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A Simple Cost Estimate for SW:TOR
thexrated
Member UncommonPosts: 1,368
Electronic Arts has a different idea. Unsurprising, since EA isn't exactly a scrappy indy! Electronic Arts' different idea, apparently, is to spend every other MMO developer into the ground. Or maybe just spend themselves into the ground. Because, as industry analyst Arvind Bhatia reported from an EA investor's conference,
Although "earnings are somewhat depressed due to ongoing expenses of the Star Wars MMO, management has high hopes for this and believes 2M+ subs is possible." He added that a little over 1 million subscribers is needed to reach the break-even point, but the ultimate goal is to get several million subscribers
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Lets assume that Bioware will have 40% retention rate (generous, probably lower than this in reality) and that they get the average 1 million subsribers for the first year, as this number is mentioned as the official break even point ( a bit more than million actually).
So, 1 million subs needed. Each pay, say $12.95 for 11 months, as the first month is included to the box purchase.
This would amount to about $142 million.
If the retention was about 40%, this would mean that they had sold 2.5 million boxes during the first year. Let's estimate that average price over a year for a box as $50,00.
This amounts to $125 million.
So with the above rough estimates, the cost of SW:TOR would be about $267 million. $300 million therefore is a pretty realistic estimate.
"The person who experiences greatness must have a feeling for the myth he is in."
Comments
You make the assumptions that subs ALWAYS decline.
WoW started 250, 000 box sales, if it does end up being a good game, the sub base could grow rather than shrink.
Its a small point and It doesnt really harm your logic all that much, my prediction for TOR is that all the bioware and star wars fanboys who have never played an mmo will fall in love and become addicts, all the mmo vets will love the shiny wrapping for a month or two, and then see the WoW clone living underneath
Your also estimating that they need to regroup all their costs in the first year, which i think is a stretch tbh
No I didn't. It is based on average whether it declines or increases is irrelevant. The average estimate was that during the first year. appromaxitely 1 million subscribers have paid 11 months worth of subscriptions. This does not look at individual subscribers, but average payments.
"The person who experiences greatness must have a feeling for the myth he is in."
Nope. It was not me who mentioned BREAK-EVEN. Check my original post. You are correct that the time period could be different, but the break-even point would still remain the same (due to needed subscriber numbers). Also, as they did not mention a time period it is usually understood as a business year, which includes 4 quarters.
"In economics & business, specifically cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been paid, and capital has received the risk-adjusted, expected return"
"The person who experiences greatness must have a feeling for the myth he is in."
Newer MMOs have seen a much higher starter sales then WoW, look at WAR and AoC.
Of course, if they can retain more people then those games, the subs / buyers could easily go up. I thought I read somewhere that WoW currently has about a 33ish% retention rate. So if they have 12 million players.....Around 36 million accounts have been created. This is the big reason behind Cata. To change the lowbie stuff to be a little more casual/new person to the game friendly. You get a NOTICE when you BUY new skills...lol.
Could this game potentially become the biggest game in the US/EU? Sure! Could this game become the biggest in the world? I doubt it. I just don't get the impression SW has such a huge fanbase in asia to bring in the 7-8 million ish accounts that WoW has.
As for the cost, your reasoning sounds okay, but then again, who knows. Maybe if they didn't keep buying Dr. Pepper and got Mr. Thunder or whatever it is, they woulda saved a couple million!
Yes you sort of did. Read your own post again. You assumed the subs would be substantially lower than the box sales (which I would agree with, by the way) and the retention rate would be about 40% percent. That's how you came up with an assumption of 2.5 million box sales - and hence the bloated budget.
Let's for a moment assume otherwise, that they were expecting to sell 500,000 boxes and have the subs rise to about 1 million via good word of mouth (which would be foolish in my opinion, but still that doesn't change the fact that you assumed subs would decline). Crunch those numbers again, see what you'll come up with.
I don't really believe that would be possible. For a few years, at least. Since with most games, even when you choose a digital download, you actually have to buy the "box", paying the same amount you'd have to pay for a physical box at your local retailer. I'm probably wrong, but I have never once seen a subscription-based game where you can just start paying the monthly sub without paying anything for the "box" in order to start playing.
Unless you're talking about initial box sales, in which case my point is pretty much... moot?
Your right, my bad, your actually being conservative lool, where your estimate blows out by a good 50mil I think is that, your estimating the developer recieves $50 per box, you have to realise, all the middlemen in between developer and the retailer take a nice chunk out of that sale price, so it would be better to estimate at around $25-30, if not less.
Subs can only increase with new box sales. There for retention rate is ALWAYS lower. This cannot even be argued. You can only have 100% retention rate or lower than that.
I did not count expected sales, but estimated the actual sales. Meaning that they would have to sell 2.5 million boxes during the first year with 40% retention rate. You could argue that the retention rate percentage could be higher, so you could decrease the actual box sales. This still does not change the fact that they need 1 million subcribers to break even only lowers the estimate for the box sales.
With 100% retention rate they would have to sell 1 million boxes during the first year to BREAK EVEN. They could of course sell shit loads more. This calculation does nothing beyond the break even point.
"The person who experiences greatness must have a feeling for the myth he is in."
You are correct. Should be simple enough to lower the second value to reflect that. I think it is just more common practise to use the actual sales prices.
"The person who experiences greatness must have a feeling for the myth he is in."
I think what EA has done is apply the budgeting and financing of Hollywood blockbuster films to the production of what is a video game.
In Hollywood, as basic rule of thumb is that the marketing budget is about the same size as the production budgets so total costs of around $200-300 million are not exceptional.
The first big stream of revenue comes in cinema ticket sales - I suppose that could equate to launch box sales.
Then comes DVD and rental revanues - initially high then gradually lower. Does that equate to subscriotions maybe?
After that comes sequels - which might be represented by paid expansions etc.
Do you think this is a reasonable comparison to make?
Doh! You're absolutely right, somehow I seem to have mentally switched "initial sales" with "overall box sales", what was I thinking?
They need far less subs than they claim but they hope to reach BE fast and start making profits within the first year.
While some fans of the game may look at your post as an insult I actually agree, it is nt a given that a game will lose subs, that's the trend because we have tended to be so rabid for mmo's we've allowed the devs far too much leeway in what they give us upon release, atleast half the mmo's I know of have not released with everything the devs claimed and I can't remember too many non mmo's that have bothered to claim something they don't have working only in mmorpg's.
I think Bioware will avoid this trend and mostly for the same reason that folks expect Bioware to fail, they are not an MMORPG development house and will not have the horrible tendencies displayed by companies like SOE,Cryptic,Funcom and the list goes on and on.
As far as the cost estimate of TOR I couldn't care less what they spend, the way I see it for those who want to complain there are tons of Starvaults and Aventurines out there churning out failure after failure for you to get behind simply because they are fighting the good fight, me I prefer quality and will gladly do business with the Blizzards and Biowares of the world to see it and not be jerked around like SOE taught these devs they could do.
but yeah, to call this game Fantastic is like calling Twilight the Godfather of vampire movies....
Nice post Jaxs
Although I would have to say I dont see SOE as da debil. Money hungry yes....but EQ was a good game, for a number of yrs, and my wife has been playing EQ2 for several yrs now. Their screw up was a sandbox(which they all suffer save EVE), and you get blame them for PotBS, VG:SoH, and MxO since they werent the original producers of those games.
The jury is out for their newer games, although Free Realms is rumored to be doing good....at least from what I have saw.
Asking Devs to make AAA sandbox titles is like trying to get fine dining on a McDonalds dollar menu budget.
There has been a news topic for this one earlier this year where the cost estimate was set to about $150M as well. It was quite a long topic and most people (including myself) were shocked about the enormous budget for the game.
Now with no news and more delays, I'm wondering if that $150M is still accurate, or that budgets have run dry (again?) and new funds were added ;-)
The 100 to 150 million estimate came out of one of EAs quarterly financial releases. Since there has been no change related to stockholders 100 to 150 million is most likely quite close to the truth.