Relic close to shutting down - not profitable

Nice read, thnx!
Because of how things have been going with the balance updates and so on (stupid scopes, ...), it was already pretty clear that someone higher up at relic is an idiot

There's no way a company like Sega would simply shut Lelic down. Far more likely they'll repurpose them to pander to the market. Maybe get them making match-3.

i'm pretty sure they would just close it down, because the problem is structural and has not a lot to do with the market.

The only observation with which I disagree here is your conclusion.

If SEGA paid approximately $26 million for Relic in 2013, my guess is that SEGA could sell on Relic and another developer would finish COH3. In fact, it has been at the back of my mind that SEGA may be using AoE4 as a marketing tool and could try to sell off Relic before the release of AoE4 - it would be a safer bet than waiting on the outcome of AoE4, when the value of the Relic asset could diminish.

What I understood from all SturmTigerCobra Posts around Sega and Relic is Sega could simply shut down Relic and transfer assets to Creative Assembly.

I don't understand ? How on earth is coh2 not a profitable game ?
It's not as profitable as let's say csgo or dota 2 but c'mon it makes/has made a lot of money for relic.
Even though the game is far from perfect it has evolved plenty since release and relic are doing a far better job now than they used to do in 2013.
I think the game is growing, and coh3 if it ever comes out will be a huge success.
RTS may be a dead genre but it has a dedicated and hardcore fanbase and any dev would be stupid not to capitalize on that.

The only observation with which I disagree here is your conclusion.

If SEGA paid approximately $26 million for Relic in 2013, my guess is that SEGA could sell on Relic and another developer would finish COH3. In fact, it has been at the back of my mind that SEGA may be using AoE4 as a marketing tool and could try to sell off Relic before the release of AoE4 - it would be a safer bet than waiting on the outcome of AoE4, when the value of the Relic asset could diminish.

Are we sure the CoH IP is under SEGA and not part of Relic? Really the more interesting thing is why is Relic working with Microsoft for AOE instead of using one of their own IPs? What does Sega think about the whole thing and why would they split off some of the cash flow for a AAA title?

Their management issues we've known for years and this is yet another confirmation that Relic management is garbo, no surprise here. The employee is referencing DOW3 a fair bit so it wouldn't surprise me that he was part of the team which we should look at as a separate issue from CoH as it could have been an entirely different Dev team (as we know they had 2 while working on the British Army Expansion).

The Dow 3 flop is a big issue for Relic and one that might have been solved by better market research TBH. The issue with Dow 3’s role simply tried to bridge a gap between RTS and Moba market however failed to satisfy both parties as both MOBA players and RTS players found the game to be rather shallow. The game itself did a lot right with good models, sounds, maps, and even animations (as limited as they were) but even with all that good came a rather fragile foundation that their elements simply created an environment that wasn’t fun or deep enough to make it reward.

With that. Its rather odd that Relic is working on AOE4 but I am afraid that AOE might not scratch the already profitable and established CoH franchise fan base which is rather large according to steamspy, 3 million units total sold by 2015 is a rather large amount of dosh that may or may not come over with the AOE IP. Even still we have yet to see anything outside of a teaser, until we know more about the game it’s hard to gauge how well the game might be received or what base they are trying to capture but my guess is that Microsoft might have better market data than Sega.


If you really want to go down the rabbit hole, what if SEGA favors CA over Relic?


*Edit: I felt like I needed to keep going as I felt like I didn't address the "coh2 wasn't profitable" idea by saying that if steamspy is correct that the total untis sold in 2015 was in fact 3.8 million doesn't include the price that it was paid for but it also doesn't account for the DLC that was sold.

I don't understand ? How on earth is coh2 not a profitable game ?
It's not as profitable as let's say csgo or dota 2 but c'mon it makes/has made a lot of money for relic.
Even though the game is far from perfect it has evolved plenty since release and relic are doing a far better job now than they used to do in 2013.
I think the game is growing, and coh3 if it ever comes out will be a huge success.
RTS may be a dead genre but it has a dedicated and hardcore fanbase and any dev would be stupid not to capitalize on that.

And how it is profitable? Sure it has DLC but in general profits are no doubt very low, considering avarage 5k online and after free giveaways 10k online, now it dropped back to 5k online.

All DLC content for original factions were released during first\first and a half year after the innitial release.

Then WFA arrived, with 3 default and like 4-5 DLC commanders.
British forces had 5 DLC commanders.

Thats pretty much it. Commanders was the only thing ppl really cared about, now we have only camos, not even single player content.

In this regard, coh2 was profitable, but its no doubt it barrely made a lot of money. Its simply not worth time and effort updating it. All updated and content, were so rare not because relic is lazy, but because profits are so low, you can consider new content as a gift for a community.

The only observation with which I disagree here is your conclusion.

If SEGA paid approximately $26 million for Relic in 2013, my guess is that SEGA could sell on Relic and another developer would finish COH3. In fact, it has been at the back of my mind that SEGA may be using AoE4 as a marketing tool and could try to sell off Relic before the release of AoE4 - it would be a safer bet than waiting on the outcome of AoE4, when the value of the Relic asset could diminish.

That is indeed an interesting thought and one that I wouldn't see impossible either. But considering the situation of Relic when CoH2 launched in its rather lackluster state and the community's full knowledge of this situation in relation to the lackluster state of launch, wouldn't such an act (the premature selling of Relic) still mean the deathbed for Relic since the community will not buy into another fiasco.

I think most studios have little leeway for major titles failing. Its not a situation unique to relic.

Most certainly.

What I understood from all SturmTigerCobra Posts around Sega and Relic is Sega could simply shut down Relic and transfer assets to Creative Assembly.

Unlikely.

They would have to relocate large amounts of staff.

And how it is profitable? Sure it has DLC but in general profits are no doubt very low, considering avarage 5k online and after free giveaways 10k online, now it dropped back to 5k online.

All DLC content for original factions were released during first\first and a half year after the innitial release.

Then WFA arrived, with 3 default and like 4-5 DLC commanders.
British forces had 5 DLC commanders.

Thats pretty much it. Commanders was the only thing ppl really cared about, now we have only camos, not even single player content.

In this regard, coh2 was profitable, but its no doubt it barrely made a lot of money. Its simply not worth time and effort updating it. All updated and content, were so rare not because relic is lazy, but because profits are so low, you can consider new content as a gift for a community.

COH2 has an average of roughly around 120,000 unique players every two weeks.

There is a general misconception that the money made from sales goes directly to the developer, This is rarely the case unless it is a self published title.

This is the normal setup for a project.

A publisher or developer agree on a project, a budget is set and a release date window.

The developer then works in chunks, delivering certain sections of the game at set dates, these are known as milestones. The publisher must approve the milestone, i.e the developer has met the requirements, if they're met the developer gets paid.

This normally goes on for the entire time of development. Once the game has gone 'gold' the developer is paid the final sum.

There are often other caveats attached e.g. If the game scores 90% meta bonuses are handed out, if the game sells x-amount a sequel is guaranteed.

What I understood from all SturmTigerCobra Posts around Sega and Relic is Sega could simply shut down Relic and transfer assets to Creative Assembly.

He is probably correct, but I do not think it is as straightforward as you might imagine.

I doubt if Canada has the equivalent of the European Union Business Transfers Directive.. TUPE (the UK version) can catch the unscrupulous practice whereby a company tries to set up an overseas subsidiary outside the EU in order to avoid the impact of TUPE. But TUPE does not apply in reverse, as far as I know.

Therefore, if SEGA transferred the COH assets to CA in UK, it would be free of TUPE, but what would occur with Relic?

1) SEGA would have to pay off the Relic staff
https://www.monster.ca/career-advice/article/your-legal-rights-following-your-canadian-job-loss

2) SEGA would have to pay off the Relic peripherals. e.g the NY servers

3) SEGA would have to dispose of the Va building

4) Relic would have to pay off its taxes

Could an inter-company transfer avoid all this debt paying? I doubt it, since interested creditors like the Canada tax authorities would be able to argue that Relic had a worth in any games which they transferred to CA. (This is not new, since THQ got pinned on the same kind of avoidance issue in 2012). Therefore, SEGA are unlikely to be able to write off Relic debts in North America.

Also, SEGA will be aware that if they transfer the COH IP to CA, they are placing themselves further in the UK, which is itself in the course of a highly unsettling Brexit for business. Indications are that the Japanese do not want to invest further in UK, if UK hives off from the EU, bcs the EU market is much bigger. Therefore, if SEGA invests further in CA, it is potentially jumping from one problem to another, if tariffs emerge between UK and EU.

And where do CA stand, if the COH software were transferred to it?

They probably know about the bugs in the Essence engine. Do they want the responsibility of taking on COH franchise with its attendant expenses? e.g. another 100 staff? Server outsourcing costs? Little income return from COH1/COH2, which have already been harvested, but which they cannot abandon, unless they lose the core members?

And since SEGA will not want to pay Relic's debts for no return, there will have to be at least a nominal capital payment by CA for the Relic assets it receives from SEGA: so what price will SEGA place on that? The cost of discharging the Relic debts (if any), or a much bigger sum? And if that larger sum was sought by SEGA, would CA want it?

Or would it be easier to sell off Relic lock, stock and barrel to an eager competitor? The alternative bidders do exist. The 2012 auction taught us that.

Are we sure the CoH IP is under SEGA and not part of Relic? Really the more interesting thing is why is Relic working with Microsoft for AOE instead of using one of their own IPs? What does Sega think about the whole thing and why would they split off some of the cash flow for a AAA title?

Iirc, it was the IPs which were up for auction at the end of 2012 and some of which SEGA acquired. I cannot be certain, but I would think that SEGA own the COH IP, and if they do not, they certainly control it.

I am happy to be corrected, but I thought SEGA set up the deal with Microsoft, albeit it is for Relic to implement the terms of it.

Their management issues we've known for years and this is yet another confirmation that Relic management is garbo, no surprise here. The employee is referencing DOW3 a fair bit so it wouldn't surprise me that he was part of the team which we should look at as a separate issue from CoH as it could have been an entirely different Dev team (as we know they had 2 while working on the British Army Expansion).

The Dow 3 flop is a big issue for Relic and one that might have been solved by better market research TBH. The issue with Dow 3’s role simply tried to bridge a gap between RTS and Moba market however failed to satisfy both parties as both MOBA players and RTS players found the game to be rather shallow. The game itself did a lot right with good models, sounds, maps, and even animations (as limited as they were) but even with all that good came a rather fragile foundation that their elements simply created an environment that wasn’t fun or deep enough to make it reward.

Not disagreeing, but I don't play DoW, so cannot comnent on that aspect, other than it seems to have been a wretched failure. .

With that. Its rather odd that Relic is working on AOE4 but I am afraid that AOE might not scratch the already profitable and established CoH franchise fan base which is rather large according to steamspy, 3 million units total sold by 2015 is a rather large amount of dosh that may or may not come over with the AOE IP. Even still we have yet to see anything outside of a teaser, until we know more about the game it’s hard to gauge how well the game might be received or what base they are trying to capture but my guess is that Microsoft might have better market data than Sega.

Steam spy gives the COH2 membership as 2,388,268. Accordingly, if we said the average payment was $50.00, it means that Relic should have paid back SEGA its investment of $26 million and covered the ongoing staff and establishment costs of the past 5 years. At least in theory, and very crudely. This is because I have no idea how much SEGA bleeds from Relic annually.

Having said that, the unhappy Relic staff member, asserts Relic is unprofitable. And the General Manager does not deny that assertion. So I am a little at a loss at this point. Are Relic profitable or not?

If you really want to go down the rabbit hole, what if SEGA favors CA over Relic?

Please see my response above to Esxile.

CA has 500 employees going for it, against Relic's 205. But, the EU has employment regulations which deter some outsiders from NA, and the UK is about to Brexit the EU (or not, depending on your point of view).

*Edit: I felt like I needed to keep going as I felt like I didn't address the "coh2 wasn't profitable" idea by saying that if steamspy is correct that the total untis sold in 2015 was in fact 3.8 million doesn't include the price that it was paid for but it also doesn't account for the DLC that was sold.

Although I do not follow Relic finances closely, I was always under the impression that it was holding its own with COH2, regardless of whether COH2 could have been handled more deftly.

That is indeed an interesting thought and one that I wouldn't see impossible either. But considering the situation of Relic when CoH2 launched in its rather lackluster state and the community's full knowledge of this situation in relation to the lackluster state of launch, wouldn't such an act (the premature selling of Relic) still mean the deathbed for Relic since the community will not buy into another fiasco.

It would certainly mean the death knell for the Relic Studio, but I guess CA (or an outside Buyer) might say: 'Relic's loss is another studio's gain', or something similar. The community has shown remarkable resilience: the core members at the time of COH2 launch are not the same core now, bcs Relic squandered so much on the COH2 launch (albeit many COH1 posters are returning from time to time).

e.g. look at this first picture in the blog and ask yourself: how many remained active within 6/12 months of COH2 launch?

Possibly relevant to this discussion is one of Sega's key reasons for buying Relic, stated at the time by Quinn or similar, notably that Relic games historically have a really long tail, as we see with COH2 - significant numbers are still playing them years later. Obviously DOW3 is not going to manage this but it does mean that Sega has/had an expectation of making profit with a long term drip feed income approach.

Consequently its easy to imagine that Relic is not profitable right now with COH2 nearly 5 years on and DOW3 a flop. They do however have a project on the go - AOE with presumably funding from microsoft and it seems to me that a 'niche' COH3, might still be considered to create long term income now that the attempt to be all popular with their moba style attempt has flopped massively

Thanks for posting Cobra. That was interesting.

However, an anonymous glass door "review" of the office environment is not a good reflection of the financial health or strategic decisions that Sega may or may not be contemplating.

Interesting stuff

Wow, some people here really knkw what they're talking about. Wuff too. Thx for the detailed analysis!


Also has to be borne in mind that of the millions they made from sales there'll be a huge amount of overheads. Office, staff, taxes, marketing, server upkeep, hardware replacements and maintenance. Just the 200 staff alone will be costing close to 10 mil a year. Need to sell a lot of animal skins for that.

#patchisalliedbiased

They did that shit to themselves. Oh well.

Unlikely.

They would have to relocate large amounts of staff.

He is probably correct, but I do not think it is as straightforward as you might imagine.

I doubt if Canada has the equivalent of the European Union Business Transfers Directive.. TUPE (the UK version) can catch the unscrupulous practice whereby a company tries to set up an overseas subsidiary outside the EU in order to avoid the impact of TUPE. But TUPE does not apply in reverse, as far as I know.

Therefore, if SEGA transferred the COH assets to CA in UK, it would be free of TUPE, but what would occur with Relic?

1) SEGA would have to pay off the Relic staff
https://www.monster.ca/career-advice/article/your-legal-rights-following-your-canadian-job-loss

2) SEGA would have to pay off the Relic peripherals. e.g the NY servers

3) SEGA would have to dispose of the Va building

4) Relic would have to pay off its taxes

Could an inter-company transfer avoid all this debt paying? I doubt it, since interested creditors like the Canada tax authorities would be able to argue that Relic had a worth in any games which they transferred to CA. (This is not new, since THQ got pinned on the same kind of avoidance issue in 2012). Therefore, SEGA are unlikely to be able to write off Relic debts in North America.

Also, SEGA will be aware that if they transfer the COH IP to CA, they are placing themselves further in the UK, which is itself in the course of a highly unsettling Brexit for business. Indications are that the Japanese do not want to invest further in UK, if UK hives off from the EU, bcs the EU market is much bigger. Therefore, if SEGA invests further in CA, it is potentially jumping from one problem to another, if tariffs emerge between UK and EU.

Nowaday you can set up a dev studio everywhere in the world. We already have seen studiso being taken away their IP to be given to another one. The IP could be moved to UK or Creative Assembly could open a branch in Canada. Or a new studio could be indpendantly open in Canada and be patronised by Creative Assembly.
THen of course it cost a lot of money to shut down an office with hundred of people in it but do not believe it can't happen, if so, Sega is probably already doing the financial step for that.

From the anonymous message we read, what scare me the most is the feeling nothing had change since DOW3 failure, same management rules are in place. I have been working on this kind of toxic environment - I can visualize any argument the anonymous is giving - and from experience, there is little you can do except cutting management multiple heads (because at the end, all your management is like that by contagion). And sometime it is cheaper and faster to simply let it die and build a new structure somewhere else.

Nowaday you can set up a dev studio everywhere in the world. We already have seen studiso being taken away their IP to be given to another one. The IP could be moved to UK or Creative Assembly could open a branch in Canada. Or a new studio could be indpendantly open in Canada and be patronised by Creative Assembly.

Agreed, but there may be provincial/taxation/national consequences. e.g. If BC lost its studio, don't expect it to be passive, if it sees another province 'stealing' its asset/trophy.Anjd don't forget TUPE! If the COH assets were transferred to CA in UK, and people worked on the project for 12 months, moving the COH assets out of UK again after that would carry restrictive employment implications.

THen of course it cost a lot of money to shut down an office with hundred of people in it but do not believe it can't happen, if so, Sega is probably already doing the financial step for that.

I agree SEGA could do it, but if it closes its NA operation - if it does - then it's more than staff lay-offs which it has to pay off (see above).

From the anonymous message we read, what scare me the most is the feeling nothing had change since DOW3 failure, same management rules are in place. I have been working on this kind of toxic environment - I can visualize any argument the anonymous is giving - and from experience, there is little you can do except cutting management multiple heads (because at the end, all your management is like that by contagion). And sometime it is cheaper and faster to simply let it die and build a new structure somewhere else.

That is what is under discussion.

In truth, it is no different to any industry. The head honchos preserve their position,and you move against them at your peril - and probably lose, unless you are in a powerful Union. Unions and the interweb are not necessarily anathema, unless you are a fervent adherent to free speech (a common fallacy) or a libertarian (rose-tinted specs syndrome).

It is global capitalism in play. The question is whether nations as small as Canada or UK have the resources to contain it, outside a big trading block like the EU.

17/01/2017 edited re TUPE implication

Thanks for posting Cobra. That was interesting.

However, an anonymous glass door "review" of the office environment is not a good reflection of the financial health or strategic decisions that Sega may or may not be contemplating.

100% this.

Glassdoor may not be a good relfection of strategic decisions, But it IS a good reflection of whether or not the process is one that should result in a good product.

Doesn't Sound like their Planning is very good and that is just the worst. If you are implementing ideas and concepts that make no sense due to a poor feedback loop you will not achieve success.

You need to
1. Identify the need why you are doing something
2. create a plan. Line up how you will serve your purpose
3. Implement your plan, the most work, the least thinking is this step
4. Recieve feedback to improve.

These 4 basic steps are evident in all project management, I swear Sophmore and Junior Year in college was these 4 steps in literally every class (interdisciplinary). Glassdoor is saying they are not that good at creating a plan(defining the scope and direction of factions units abilities), or recieving feedback(cutting out the bad ideas before players get to them). To me this signals poor leadership WILL lead to poor project results/games.

I just want some good games and this doesn't look promising. Hopefully they get better.

COH2 has an average of roughly around 120,000 unique players every two weeks.

That is not a good figure to gauge how profitable CoH2 is. It doesn't say how many of them buy anything, nor how interested they are in new DLC/Expansions/CoH3. Since Relic isn't making new DLC/Expansions for Coh2, we can assume it isn't profitable/worthwhile to make them. CoH2 base game has been on deep sale/bundles/even free, the base game is peanuts as far as generating additional revenue is concerned. Did Sega even get the pre-order money from Coh2, because I cannot find whether they won the lawsuit?

If AoE4 is a windows store exclusive (looks like the case), Relic is in a big trouble. Windows Store is a joke for PC exclusives, it is going to sell worse than DoW3.