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Contents:
1) Introduction
2) About the Author
3) Issue 1: Profit vs. Sales
4) Issue 2: 5% of what?
5) Issue 3: What does 5% really mean?
6) Issue 4: Broadcasting Fees
Introduction:
In this post I aim to deconstruct the press conference held by Paul Sams on Dec. 02 (http://www.teamliquid.net/forum/viewmessage.php?topic_id=173542) and the subsequent KeSPA response (http://www.teamliquid.net/forum/viewmessage.php?topic_id=173841). The reason I find it important to write this is that both sides are presenting the facts (if they are indeed facts) in such a way that benefits their side. I really think that this debate is more of a PR war than anything, and I really wanted to give the fan-base a clear idea of what is actually going on.
I don't have any inside connections in KeSPA or Blizzard - instead, I'm simply going to take whatever was said in the articles as true, but show you how this doesn't necessarily paint the picture that may seem most obvious.
I actually have an exam this coming Tuesday, so I can't spend too long writing this, but I think it's important to get something down quickly while people are still thinking about these press releases.
About the Author:
I am currently a 4th year undergraduate at the Rotman School of Management at the University of Toronto in Canada. I am a specialist in Finance and Economics with a minor in Political Science. I also have basic familiarity with business law. Upon graduation I have an offer to join a top global management consulting firm. I am also an avid fan of SC:BW and SC2. I have not followed the Korean pro-scene intensely, but often read a lot of summaries and articles here in TL.
Issue 1: Profit vs. Sales
This is actually minor in the case of Blizzard, but on a general level it's a major misconception. I just through I should point this out.
I've read a news article where Korean sales takes up 60% of Blizzard's overall profits ... Blizzard Korea has only earned 5% of overall worldwide sales.
For those of you who are not familiar, "sales" refers to the total value of items sold by a company. So for example, if a candy store sells 100 chocolate bars for $2 each, their sales for that day is $200.
Profit, on the other hand, refers to sales minus costs. So in my candy store example, if each bar cost the store $0.50 to buy, and the clerk, who is paid $10/hr had to stand there for 5 hours to sell all the bars, then the profit for the day is (2-0.5)*100 - 10*5 = $100. And that doesn't even count rent, electricity etc.
So even if Blizzard only have 5% of it's sales in Korea, it's profit could be much higher if it's costs are lower in Korea. Not to say that they are, merely that it is possible. Most of Blizzard's "costs" probably relate to game development and thus aren't directly related to sales, so this is probably a weak argument. Nevertheless, I found it odd that they could take the leap from sales to profit so quickly.
Issue 2: 5% of what?
So once again I return to the quote:
Blizzard Korea has only earned 5% of overall worldwide sales.
Is this really relevant? I don't know a heck of a lot about Blizzard's operating structure, but I would assume that the vast majority of it's global sales comes from World of Warcraft subscriptions. In Korea, WoW has to compete with major Korean titles, the most popular of which is Aion Online by NCSoft. Blizzard probably has a lesser share of the MMORPG market, but a near monopoly on the RTS market! Also, I haven't talked at all about Diablo or the Warcraft RTS games. What do we really need to know? What percentage of total sales does Korea account for in terms of the Starcraft franchise only?
Furthermore, WoW is an old an established game which a business model that has ongoing revenue streams. SC2 is a one-time purchase product that has barely been released for months. Obviously, it doesn't (yet) account for the majority of Blizzard sales. In all likely hood, the vast majority of the profits related to SC2 have yet to be realized. So really, the best question is:
How much of Blizzard's expected return on investment for Starcraft 2 is expected to come from Korea?
Issue 3: what does 5% really mean?
Let's take this 5% of sales figure as given; what does this really mean for Blizzard? In the context it was given, it was clearly meant to say to tell fans that "Korea is not so significant that we would be doing this for the sake of profit." I believe that we can draw the opposite conclusion from this number.
Let's think about this for a moment. 5% seems likely an incredibly small number. Now let's think about the relative importance of Korea to the Starcraft scene relative to the rest of the world. Does Korea make up 5% of all Starcraft "happenings" around the world? I would argue that it takes up much more than that; the number in this regard is likely well over 50%! What this tells us, instead, is that Blizzard is making a disproportionately small amount of money from Korea relative to the actual impact it's game is having. Thus, Korea is probably THE biggest opportunity for profit growth for Blizzard.
Conclusion? Korea MATTERS for Blizzard's bottom line.
This makes a lot of sense because what Blizzard is fighting for (broadcasting fees, short contracts, ownership of derivative material) all point towards looking towards a long term goal of getting a significant piece of the progaming pie.
Issue 4: Broadcasting Fees
I know that KeSPA demanded 1,700,000,000 won for broadcasting fee over the last 3 years for broadcasting Proleague in 2007. They don't have the rights to do that. In addition, the yearly broadcasting fee that KeSPA wants is still 5 times more than what GomTV is requesting KeSPA to pay
vs.
the amount requested by the Gretech amounts to 700 million won a year minimum if you combine the Proleague and both Individual Leagues. This amounts to far more than 2 billion won even through a simple calculation
So clearly have some issues here. If KeSPA made 1.7bil won over the last 3 years for proleague, but also ran 3 years, then it made about 1.7bil per year. Under the GOMTV terms, KeSPA would have to pay 700m*3 = 2.1bil per year, or an increase of 400m won, or about 25%. This is obviously not the "1/5th" Blizzard is claiming, but this should be taken with a grain of salt!
KeSPA sites only broadcasting rights, but
KeSPA's main source of revenue are the membership fee, the Proleague sponsorships, and the Proleague licensing revenues
Do "Proleague licensing revenues" refer to broadcasting fees? Or are they something different? I seem to recall that Blizzard charges a 1 won fee for the rights to hold the tournament, but then charges a much larger broadcasting fee. How much does KeSPA charge for these rights?
Definitions aside, how much does it actually cost to host and broadcast an SC1 tournament vs. an SC2 tournament?
Ok there's actually more I want to write but I really need to get back to studying. Post away, I may update.
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so basically you have no clue about anything, think that everything KeSPA said is absolutely true and generally just sound like another conspiracy theory.
even that you would consider korea to make up 60% of Blizzards over all yearly profits makes my head hurt.
go look at their buiness reports they have to give out each year and you'll see that's bullcrap.
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On December 04 2010 09:27 Blobskillz wrote:even that you would consider korea to make up 60% of Blizazrds over all yearly profits makes my head hurt.
you clearly read nothing.
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On December 04 2010 09:30 farseerdk wrote:Show nested quote +On December 04 2010 09:27 Blobskillz wrote:even that you would consider korea to make up 60% of Blizazrds over all yearly profits makes my head hurt. you clearly read nothing.
enlighten me please.
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On December 04 2010 09:32 Blobskillz wrote:Show nested quote +On December 04 2010 09:30 farseerdk wrote:On December 04 2010 09:27 Blobskillz wrote:even that you would consider korea to make up 60% of Blizazrds over all yearly profits makes my head hurt. you clearly read nothing. enlighten me please.
When did I ever say that Korea makes up 60% of their profits? I never said that even once. I also think that's outrageous. I more wanted to point out that because the share is currently low, that makes Blizzard want to enter more because there is untapped potential. Why would Blizzard fight over these rights if they were already making money?
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I'm not sure we really need another thread like this. Your comments don't seem at all substantial enough or informed enough to merit their own thread on the subject.
Again, the issue is image more than it is profits. Blizzard wants to control how their image is used, and how their games are used, to prevent embarrassing and damaging scandals and stuff like that. Of course they also want some money out of it most probably. But the issue is much more over image than it is over profits.
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On December 04 2010 09:34 farseerdk wrote:Show nested quote +On December 04 2010 09:32 Blobskillz wrote:On December 04 2010 09:30 farseerdk wrote:On December 04 2010 09:27 Blobskillz wrote:even that you would consider korea to make up 60% of Blizazrds over all yearly profits makes my head hurt. you clearly read nothing. enlighten me please. When did I ever say that Korea makes up 60% of their profits? I never said that even once. I also think that's outrageous. I more wanted to point out that because the share is currently low, that makes Blizzard want to enter more because there is untapped potential. Why would Blizzard fight over these rights if they were already making money?
you might want to read the first quote in your first post. For me there is pretty clearly written that Korea makes 60% of the profits.
The next thing is that you compare the numbers for the IP rights that were given by KeSPA with pretty much nothing. As far as I know Blizzard never gave concrete numbers about how much they'd charge for Ip rights. Gretech gave numbers and those were considerably lower then those 700 million won.
To me you jsut sound like another guy that wants to say that Blizzard is deliberatly killing off SC1
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It looks like this thread has nothing to do with SC2 at all... may be general forum is more suitable.
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On December 04 2010 09:27 Blobskillz wrote:
so basically you have no clue about anything, think that everything KeSPA said is absolutely true and generally just sound like another conspiracy theory.
even that you would consider korea to make up 60% of Blizzards over all yearly profits makes my head hurt.
go look at their buiness reports they have to give out each year and you'll see that's bullcrap.
You sir don't seem like you read it. Maybe glanced at it, but missed the beginning where he said that he will take what they say as true and see what story it gives.
Also, how is this like a conspiracy theory when he's not suggesting that anyone is hiding anything? (In fact, you seem like you have a conspiracy theory going around saying how the numbers they are saying are all lies and some obscure document you haven't read has the real facts saying something...). Blobskillz, since you know exactly what the truth is, can you link to the business reports that have the proper numbers?
I applaud you OP for righting this because this is a good summary of the recent events and it gives some business management insight.
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On December 04 2010 09:48 Blobskillz wrote:Show nested quote +On December 04 2010 09:34 farseerdk wrote:On December 04 2010 09:32 Blobskillz wrote:On December 04 2010 09:30 farseerdk wrote:On December 04 2010 09:27 Blobskillz wrote:even that you would consider korea to make up 60% of Blizazrds over all yearly profits makes my head hurt. you clearly read nothing. enlighten me please. When did I ever say that Korea makes up 60% of their profits? I never said that even once. I also think that's outrageous. I more wanted to point out that because the share is currently low, that makes Blizzard want to enter more because there is untapped potential. Why would Blizzard fight over these rights if they were already making money? you might want to read the first quote in your first post. For me there is pretty clearly written that Korea makes 60% of the profits. The next thing is that you compare the numbers for the IP rights that were given by KeSPA with pretty much nothing. As far as I know Blizzard never gave concrete numbers about how much they'd charge for Ip rights. Gretech gave numbers and those were considerably lower then those 700 million won. To me you jsut sound like another guy that wants to say that Blizzard is deliberatly killing off SC1
You are an idiot. You did not read Paul Sams declarations did you? The first quote in the post is from Paul Sams statements. He is showing that quote in order to see how he jumped from profit to sales.
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On December 04 2010 09:08 farseerdk wrote:
Introduction:
In this post I aim to deconstruct the press conference held by Paul Sams on Dec. 02 (http://www.teamliquid.net/forum/viewmessage.php?topic_id=173542) and the subsequent KeSPA response (http://www.teamliquid.net/forum/viewmessage.php?topic_id=173841). The reason I find it important to write this is that both sides are presenting the facts (if they are indeed facts) in such a way that benefits their side. I really think that this debate is more of a PR war than anything, and I really wanted to give the fan-base a clear idea of what is actually going on.
I don't have any inside connections in KeSPA or Blizzard - instead, I'm simply going to take whatever was said in the articles as true, but show you how this doesn't necessarily paint the picture that may seem most obvious.
am I the only one who thinks that those parts dont work together?
On December 04 2010 09:58 leo23 wrote:
You are an idiot. You did not read Paul Sams declarations did you? The first quote in the post is from Paul Sams statements. He is showing that quote in order to see how he jumped from profit to sales.
that might as well be a translator mistake. Really man we are talking here about an itnerview that was was msot likely hold in this way.
Korean Reporter asks
korean translator
Paul sams answers
korean translator
reporter writes down
then english dude translates news article
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On December 04 2010 09:59 Blobskillz wrote:Show nested quote +On December 04 2010 09:08 farseerdk wrote:
Introduction:
In this post I aim to deconstruct the press conference held by Paul Sams on Dec. 02 (http://www.teamliquid.net/forum/viewmessage.php?topic_id=173542) and the subsequent KeSPA response (http://www.teamliquid.net/forum/viewmessage.php?topic_id=173841). The reason I find it important to write this is that both sides are presenting the facts (if they are indeed facts) in such a way that benefits their side. I really think that this debate is more of a PR war than anything, and I really wanted to give the fan-base a clear idea of what is actually going on.
I don't have any inside connections in KeSPA or Blizzard - instead, I'm simply going to take whatever was said in the articles as true, but show you how this doesn't necessarily paint the picture that may seem most obvious.
am I the only one who thinks that those parts dont work together?
No, you're the only one who really isn't thinking here and just trying to be a smartass. He's trying to the compile information that we have, and he did a pretty good job. He basically says "this is the information that we have, and here is what you can get out of this". Please stop trolling.
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On December 04 2010 09:48 Blobskillz wrote:Show nested quote +On December 04 2010 09:34 farseerdk wrote:On December 04 2010 09:32 Blobskillz wrote:On December 04 2010 09:30 farseerdk wrote:On December 04 2010 09:27 Blobskillz wrote:even that you would consider korea to make up 60% of Blizazrds over all yearly profits makes my head hurt. you clearly read nothing. enlighten me please. When did I ever say that Korea makes up 60% of their profits? I never said that even once. I also think that's outrageous. I more wanted to point out that because the share is currently low, that makes Blizzard want to enter more because there is untapped potential. Why would Blizzard fight over these rights if they were already making money? you might want to read the first quote in your first post. For me there is pretty clearly written that Korea makes 60% of the profits. The next thing is that you compare the numbers for the IP rights that were given by KeSPA with pretty much nothing. As far as I know Blizzard never gave concrete numbers about how much they'd charge for Ip rights. Gretech gave numbers and those were considerably lower then those 700 million won. To me you jsut sound like another guy that wants to say that Blizzard is deliberatly killing off SC1
To me you just sound like another guy that wants to say that KeSPA is deliberatly lying in every single way possible.
Korea makes 60% of the profits
1. My friends cousins who live in Korea don't know what WoW is
2. Most of them obtained their copies illegally
3. Those who play with legal copies play at PC Bang
So let's go back to the quote. 60%? I'm pretty sure Blizzard is making more money off from WoW.
You have no idea what you're talking about. If you want to discuss, look at both sides of the argument, not just one.
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thank you for writing this. I was very confused about what all the fuss was about . +1 internets =)
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One of the most unbiased article written on the subject. Well done sir.
Also, if I remember correctly, the KeSPA's profits are distributed to several people/places, calling themselves non-profit organization. (of course, non-profit is BS, but they don't make too much money off of it).
I'll try to find the post if I can. If someone has a different post with a proof that I'm wrong, feel free to say so.
But don't be an idiot and post random BS.
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On December 04 2010 10:03 supernovamaniac wrote:Show nested quote +On December 04 2010 09:48 Blobskillz wrote:On December 04 2010 09:34 farseerdk wrote:On December 04 2010 09:32 Blobskillz wrote:On December 04 2010 09:30 farseerdk wrote:On December 04 2010 09:27 Blobskillz wrote:even that you would consider korea to make up 60% of Blizazrds over all yearly profits makes my head hurt. you clearly read nothing. enlighten me please. When did I ever say that Korea makes up 60% of their profits? I never said that even once. I also think that's outrageous. I more wanted to point out that because the share is currently low, that makes Blizzard want to enter more because there is untapped potential. Why would Blizzard fight over these rights if they were already making money? you might want to read the first quote in your first post. For me there is pretty clearly written that Korea makes 60% of the profits. The next thing is that you compare the numbers for the IP rights that were given by KeSPA with pretty much nothing. As far as I know Blizzard never gave concrete numbers about how much they'd charge for Ip rights. Gretech gave numbers and those were considerably lower then those 700 million won. To me you jsut sound like another guy that wants to say that Blizzard is deliberatly killing off SC1 To me you just sound like another guy that wants to say that KeSPA is deliberatly lying in every single way possible. 1. My friends cousins who live in Korea don't know what WoW is 2. Most of them obtained their copies illegally 3. Those who play with legal copies play at PC Bang So let's go back to the quote. 60%? I'm pretty sure Blizzard is making more money off from WoW. You have no idea what you're talking about. If you want to discuss, look at both sides of the argument, not just one.
That's why he quoted from both sides. It's pretty balanced argument (not even an argument! It's not like he chose a freaking side!). The thing I have to say though is that the use of the 60% quote is off. The CEO said he read it in a newspaper and that it was wrong, so it should be taken as something probably lower, but no one really knows how much lower.
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On December 04 2010 10:03 supernovamaniac wrote:
To me you just sound like another guy that wants to say that KeSPA is deliberatly lying in every single way possible.
the Op said it, it's more or les a PR campain from both sides, but what I believe is that Blizzard has no reason to insist this strongly on their IP rights for that puny pocketmoney they'd make off KeSPA.
KeSPA on the other hand is fighting for it's survival or at least it would be a major blow to them, so I tend to be more willing to believe what Blizzard is stating.
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On December 04 2010 09:48 Blobskillz wrote:Show nested quote +On December 04 2010 09:34 farseerdk wrote:On December 04 2010 09:32 Blobskillz wrote:On December 04 2010 09:30 farseerdk wrote:On December 04 2010 09:27 Blobskillz wrote:even that you would consider korea to make up 60% of Blizazrds over all yearly profits makes my head hurt. you clearly read nothing. enlighten me please. When did I ever say that Korea makes up 60% of their profits? I never said that even once. I also think that's outrageous. I more wanted to point out that because the share is currently low, that makes Blizzard want to enter more because there is untapped potential. Why would Blizzard fight over these rights if they were already making money? you might want to read the first quote in your first post. For me there is pretty clearly written that Korea makes 60% of the profits. The next thing is that you compare the numbers for the IP rights that were given by KeSPA with pretty much nothing. As far as I know Blizzard never gave concrete numbers about how much they'd charge for Ip rights. Gretech gave numbers and those were considerably lower then those 700 million won. To me you jsut sound like another guy that wants to say that Blizzard is deliberatly killing off SC1
I know English is probably not your first language but holy shit work on your reading comprehension before you make posts criticizing someone else's arguments.
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On December 04 2010 10:09 Blobskillz wrote:Show nested quote +On December 04 2010 10:03 supernovamaniac wrote:
To me you just sound like another guy that wants to say that KeSPA is deliberatly lying in every single way possible.
the Op said it, it's more or les a PR campain from both sides, but what I believe is that Blizzard has no reason to insist this strongly on their IP rights for that puny pocketmoney they'd make off KeSPA. KeSPA on the other hand is fighting for it's survival or at least it would be a major blow to them, so I tend to be more willing to believe what Blizzard is stating.
You still don't know what kind of battle you're stepping into.
"Hi. I don't have to lie since I'm not desperate"
"Hi. I will lie since I'm desperate"
That's your whole argument. Nothing else. You're willing to believe someone just over the fact that he/she isn't desperate for money.
That's why he quoted from both sides. It's pretty balanced argument (not even an argument! It's not like he chose a freaking side!). The thing I have to say though is that the use of the 60% quote is off. The CEO said he read it in a newspaper and that it was wrong, so it should be taken as something probably lower, but no one really knows how much lower.
You don't even see quality posts like these nowadays. Maybe once a few days. One of the reasons why I don't like the SC2 section and the Blizzard vs KeSPa threads: it's filled with biased crap, with no evidence to back them up.
And thanks for the correction.
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OP ! Finish the post and don't mind ze trollz.
They suck big, sweaty, salty and hairy ballz.
^_^
P.S. : Nice read BTW, looking forward seeing it finished.
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EPT
