EA Deepens Its Stake In The Old Republic

[Jake Martinez]

The question is when you pour that much money into a project how exactly do you consider it a success? A regular game can tell by its sales, but for MMOs it isn't as easy. WoW didn't get its millions upon millions of subscribers overnight. More and more it just seems like they are setting the game up for disaster.

Actually, this is really easy to figure out. The cost is:

Revenue, LESS...

Infrastructure
Support
Development
Distribution
Financing

Also, in software (which is the business I happen to be in) there are two metrics on profitability that are really standard across the business. The first is the gross take, and the second is the net.

The gross take is defined as the profit after sales - labor + materials. If you believe the 300 million figure (and I don't) and we attribute about 65% of that to labor and materials, we're talking a huge number of box sales to make the 90% profitability gross standard. To put it simply, it'd have to be the best selling video game release *ever* at launch in order to recoup this investment.

However, since it's an MMO and their sales cycle is far longer than a standard piece of software, it's likely that internally EA will calculate this over a longer term forecast of several years (dunno how many, this is all black magic at this point because it's a slightly different business model, more like SaaS instead of traditional box software)

Anyway, the second number is easier to track on a quarterly basis, and that's the net return. This is just quarterly profits (sales + subscriptions) less the ongoing operational expenses. In this case, we can assume that their ongoing expenses will be large, but still modest, maybe 20% of initial investment (which at a purported 300 million, is still huge - 60 mil a year, 15 mil a quarter). The standard here is also lower, you're looking for an average margin of about 20-30%, or about 2 million subscribers a month (which perhaps not so strangely, falls in line with what EA is claiming it will generate, ergo 1 to 2 million subscribers)

So, looking at all those numbers and lining them up with some of the rumors we've heard, it's pretty easy to speculate that almost certainly if after the first year or so of release, if this game doesn't have at least 1 million subscribers, it'll be a money loser for EA and even at the 1 to 2 million subscription mark, it will be a period of 2-3 years before the project as a whole starts to line up with profitability standards. However, if you change some of the numbers around (like say, drop from 300 million to 100 million for initial investment), it becomes a hell of a lot easier to see how the game could survive and even prosper.

To be perfectly blunt, the news that EA is taking a bigger stake in the game is not a good sign. Not a good sign at all. A company like LucasArts doesn't relinquish part of a publishing deal that they are guaranteed to make money on, so my gut reaction is that EA has gone over budget on this game substantially (I would say, split the difference and say 120-200 mil instead of the 300 mil, but hey... it could be true) and in order to keep LucasArts from breathing down their necks, they limited their exposure to the potential economic loss of the game.

Now, I wouldn't say this game is in trouble. If it's a good game, even if the subscription numbers aren't there initially to line it up with the 20-30% margin, EA has deep enough pockets to eat a slow growth proposition. If they'll do it however (and this will probably be dictated by licensing agreements and subscription forecasts), will remain a mystery. My gut feeling however is that the bean counters over at EA are already aware of this and preparing for a long slog. I mean, really, unless the game is crap on ice, it's almost certain that they can eventually get their money back out of this. It's just a matter of how long they eat the chowder until they get the lobster.

 

[Sajuuk-khar]

I don't really see what everyone's complaining about. From the footage we've been shown it's like a 'normal' BioWare RPG like KOTOR or Mass Effect in an MMO setting. Everything we've actually seen is great as far as I'm concerned. Only thing that worries me is length, the game better have a lot of missions.

I don't really see where the criticism is coming from. All I see is complaining about things they can't proof (yet, I admit) or pure speculation.

 

[DancePuppets]

You're fucking with me, right? They've made sure to thoroughly ass rape every bit of good lore that there was to be found in World of Warcraft. Not only have they begun to repeat the same stories that have already been told in the older games/books, but they let you kill key characters in the story which should have been too powerful to combat, even with 300 people.

Add Space Elves to that and you've got some real bullshit stew. Not Draenor, that was fine...Warcraft is a world of magic, and the portals made sense. But the fact that they literally had Draenei and Blood Elves flying around in spacecraft in some of the new lore; fucking retarded. How hard is it really to simply stick to your medieval setting?

The few bits of lore that they do get right are stories that were already covered in the books. Like in many of the Caverns of Time quests. But everything new that they've attempted to write, and everything they've attempted to edit from past lore, is all worse than the stuff coming out of tubgirl.

Within WoW the lore is perfectly consistent and does work, I'm not defending it when compared to lore from previous games in the series (ie. the RTS's), but things like the Draenii were introduced in Vanilla WoW and are detested by some people, such as yourself, whereas I have no problem with them, considering that you've already got the gnomes able to build an underground train system, I think the medieval setting went out the window a long time ago.

 

[DancePuppets]

I don't really see what everyone's complaining about. From the footage we've been shown it's like a 'normal' BioWare RPG like KOTOR or Mass Effect in an MMO setting. Everything we've actually seen is great as far as I'm concerned. Only thing that worries me is length, the game better have a lot of missions.

I don't really see where the criticism is coming from. All I see is complaining about things they can't proof (yet, I admit) or pure speculation.

The only problem I've heard about was from PAX, where there were complaints that listening to some telling you to go off and kill 10 "space-rats" did not add to the game at all and actually detracted from it.

 

[Sajuuk-khar]

...

The only problem I've heard about was from PAX, where there were complaints that listening to some telling you to go off and kill 10 "space-rats" did not add to the game at all and actually detracted from it.

Well I guess that's true then, but all other MMO's do exactly the same. I don't mind some grinding if I get hours of normal BioWare RPG stuff in an MMO world.

 

[DancePuppets]

This is what I was saying that I am speaking for deafears.
The WoW lore is NOT strong, it's weak and pathetic full of plotcraps that really doesn't make much sense at all and really is there to cater to the 13 year old boys.

That is all I am going to add to this discussion about it.

If you read what I've put I've not actually said it's strong, just that it hasn't got any worse since BC, hence your original post decrying everything since the BC because of Activision's involvement seems inconsistent. Again, from your arguments the perceived decline in the quality of Blizzard's products appears to have more to do with the release and maintenance of WoW than anything to do with Activision. I, personally, like a lot of the lore within WoW, I accept it's not necessarily as well written as it could be, but it is fun, and that's all that matters to me within a game.

 

[DancePuppets]

]Well I guess that's true then, but all other MMO's do exactly the same. I don't mind some grinding if I get hours of normal BioWare RPG stuff in an MMO world.

Other MMOs don't have you listen to a voice-over of someone telling you to go kill rats, that's the main difference. You can probably skip it though, it's just a pity that they've spent so much money on such things.

 

[Colonel Alzheimer's]

Everyone needs to chill the fuck out. Beyond all the financial speculations and fancy trailers, all we really know is that this game looks really good so far, and is supposed to have the content of several KOTOR games. I think we should just catch our breath and wait for the damn thing to come out before we all decide whether it'll be a WoW killer or a massive failure that will destroy Bioware.

 

[JediMB]

This is exacerbated by BioWare's inexperience with MMORPGs.

This is something I keep hearing, but don't get.

Wasn't World of Warcraft Blizzard's first MMO experience? Wasn't Final Fantasy XI, which is also still alive and well, Square Enix' first MMO?

They're experienced videogame developers. They know how to make good and successful games. Beyond that, they are likely to have plenty of people on-board who play or have studied MMOs to understand how they work.

 

[Dirty Apple]

They're in a very tough spot. The game will either be too much like WoW or not enough like WoW. I've seen the fanboy comments before, "This is just a direct rip-off of WoW's game mechanics and therefore it is poser garbage," or, "Where's the WoW game mechanics that I've grown accustomed to? There not in this game therefore it's just wannabe garbage." I have no idea how EA/Bioware are gonna walk that tightrope.

 

[Sajuuk-khar]

This is exacerbated by BioWare's inexperience with MMORPGs.

This is something I keep hearing, but don't get.

Wasn't World of Warcraft Blizzard's first MMO experience? Wasn't Final Fantasy XI, which is also still alive and well, Square Enix' first MMO? (...)

Yeah it's also not exactly true. Mythic (Dark Ages of Camelot, Warhammer Online) is now part of BioWare as well.

Other MMOs don't have you listen to a voice-over of someone telling you to go kill rats, that's the main difference. You can probably skip it though, it's just a pity that they've spent so much money on such things.

Oh well let's just hope/assume they listen to those complaints.

 

[SomebodyNowhere]

The question is when you pour that much money into a project how exactly do you consider it a success? A regular game can tell by its sales, but for MMOs it isn't as easy. WoW didn't get its millions upon millions of subscribers overnight. More and more it just seems like they are setting the game up for disaster.

Actually, this is really easy to figure out. The cost is:

Revenue, LESS...

Infrastructure
Support
Development
Distribution
Financing

Also, in software (which is the business I happen to be in) there are two metrics on profitability that are really standard across the business. The first is the gross take, and the second is the net.

The gross take is defined as the profit after sales - labor + materials. If you believe the 300 million figure (and I don't) and we attribute about 65% of that to labor and materials, we're talking a huge number of box sales to make the 90% profitability gross standard. To put it simply, it'd have to be the best selling video game release *ever* at launch in order to recoup this investment.

However, since it's an MMO and their sales cycle is far longer than a standard piece of software, it's likely that internally EA will calculate this over a longer term forecast of several years (dunno how many, this is all black magic at this point because it's a slightly different business model, more like SaaS instead of traditional box software)

Anyway, the second number is easier to track on a quarterly basis, and that's the net return. This is just quarterly profits (sales + subscriptions) less the ongoing operational expenses. In this case, we can assume that their ongoing expenses will be large, but still modest, maybe 20% of initial investment (which at a purported 300 million, is still huge - 60 mil a year, 15 mil a quarter). The standard here is also lower, you're looking for an average margin of about 20-30%, or about 2 million subscribers a month (which perhaps not so strangely, falls in line with what EA is claiming it will generate, ergo 1 to 2 million subscribers)

So, looking at all those numbers and lining them up with some of the rumors we've heard, it's pretty easy to speculate that almost certainly if after the first year or so of release, if this game doesn't have at least 1 million subscribers, it'll be a money loser for EA and even at the 1 to 2 million subscription mark, it will be a period of 2-3 years before the project as a whole starts to line up with profitability standards. However, if you change some of the numbers around (like say, drop from 300 million to 100 million for initial investment), it becomes a hell of a lot easier to see how the game could survive and even prosper.

To be perfectly blunt, the news that EA is taking a bigger stake in the game is not a good sign. Not a good sign at all. A company like LucasArts doesn't relinquish part of a publishing deal that they are guaranteed to make money on, so my gut reaction is that EA has gone over budget on this game substantially (I would say, split the difference and say 120-200 mil instead of the 300 mil, but hey... it could be true) and in order to keep LucasArts from breathing down their necks, they limited their exposure to the potential economic loss of the game.

Now, I wouldn't say this game is in trouble. If it's a good game, even if the subscription numbers aren't there initially to line it up with the 20-30% margin, EA has deep enough pockets to eat a slow growth proposition. If they'll do it however (and this will probably be dictated by licensing agreements and subscription forecasts), will remain a mystery. My gut feeling however is that the bean counters over at EA are already aware of this and preparing for a long slog. I mean, really, unless the game is crap on ice, it's almost certain that they can eventually get their money back out of this. It's just a matter of how long they eat the chowder until they get the lobster.

I expect the game to survive for years(if just for the "long slog" approach). Considering the amount of money put into the project(which will likely increase once the marketing costs are added), if the initial sales don't exceed other "next big MMORPG"s' like Aion or Age of Conan I would expect EA to go into damage control mode fast. Worst case senario(and what I suspect EA is really trying to avoid) is The Old Republic's launch ending up like Final Fantasy 14's. It is good that they are invested in the project, but the pessimist in me says there's so much more risk than there is reward.

 

[Traun]

Yes, but none of them broke the maintream shell like Mass Effect did which was what I said.

Baldur's Gate series (2 games) sold 5 million copies, it is still one of the most selling RPG's to date.

Also, I strongly disliked KOTOR. It was just not a good game.

That's a nice opinion you've got there.

SC2's multiplayer can be summed up as this: Overly balanced to the brink that it falls on it's own sword and too damn competetive rather than fun.

Competition = fun, Loosing is Fun. (Good) Multiplayer games have always operated on this principle.

 

[Vrach]

Yeah, this is just more of LA dropping any external projects that we've seen announced a while ago. It's quite sad really, considering they don't really produce any good games (or rather, they don't produce anything good) themselves anymore, their ability to fund external projects is what kept the company image up at least a bit and having the brand name next to something as daring and potentially as successful as TOR... well, it'd be a big plus for them, especially in the eyes of the gaming public. Then again, this is LA we're talking about, so can't really take sense for granted.

That said, it gives more power to EA (which I don't label as evil really, having produced a number of my favourite games over the years) and thus BioWare which I think is a good thing. The game would have to try quite hard to be a financial failure at this point - it has too much going for it to not manage to make back the investment. And if it passes that point (and I think it will) and ends up being a good game, it'll be one of the biggest money spinners on the market.

 

[cerebus23]

i doubt they will ever be able to axe bioware, bioware has grown pretty damn large on its own and produced nothing but good to great games their entire history in gaming. if tor fails it will fail and investors will not be happy but would EA really have the stones to dissolve a game company that has one hit game after another? mass effect 3 will make a good chunk of change, me2 will still make more money when it hits ps3 at some point. dao2 etc bioware has any number of safe bets in development that will make several hundred million dollars.

any mmo is a high investment high risk proposition wow was but wow worked well enough and got good enough word of mouth to draw tons of people into it, even people that would not know spit about the lore of warcraft nor care. what got wow 12 million subs? word of mouth some knew someone that was playing wow and said hey you got to try this game out.

word of mouth will make tor float or sink, it has an automatic built in sure fire player base with the star wars ip, granted the last 23 movies did more to hurt than help that ip but there still a ton of die hard star wars fans covering multiple generations that will jump into the game no matter what. beyond that how good the games is will make the game grow and grow because of the people playing tell their friends and their freinds tell theirs when they like the game, then you got something that will rival wow given enough time.

lets be clear wow has 11 12 million sub but many of the older and longer players have been looking for something better for awhile, my buddy has quit wow 5 or 6 times because he was bored of the whole formula of wow, but there have been no other mmos good enough to hold his interest cause they were rushed out the door and unfinished.

and this is a guy that played age of conan, warhammer online, d&d online, lotr etc etc there are not too many high profile mmos he did not give a shot and left wow to play. and i am sure there are many other that given a good mmo with good mechanics and class balance and strong story and end game content and good fun pvp then maybe tor will fit that bill finally for those people.

 

[ZodiacBraves]

I was interested in this game at the start. Then I dwiddled away from it.
Now, I have nil interests in it and I hope it.. How goes it..

"The Ship of failure floats on the sea of excuses"

despite having no interest in the game, star wars and not really believing in it being a success, i will still buy it, i love biowares rpgs and would hate for them to shut down, at least not before dragon age 2 comes out.

I'm sorry but.. You are a true Fanboy. And that's not a bad thing but let me explain before you waste money;

I love Final Fantasy, but even I don't buy them all because not every game they've made is good.
Mass Effect was good. Dragon Age had a target audience of 13 year old boys. Bioware became EA Games.

I am a Nintendo fan myself. I've been going from Nintendo to Gameboy to Super Nintendo to N64, GBA - Sold GBA, got DS, bought Wii. But I don't buy every Nintendo-made game for that because they aren't all good. Just like Bioware made one game that truely threw them out there into mainstream knowledge and that game was Mass Effect. Prior to that, they made a few D&D Game that frankly was not that good at all.

What I am saying is this;
The Bioware you loved is EA Bioware now. Just as the Blizzard I once loved is Activision Blizzard now which have only ruined it's franchises ever since TBC. Don't expect Bioware to hold the same quality as you once remembered.

But I realize I'm probably speaking for deafears though.

I stopped reading when you said DA had a target audience of 13 year old boys. You don't seem to care much for Bioware in general and completely dismiss some of their best games without any explanation. You are speaking nonsense, go somewhere else to put on your tinfoil hat.

Edit: Although I will agree that you shouldn't support a game solely based on the developer.

 

[viranimus]

A distributor taking greater share in its developers work? It seems entirely possible this will not end well.

 

[RatRace123]

I really hope they succeed, not just for EA and Bioware, and the fact that it could have huge ramifications for the companies if it fails.
I hope they succeed because it'd be nice to see WoW taken down a peg.