Nexon: ‘PUBG’ to Blame for ‘LawBreakers’ Poor Performance

Nexon: ‘PUBG’ to Blame for ‘LawBreakers’ Poor Performance

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Wednesday, 03 January 2018
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Publisher Nexon, speaking in a recent earnings call, cites the massive success of PlayerUnknown’s Battlegrounds for the poor performance of LawBreakers. But that admonition, as harsh as it is, might not mean much for players or the game itself, an analyst tells Glixel. 

Since its release in August 2017, LawBreakers, the newest game from Gears of War creator Cliff Bleszinski, has had a tough time finding a large, dedicated fan base. Just two months after its release, the game’s concurrent player count dropped to only 10. At the time of writing, according to Steam Charts, only 29 were playing. For comparison, Battlegrounds recently broke its own concurrent record, topping out at 3,106,358 simultaneous players. Since its March 2017 release, the game’s sold more than 30 million copies. 

“Our results in North America in the third quarter were below our outlook, mainly due to the sales from LawBreakers being below our expectations. LawBreakers is a unique FPS developed for core users,” Nexon said in its call. “We had very high expectations for its launch; however, the timing of its launch turned out to be unfortunate, specifically the blockbuster PC online game PlayerUnknown’s Battlegrounds came out right about the same time, making the market environment very tough for first-person shooters in general and for LawBreakers.”

It’s worth pointing out, though the publisher says the game came out “right about” the same time as each other, there was a five month separation between the release of Battlegrounds and LawBreakers. 

“In [quarter three], in other expenses, impairment loss is included,” Nexon chief financial adviser Shiro Uemura said. “And out of the total number, LawBreakers-related impairment loss actually accounts for the majority of that amount. And also, regarding impairment loss for LawBreakers, this is everything, so we will not be accruing any other impairment loss pertaining to LawBreakers in the future.”

“It means nothing regarding support for the game or relationship with Boss Key and gamers shouldn’t care,” Wedbush Securities analyst Michael Pratcher told Glixel this morning over email. “Nexon has a responsibility to its shareholders to accurately reflect the value of assets on its balance sheet. Lawbreakers had a value that was too high, and the company took an impairment charge to reflect the appropriate value. It doesn’t mean they are unsupportive or angry.”

Due to the performance of LawBreakers, Nexon says it suffered “higher-than-planned expenses due to impairment losses on prepaid royalties related to LawBreakers and incentive bonus expenses related to strong business performance.” However adds these were offset thanks to the performances of Dungeon&Fighter and MapleStory2 in China, and FIFA Online 3, FIFA Online 3 M, and AxE in Korea. 

As PCGamesN points out: “Nexon didn’t say exactly how much money they lost on Lawbreakers, but said it ‘accounts for the majority’ of their Q3 expenses, which totaled roughly $32.6 million.”

“Impairment charges arise when an asset no longer has the value carried on the books,” Patcher says. “For example, If a building is on the books at $100,000 and it burns to the ground without insurance, the value is impaired by $100,000 and must be charged off.

“In the case of LawBreakers, the write down appears to be the unamortized balance that Nexon spent on the game. In other words, if the game cost Nexon $50 million to develop and the company had expensed $20 million since the game’s launch, there would be $30 million remaining on the books that has as yet to be amortized. Game development costs are typically amortized based upon an estimate of units that will be sold. If the game cost $50 million and Nexon expected it to sell 10 million units, it would amortize $5 for each unit sold until it was able to charge the entire $50 million in expenses against its income. A write down for impairment means that Nexon no longer has confidence that the game will sell as many units, and has decided to charge off the remaining unamortized balance.”

“Let’s pretend the building is on the books at $100,000 and that its roof is torn off in a hurricane,” Patcher adds. If the cost to repair the roof is $100,000, the company may decide to rebuild, but would write off the asset as impaired. It doesn’t mean that the asset is abandoned, but rather means its value was impaired by the hurricane. In the case of Lawbreakers, the initial value was high, and disappointing sales led Nexon to determine that its remaining value was lower than is shown on their books, nothing more than that.

“They may decide to abandon the game, but you can’t conclude that from taking an impairment charge.”

We’ve reached out to Boss Key about the future of the game and its support and will update the story should we hear back. 

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