The New Normal

Regular readers of this blog know that I am attempting to make a profitable enterprise out of a solo, casual industrial effort in high security space. Before the comprehensive revamp of all industry mechanics in the Crius expansion, released on July 22nd, I was making a very good income in-game, doing invention and Tech II manufacturing in a small player-owned starbase (POS) in high-sec. The Crius expansion changed the economic landscape in New Eden, by making industry more accessible to players, and at the same time, by pushing advantages for invention and manufacturing towards lower security space, to encourage more infrastructure development there.

Some cynical prognosticators predicted dire consequences as an inevitable result of the Crius changes, including an erosion of any meaningful profits for high-sec manufacturers, or an inexorable dominance of null-sec industrialists over all production in New Eden. So far, two months after the introduction of Crius, neither of these extreme scenarios have yet come to pass, much to my relief.

Though it is still too early to state with certainty what the ultimate results of the Crius industry changes will be to New Eden's economy, I see some initial trends, and am now forming some opinions on how a "new normal" is emerging for aspiring industrialists in EVE Online. In this post, I would like to share a few perspectives on the post-Crius environment as an independent inventor, manufacturer and tradesman based in high-sec space.

Margins Since Crius

What has happened since the release of the Crius expansion? First, as documented by CCP Ytterbium in a recent dev blog, general participation in industrial activities has increased by double-digit percentages across the board (except for Reverse Engineering, which still realized a healthy increase of 8%).

Industrial activity in New Eden, pre- and post-Crius - clearly, industrial job counts are up, across the board.

CCP devs also commented during the recent Alliance Tournament that this increase in industrial activity has occurred in all types of space: null-sec, low-sec, high-sec and even wormhole space to a degree. So, Crius has succeeded in stirring the interest of industrialists throughout all of New Eden, thus far, and not only in 0.0 as some had feared.

If this level of activity continues, this is both good and bad news. The good news is that more production means more products in the markets, which should keep costs low, a benefit for all players. For manufacturers, however, the increased supply means much higher market competition, which puts pressure on profit margins.

And indeed, I have discovered that my profits on my Tech II modules appear to have declined by about one-quarter to one-half. Before the Crius expansion, my gross margins on most Tech II modules averaged around 40 percent - today, they average a little over 20 percent, with some variability depending on the item sold and where I sell it.

In this regard, the cynical prognosticators mentioned previously have proven to be about half-right - margins have trended lower for high-sec producers, though this seems to be a result of more participants from everywhere in New Eden, rather than from a wholesale market takeover by null-sec producers alone.

Prices Since Crius

Just before the release of the Crius expansion, CSM member mynnna, known for his industrial expertise, wrote an interesting blog post which boldly forecast future trends of prices in the market, as a result of the Crius changes. Though it is still too early to make a final judgement on his predictions, it is useful to benchmark these against what has actually transpired, so far.

Note that I am using Jita prices and trends as illustrations here. Prices differ in other markets, as I'll explore further below. But as the dominant market in New Eden, Jita provides a good indicator of the general price levels in New Eden, with the proviso that your experience may be slightly different in your local market.

mynnna's first prediction was: "Expect a base price rise of 3-4% or more" on manufactured goods. His reasoning was that manufacturers need to cover the higher fees in Crius, which should have driven prices up slightly. That is the rational conclusion, but markets in New Eden are rarely rational. A quick survey of common Tech I items shows the ususal cacophony of price increases, decreases and fluctuations, instead of a general price rise since July 22nd.

However, mynnna also predicted "chaos" for prices of Tech II manufactured items, and this has proven to be more correct. The dominant effect of increased levels of invention has resulted in higher production of advanced tech items, putting downward pressure on most prices in the market. These examples illustrate the broad declining trend for Tech II items:

Notably, there are some exceptions to the prevailing trend, such as Tech II sentry drones and afterburners, though with more price fluctuations, as illustrated here:

I would love to see some summary statistics from CCP Games on overall market pricing trends since Crius. (Alas, we need our economist, CCP Dr. EyjoG, back!) But in general, what I have personally experienced so far seems to be the result of higher participation and activity by an increased number of producers, resulting in lower prices for most Tech II items.

The lesson for inventors and manufacturers is nothing new in EVE Online: research the markets carefully before deciding what items to invent and produce. This basic advice has become even more important in the post-Crius environment, given the higher market competition and the significant fluctuations in prices on many items.

Minerals Since Crius

mynnna also predicted that mineral prices would be "Probably down, mostly." However, he was far less certain about the expected impact of Crius on minerals. Indeed, so far, prices on minerals have trended in unpredictable ways since the Crius expansion release.

Here are the minerals that have trended upwards:

Meanwhile, other minerals have trended downwards, or remained low post-Crius:

And finally, two minerals seem to be fluctuating as the chaos of the emerging post-Crius market continues, especially Morphite, which is now required for most Tech II item manufacturing:

I honestly do not know what to make of these trends. You would think that with the addition of Mexallon, Pyerite and Nocxium to Arkonor, Bistot and Crokite, respectively, there would be more supply of each, and therefore, a consistent decline in price for all, but that has not turned out to be the result, so far. Suffice it to say that the mineral prices in the post-Crius era illustrate the still ongoing disruption in the market, and any consistent patterns of relative price levels have yet to emerge.

The New Normal

Though my casual high-sec industry experiment is ongoing, I've had enough experience in the post-Crius world to come to some initial conclusions.

  1. Profits are still to be made in industry, including in high-sec - though generally not at pre-Crius levels. The key to success in industry has expanded from simply maximizing production amounts to managing and minimizing production costs as well. In the pre-Crius world, gross profit margins on nearly all Tech II items were generally high (except for some ships and selected low-turnover items), and so, the key to success was to simply produce as much as possible. When your margins are big, you don't have to worry too much about expenses. In the post-Crius world, that is no longer the case. Now producers need to consider where they are based, the costs of their raw materials, the application of teams, and the effectiveness of their chosen production facilities - all to keep costs at low enough levels to realize a profit in the market. By paying attention to these factors, my cash flow has continued to be positive. In fact, since the release of the Crius expansion, my relatively low-effort high-sec industry experiment has produced over 3 billion ISK in cash. However, this does not take into account my previous investments in fixed costs, such as my POS and related expenses. Still, I remain optimistic about the long-term profitability of my experiment, so far.
  2. Higher competition in markets is the new normal. More than any other factor, the increased level of participation in industrial activities is driving prices and profit margins in the post-Crius world. I don't think even CCP or many of the industry experts in the game adequately foresaw the impact of the large number of players who have jumped into industry, and based on the trends so far, the higher level of competition in the market shows no sign of abating.
  3. Sell in optimal markets, patiently. In the pre-Crius world, I usually produced my Tech II modules and shipped them to Jita for a quick sale. With the generally lower price levels in the post-Crius world, I have to be more discerning about where I sell my manufactured items in order to realize good returns. I've established trading alts in multiple local markets, and use them to determine where to ship items to take advantage of the best prices. It takes longer to use sell orders in these smaller markets, to be sure, but the margins come out better - it simply requires more attention, persistence and patience. One of CCP Games' objectives was to spread the value of industrial activity across more systems in New Eden - in this regard, the Crius changes have been successful.

Bracing for the New Invention

As I reported in my previous post, I'm excited about the upcoming changes to invention, though I suspect that it may actually work against me in the market. The proposed changes simplify the invention process, making it more accessible to players. I expect that this will encourage even more participation, which will further increase supply and put even more pressure on Tech II margins.

Therefore, I remain reluctant to proclaim my experiment in high-sec industry a success. The storm that started with Crius is not yet over, and there is at least one more wave of change to endure before I can come to any final conclusions about the viability of manufacturing in high-sec space as a profitable, solo enterprise.

The emerging new normal for industrialists in EVE Online is not yet fully defined, though it is beginning to take shape - and so far, I am intrigued, though still a little fearful, by what I see.

Fly safe! o7