Analyst: EA's Spent $500 Million On The Old Republic

[vansau]

Analyst: EA's Spent $500 Million On The Old Republic

Even though everybody knows that The Old Republic cost a lot of money to make, most folks probably didn't think it was that expensive.

In spite of some of its troubles at launch, it's safe to say that <a href=http://www.amazon.com/Star-Wars-Old-Republic-Pc/dp/B001CWXAP2/ref=sr_1_1?ie=UTF8&qid=1326850334&sr=8-1>Star Wars: The Old Republic has been a <a href=http://www.escapistmagazine.com/articles/view/editorials/reviews/9347-Star-Wars-The-Old-Republic-Review>pretty rousing success so far. That's certainly good news for Electronic Arts, since this game is <a href=http://www.escapistmagazine.com/news/view/100967-Star-Wars-The-Old-Republic-is-EAs-Most-Expensive-Project-in-History>reportedly the most expensive the company's ever developed and produced. But how much did the game cost to make? One analyst is claiming that the company's shelled out at somewhere around $500 million.

Speaking to MarketWatch in a profile piece about Electronic Arts CEO John Riccitiello, Doug Creutz of Cowen & Co explained that EA took a substantial risk with The Old Republic:

"I think it's safe to say that the total all-in investment in 'Star Wars' is probably approaching half a billion dollars. EA has minimized its risks as much as it can on this bet, but it's still a risky bet. To the extent that any one game defines his tenure, it's going to be how Star Wars performs."

Of course, EA is keeping mum about how much money it actually spent, so there's no hard data to support this theory. Still, it wouldn't be all that surprising if it turned out to be true: If you're going to make a game that will possibly unseat World of Warcraft, you better go big or go home.

Source: <a href=http://www.marketwatch.com/story/electronic-arts-riccitiello-aims-high-2012-01-17?pagenumber=2>MarketWatch



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[D0WNT0WN]

$500 Million?! To make a bad World Of Warcraft clone!?

"It's to big to fail!"

 

[Omnific One]

Hey, maybe if this fails and EA gets annoyed, they might try to sell Bioware. And you know a company with a ton of investment capital? Bethesda. That would be a dream come true.

 

[Treblaine]

Spoiler

[HEADING=2]The Price of SWTOR is Too Damn High![/HEADING]

Spoiler

That is insane money. Avatar didn't cost that much. And Entire TV season an entire series even doesn't cost that much. That is moving into the are of 'military budgets of small nations' amounts of money. Jesus, that the kind of cash you use building an oil rig or power station.

Mind you. $15 per month, over lets say 4 years. If they average just 3 million users and running costs are included in that $500m estimate then they will make a profit. Barely.

 

[viranimus]

What I find interesting is that we see estimates coming in at half a billion dollars, yet not even a week earlier we saw articles popping up that EA is now quite pleased with ToRs financial performance. Pretty much indicating that EA finds it to be a profitable venture now. With a yard mark of half a billion that somewhat indicates the kind of money they have made thus far and are likely to make quite soon once the first month is over and subscription costs come rolling in.

EDIT: Dont forget the initial 60-80USD for the cost of the game. If there are 2 million subscribers, which server populations sort of hint that there are and 2 million is sort of a low figure for typical triple A titles, your looking at potentially 160 million just from the first day. Then roughly 30k added every month, then the eventual "episodes" or DLC/microtransactions that bioware is likely going to try to sell between expansions and the game if it is able to retain a steady population of 2 million could easily return that in roughly about a years time.

 

[isometry]

For a total of $100 million, they could have made 3 cross-platform single-player KoTOR sequels this generation and sold 2-3 million each, easily. That's what Mass Effect sells, so add the star wars license and they could sell 4-5 million copies each across all consoles and PC.

Three games at 2-5 million copies, they'd be looking at at least 300 million to up to a billion in revenue. Skyrim alone made $650 million in revenue at last count, so for 3 KoTOR games we're just trying to get an estimate of what they could have made. After all costs paid, 200 million or more in profits.

We don't have sales data from Origin for SW:TOR, but based on retail it's in the neighborhood of 2 million copies sold. Let's assume they sell 4 million copies (very optimistic), and hang on to an average of 1 million subscribers for 1 year (very optimistic).

Say the average price per copy is, $60, averaging out sale prices with collector's editions, so $60*4 million = 240 million. The subscriptions would be 15*12*1 million = 180 million. So this very optimistic projection puts them at $420 million in revenue.

Without even considering the development costs, and on-going support costs for a huge online game, we're looking at gross revenue of $500 million. If we believe this article, that would put net profits at roughly zero. Compared to net profits of 300 million to 1 billion that three KoTOR sequels would have brought in by now.

As you can see, these numbers add up to a financial disaster. What were they thinking? It's clear that at some point they thought they could bring in 10 million subscribers, that's the only reason they would have made SW:ToR instead of three KoTOR sequels. The game won't shut down of course, but unless they match WoW numbers it's a clear financial failure compared to the games they could have made, without even taking into account this rumored record-breaking budget.

 

[Treblaine]

Hey, maybe if this fails and EA gets annoyed, they might try to sell Bioware. And you know a company with a ton of investment capital? Bethesda. That would be a dream come true.

The only way you will get Bioware (with its current value) from EA is from their cold dead hands, i.e if the company descends into bankruptcy and is forcibly liquidated and to sell off all their assets before they are shut down.

That, or all the STAFF of Bioware quit in a mass exodus and effectively set up a clone company like Respawn Software from Infinity Ward. Of course if Bioware suddenly forget how to make good games and stop making profit EA might sell, but then it is more likely the studio will be liquidated than sold.

 

[razer17]

Say the average price per copy is, $60, averaging out sale prices with collector's editions, so $60*4 million = 240 million. The subscriptions would be 15*12*1 million = 180 million. So this very optimistic projection puts them at $420 million in revenue.

Without even considering the development costs, and on-going support costs for a huge online game, we're looking at gross revenue of $500 million. If we believe this article, that would put net profits at roughly zero. Compared to net profits of 300 million to 1 billion that three KoTOR sequels would have brought in by now.

As you can see, these numbers add up to a financial disaster. What were they thinking? It's clear that at some point they thought they could bring in 10 million subscribers, that's the only reason they would have made SW:ToR instead of three KoTOR sequels. The game won't shut down of course, but unless they match WoW numbers it's a clear financial failure compared to the games they could have made, without even taking into account this rumored record-breaking budget.

I don't think you're right. Firstly I think the financial analysts of EA are probably privy to some much better data than your conjecture. The first KoToR games, whilst popular, weren't that big sales wise.

I've seen some pretty good reviews for this game, and the sales already have been very good. I think what you say are very optimistic sales and subscriptions are actually quite low, especially the subscriptions. This may well be the MMO to finally take away a large chunk of WoW players for a long period of time. Bioware are a company pretty similar in stature to WoW, so they have the developer credibility, plus the advertising budget that EA inevitably has.

I think that a company like EA would only sanction these sort of dev costs if it was almost guaranteed to make money. People are still paying for Conan and Warhammer, which are comparatively flops.

This game will probably continue to sell well for another year at least, with subscriptions levelling out after a while and staying steady, but profitable.

 

[glenbruton]

Guys, you do know that this analyst has made this GUESS based on unverified assumptions right ?


Unbelievable figures should not be believed .

 

[Sixcess]

If they did spend anywhere close to that kind of money on SWTOR then it's clear that EA wants a WoW killer. They pitched BF3 as going head to head with MW3 so it's entirely in character for them to push SWTOR directly up against WoW.

Which is the biggest risk to the long term success of SWTOR. If it had launched like any other MMO of the last five years it'd be doing fine, but EA had to go big, and that's going to hurt them, because there is no way that SWTOR will ever achieve more than 1-1.5 million subs and hold onto them, and that's being optimistic.

That's what worries me the most about TOR, and it's one of the main reasons I keep following its progress. It may well end up changing the nature of the MMO industry - by scaring away investment money from future projects by other developers if it fails.

And by 'fails' I don't mean if it shuts down. I mean if it doesn't perform to EA's insane expectations, and I don't see how it can.

 

[SkeletonGuy]

EDIT: Dont forget the initial 60-80USD for the cost of the game. If there are 2 million subscribers, which server populations sort of hint that there are and 2 million is sort of a low figure for typical triple A titles, your looking at potentially 160 million just from the first day.

We don't have sales data from Origin for SW:TOR, but based on retail it's in the neighborhood of 2 million copies sold. Let's assume they sell 4 million copies (very optimistic), and hang on to an average of 1 million subscribers for 1 year (very optimistic).

Say the average price per copy is, $60, averaging out sale prices with collector's editions, so $60*4 million = 240 million. The subscriptions would be 15*12*1 million = 180 million. So this very optimistic projection puts them at $420 million in revenue.

Guys that's not how retail revenue works, it's not as simple as calculating how many copies it sold times the cost of every copy. Retailers take a big chunk of that plus taxes plus shipping plus all those things, I have no exact numbers but some analysts say devs and publishers only make like 45% 50% of every retail copy sold

P.S. that estimate number of units sold is absurd considering swtor only has a million subscribers as of now, straight from EA's mouth

 

[SkeletonGuy]

Also my bet is they spent most of the money on marketing,seriously the swtor advertising campaign was ridiculous and bigger than any other mmo ever

 

[Terminate421]

Spoiler

[HEADING=2]The Price of SWTOR is Too Damn High![/HEADING]

Spoiler

That is insane money. Avatar didn't cost that much. And Entire TV season an entire series even doesn't cost that much. That is moving into the are of 'military budgets of small nations' amounts of money. Jesus, that the kind of cash you use building an oil rig or power station.

Mind you. $15 per month, over lets say 4 years. If they average just 3 million users and running costs are included in that $500m estimate then they will make a profit. Barely.

Spoiler

Spoiler

Don't forget that its a sequel to a rather large MMO so....the fans who like it will definitly buy it. Don't forget about newcomers who may be intrigued as well.

 

[isometry]

EDIT: Dont forget the initial 60-80USD for the cost of the game. If there are 2 million subscribers, which server populations sort of hint that there are and 2 million is sort of a low figure for typical triple A titles, your looking at potentially 160 million just from the first day.

We don't have sales data from Origin for SW:TOR, but based on retail it's in the neighborhood of 2 million copies sold. Let's assume they sell 4 million copies (very optimistic), and hang on to an average of 1 million subscribers for 1 year (very optimistic).

Say the average price per copy is, $60, averaging out sale prices with collector's editions, so $60*4 million = 240 million. The subscriptions would be 15*12*1 million = 180 million. So this very optimistic projection puts them at $420 million in revenue.

Guys that's not how retail revenue works, it's not as simple as calculating how many copies it sold times the cost of every copy. Retailers take a big chunk of that plus taxes plus shipping plus all those things, I have no exact numbers but some analysts say devs and publishers only make like 45% 50% of every retail copy sold

P.S. that estimate number of units sold is absurd considering swtor only has a million subscribers as of now, straight from EA's mouth

I completely agree with you. The way I calculated the revenue was very optimistic in EA's favor, because I wanted an upper bound on the revenue. In other words, even with the over-estimates they would be lucky to make $420 million gross profit after 1 year.

Also Skyrim gross revenue of $650 million is not my calculation, it's a direct quote from Bethesda.

http://gamingbolt.com/skyrim-ships-10-million-650-million-in-revenue-and-becomes-the-fastest-selling-game-in-steam-history

Say the average price per copy is, $60, averaging out sale prices with collector's editions, so $60*4 million = 240 million. The subscriptions would be 15*12*1 million = 180 million. So this very optimistic projection puts them at $420 million in revenue.

Without even considering the development costs, and on-going support costs for a huge online game, we're looking at gross revenue of $500 million. If we believe this article, that would put net profits at roughly zero. Compared to net profits of 300 million to 1 billion that three KoTOR sequels would have brought in by now.

As you can see, these numbers add up to a financial disaster. What were they thinking? It's clear that at some point they thought they could bring in 10 million subscribers, that's the only reason they would have made SW:ToR instead of three KoTOR sequels. The game won't shut down of course, but unless they match WoW numbers it's a clear financial failure compared to the games they could have made, without even taking into account this rumored record-breaking budget.

I don't think you're right. Firstly I think the financial analysts of EA are probably privy to some much better data than your conjecture. The first KoToR games, whilst popular, weren't that big sales wise.

I've seen some pretty good reviews for this game, and the sales already have been very good. I think what you say are very optimistic sales and subscriptions are actually quite low, especially the subscriptions. This may well be the MMO to finally take away a large chunk of WoW players for a long period of time. Bioware are a company pretty similar in stature to WoW, so they have the developer credibility, plus the advertising budget that EA inevitably has.

I think that a company like EA would only sanction these sort of dev costs if it was almost guaranteed to make money. People are still paying for Conan and Warhammer, which are comparatively flops.

This game will probably continue to sell well for another year at least, with subscriptions levelling out after a while and staying steady, but profitable.

I agree that the original KoTOR games did not sell that well, 2 million on Xbox for KotoR 1, and 1.6 million on Xbox for KoTOR 2. PC retail sales were almost non-existent, less than 100k.

Still, the games had/has a great reputation, and during a steam sale last year I saw KoTOR 1 on the best selling list (in 2011!). I arrived at my 2-5 million per KoTOR sequel estimate based on Mass Effect quality + great license (Force Unleashed sold 6 million copies).

As for Bioware's reputation compared to Blizzard. First, understand I'm no WoW fan, I don't care for the setting/genre/style of Warcraft. But I did play Diablo in the 1990s, enough to know that Blizzard had the best selling addictive-repetitive online loot ladder before WoW even existed. In comparison, I've never heard of Bioware's games being described as addictive for months at a time.

I don't think the game will have trouble breaking even (I'm sure it's budget is less than the 500 million in this article). But this is Star Wars, and Bioware, they may pretend to be satisfied with breaking even but for hot properties like these it's a failure. If you expect your investment to do 20% per year and it "breaks even" i.e. 0% that's a major failure.

 

[Ligisttomten]

For 500 Million $ I predict a long-living Tortanic meme. IF that estimate is even close to accurate.

 

[Pebkio]

500 mil for a game that is almost, but not quite, exactly like WoW. I mean, I was watching a friend play, and I saw him take a gryphon land-speeder ride that acted a lot like riding a land-speeder gryphon.

Still, if you want to unseat WoW, I guess you make a game exactly like it, but just make it Star Wars instead.

 

[Aiddon_v1legacy]

I could understand that if it includes marketing. Bioware is a big name in the gaming industry and Star Wars is one of the biggest cultural names of all time, so I can see this game finding its niche and carving out a reputable profit.

 

[Sylveria]

then the eventual "episodes" or DLC/microtransactions that bioware is likely going to try to sell between expansions and

I won't comment on the quality of the game, but right there is one of the core reasons I'm waiting a while before I buy it. If I'm dropping $15 a month on the game, I shouldn't be paying extra for new content. That $15 a month is my pre-payment for new content, otherwise what am I paying for? To keep accessing a game I already paid full price to purchase?

When it boils down to it, BioWare is EA's ***** now and I can easily see them charging you extra for content on top of your subscription fee. Hopefully I'm wrong, cause microtransactions for actual content in a game that already has a monthly subscription fee is not going to go over well even for a game as big as SWTOR, and it could easily send people back to WoW.

 

[008Zulu_v1legacy]

I read $500 million and my right eyebrow shot up so high it flew right off my face.

It will be years before they make their money back, if at all. Right now all the servers are based in America yeah and they have said that anywhere outside will have lag issues? Do they really expect America's 300 million population to buy 1.5 copies each? To say nothing about the subscription fees.