by yourself.
3. FD do look into the number and may he see something that others dont? Rats fleeing a sunken ship?

I do not belive it is the number 3 option as FC got cash reserves and AoC is slowly rising again. And 1-3 hole in the hull of the ship can be sealed with clever thinking! So FC does not have a broken back yet! So I think it is mainly number 1 that is most likely, then number 2.

Hopefully AoC will get a 10%++ raise of subscribers with the 1.04 patch, and hopefully 50-150%+ raise after the 1.05 update.
Time will tell and if FC is releasing any numbers of subscribers.

EDIT -
FC press release
AoC launched in Poland and Russia
http://www.funcom.com/wsp/funcom/frontend.cgi?func=publish.show&func_id=1336&table=CONTENT&item=1004

And a bit old 12th November 2008 - AoC is announced to be launched in Korea.
http://www.funcom.com/wsp/funcom/frontend.cgi?func=publish.show&func_id=1323&table=CONTENT

Both I think will boos number of players a bit.

Good luck in Korea though. They have quite a large number of locally developed MMORPGs (I know, I played some of them in the past). While they have an MMORPG gamer culture, I think it will be hard to break into an established market with games tailored specifically to their needs. Still, hopefully FC will get a slice and can speed up the damn fixes and development.