Someone is also not taking into account the box sales and digital downloads that will happen post launch. This game will recoup its initial costs and if it proves successful will make a lot of money. But really, who cares? Is this really a consideration that you are going to make when deciding to pick up a game?
Look they guy is saying that u arent actually figureing in the initial box sales. So if tor sold 2 mil copies at 40 dollars avg then thats 80 million dolarrs in box sales alone. even if this game only sold 500 thousand boxes and im almost betting it will do 3-4 mil in box sales alone. thats 2 million dollars in revenue u arent even considering.
This game has 1.5 million beta sign ups. U have to figure bioware has to believe they will do more then 500 k in box sales.
So yoru numbers arent exactly correct. U arent figureing box sales at all. So instead of rippign guy who is telling u to figure box sales as a fanboi maybe u shoudl actually read what they say.
Rift which doesnt have star wars or biowares built in fan base sold 2 million copies in the first month tor will do at least that.
Then take 500 k subs that say past first month at 15 dollars thats 85 mil in sub fees alone. Thats 165,million in profit. This game at most has a 150 million dollar budget.
so lets not go to the 300 million dollar figure thats been debunked for almost 6 months now. So if bioware sells 2 million box copies and only keeps 500k subs they still make a 15 million dollar profit on the 150 million investment. Now thats not great but its ok.
Im still betting they do better then that though at least 1-3 mil will stay past the first monthh. and we dont know what the budget for this game really is so i belive bioware over u.
So you'll put your trust in company PR/Media spokespersons releasing comments for public consumption for which they cannot be held directly accountable rather then basic mathematics? Well....whatever works for you.
Piece of advice though...in business you generaly don't get to hear the real numbers/projections from the real experts unless you are sitting in the corporate board-room...and often not even then.
Shrug. It was stated at a conference investors/shareholders meeting that 'at half a million subscribers, the game is substantially profitable', I see no reason why they should lie about it at such a meeting.
Originally posted by GrumpyMel2
Originally posted by Zulbas
Originally posted by GrumpyMel2
Math is our freind. 1 million subs x $15 per month (assuming standard MMO pricing structure) x 12 month's = $180 million... GROSS
Where's the 50 million dollars they get with boxes?
A publisher typicaly recoups a very small amount of of each retail box sold. It's why discounts for digital distribution or even giving away the clients for free are fairly common options for SaaS providers (which is basicaly what MMO's are). Also the boxed sale typicaly comes with 30 days worth of time included.... so it's not really all that unreasonable to count it in with A $15 per month sub fee. Realisticaly that's about what the publisher see's (sometimes even less) with a hard copy that is sold retail.
Sorry, but that's hardly realistic.
A lot of speculation on these and other forums is often more indicative of the contrary, that MMO companies rake in a lot of revenues and profit due to the box and digital sales at the launch of a new MMO, up to the point that there've been accusations regarding companies like Cryptic that they're mainly focused on the game sales revenues, and not sub retention.
1) Exactly how did they define "profitable" is it in the typical sense that at that point gross income outstrips expenditures? If that were the case they could indeed be operating at a "profit" and still take a thousand years to recoup the initial investment it took to develop the product (i.e. they operating at a positive each month but hold substantial debt/obligations that has not be paid back).
Again, simple math is our friend... at 500K subscriptions thier MAXIMUM GROSS REVENUE for a year is 90 million....assuming $15 per month sub fee. Unless the game only cost 90 million to make....and they have ZERO operating expenses and ZERO royalty obligations to the IP holder.....and ZERO tax liabilities....then they haven't even come close to breaking even at that point.
Don't assume that shareholder meetings are devoid of spin.....in fact, they are often where the greatest degree of spin occurs. Regardless... numbers don't lie. Unless they are expecting WAY more then $15 per month income off the average user....it's going to take a long, long time (if ever) for 500k subs to recoup their initial investment.
2) Think what you like about forum speculation....go out and try to cut a deal with a whole-saler's, distributers and retailers.... (let alone printing and production costs for physical copies)....see for yourself what kind of markup they get on each sale. The publishers/developer realizes only a small fraction of each sale. Digital distribution tends to be much better...but even there it's not 100 percent profit to the publisher. Don't take my word for it....research it yourself.
OK, I'll play the game, but here is a little better figures to work with. By the way, your $90 Million is off at the very start since the first month of play is always free.
Box sales (partial profit of 25%) 400K x 60 x .25 = $7.5 mil (400K is extremely low by my estimation, but we'll see)
Electronic Sales (pure profit) 100K x 60 = $6.0 mil (100K is extremely low again by my estimation)
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (Can't forget only 11 months since the first one is free)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $96 mil (Completely profitable in first 2.25 years, including development costs of $150 million and your $30 million annual budget)
If we adjust this to 1 million sales though and only 500K subscriptions stay on board for the first year it looks more like this:
Box sales (partial profit of 25%) 800K x 60 x .25 = $12 mil (800K is still extremely low by my estimation, but we'll see)
Electronic Sales (pure profit) 200K x 60 = $12 mil (200K is also extremely low again by my estimation)
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (Still not forgetting about that free month)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $106.5 mil (Completely profitable in first 2 years, including development costs of $150 million and your $30 million annual budget)
Now slightly higher numbers of 1.5 million buyers and still only 500K subscribers:
Box sales (partial profit of 25%) 1.2 mil x 60 x .25 = $18 mil
Electronic Sales (pure profit) 300K x 60 = $18 mil
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (Can't forget only 11 months since the first one is free)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $118.5 mil (Completely profitable in first 1.75 years, less actually, including development costs of $150 million and your $30 million annual budget)
And Finally with purchase numbers of 2 million and still only 500K subscribers:
Box sales (partial profit of 25%) 1.6 mil x 60 x .25 = $24 mil
Electronic Sales (pure profit) 400K x 60 = $24 mil
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (1st month = free)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $130.5 mil (Completely profitable in first 1.5 years, including development costs of $150 million and your $30 million annual budget)
As you can see GrumpyMel2, math is indeed my friend, especially when I put realistic numbers down. Keep in mind that I low balled the profit margin of box sales AND didn't take into account that BioWare is creating this game While EA is publishing it, so a much larger profit margin actually goes to the those companies than normal. Nor did I take into account the possiblilities of "Fluff" sales.
This math is exactly why I will trust a professional company over your wild guesses any time.
"If half of what you tell me is a lie, how can I believe any of it?"
2) Think what you like about forum speculation....go out and try to cut a deal with a whole-saler's, distributers and retailers.... (let alone printing and production costs for physical copies)....see for yourself what kind of markup they get on each sale. The publishers/developer realizes only a small fraction of each sale. Digital distribution tends to be much better...but even there it's not 100 percent profit to the publisher. Don't take my word for it....research it yourself.
Well, I did do some research of it in the past or read some articles about it. I don't feel inclined to go onto another long surfing tour again, but to dig up one example:
Aion's launch in the West led to something about 900-950k unit sales, which in turn led to increased revenues of about 35 million dollars, purely the sales.
Originally posted by GrumpyMel2
The 1 million subs came from an outside analyst working for Stern Agee (SAFS), an instutional investment firm that was looking at EA. You can choose to believe it or not....but all I've seen you do here is hype TOR and ignore anything that remotely hints of math and actual numbers.
There are alot of things we don't know.... but we certainly CAN calculate things like gross income from subscriptions based on a given subscription price. You can also get a pretty good rough guess as to income from retail box sales...if you have any experience in the field whatsoever.
The statements that TOR has the largest development budget of any MMO to date.....is simply not compatible with the statement that they will have broken even after 1 year at only 500K subs...given standard industry sub prices (Note though that Bioware/EA only stated that they would be "profitable" with no definition of what they actualy meant by that).
Like it or not...it is what it is...numbers don't lie. 500K for a year at $15 per month is 90 Million GROSS.
It's a bit hilarious when you accuse me of ignoring anything that remotely hints at math and actual numbers, while you chose to ignore hard figures and actual numbers yourself. If you'd really be objective and watched my posting history, you'd see I've almost a ruthless passion for figures and actual numbers, whether that's MMO player numbers to server capacity to actual worldsizes. What I do though is take all the figures and statements that are given and not just ignore some because they appeal to my personal taste more. And if I'm wrong at first with any speculation I made, I adjust with any new (reasonably) trustworthy information that is given.
- Aion's launch generated 30-35 million dollar revenue for 900-950k units
- Rift box sales was only about 200k, looking at the player numbers that's maybe 20-40% of the total, the rest being digital.
We have no idea what calculations the outside analyst were using or what projected results the BW analysts were using, but to take 1 step further speculating:
- SWTOR will potentially sell 1.5 million units
- suppose a 500k digital sales (which would be less percentage than Rift had) and ignoring any Collector's Editions
- 500k digital sales would amount to like 25 million dollar revenues
- let's say that SWTOR's million units equals Aion's 900-950k units, this'd mean 35 million dollar.
This would result in a speculative 1yr subs + unit sales = 78m + 60m = 138 million dollars.
I don't think describing this as 'substantially profitable' would be that farfetched, especially if the break even point lies a lot lower, with the budget being less.
edit: meh, didn't see your post GMan3, must have been posted while I was busy with my post, I could've saved me the trouble
The ease with which predictions are made on these forums: Fratman: "I'm saying Spring 2012 at the earliest [for TOR release]. Anyone still clinging to 2011 is deluding themself at this point."
Well two things first of all no matter how you rationalize it, box sales will NEVER be enough to support an mmorpg based on a monthly sub base, NEVER.
Also In order for ANY product to have a positive change on the industry it well ahem has to CHANGE something. This product changes absolutely nothing. Its like trying to sell a new brand of Ramen noodle and claiming it will change food forever. Its just not going to happen. It might sell well, their might be a fierce debate over who has the best flavor packet and whatnot, or how many ounces of noodle etc. Mechanic wise TOR is nothing new, they just paid alot of voice actors is all.
Well two things first of all no matter how you rationalize it, box sales will NEVER be enough to support an mmorpg based on a monthly sub base, NEVER.
Also In order for ANY product to have a positive change on the industry it well ahem has to CHANGE something. This product changes absolutely nothing. Its like trying to sell a new brand of Ramen noodle and claiming it will change food forever. Its just not going to happen. It might sell well, their might be a fierce debate over who has the best flavor packet and whatnot, or how many ounces of noodle etc. Mechanic wise TOR is nothing new, they just paid alot of voice actors is all.
Actually Faelson, if you take your Ramen analogy farther, it does show a potential for changing the RAMEN food scene. Say you make your Ramen package 4x bigger than all the other brands, make the quality superb, and then make sure there is a ton of variety in flavors. Finally you still charge the same price as every other Ramen Soup out there that is of inferior quality and quantity. Which one would YOU buy?
According to all accounts, that is what BioWare is trying to do here with SWTOR. Will they be as successful as they think? I don't know, but I still have not seen a single bad review from someone that actually played it, while I have seen a self admitted Star Wars hater that said the game was a lot of fun and now on his list to buy. Speaks pretty well of the game for me.
As usual though, you are welcome to your opinion and I will keep my own as well.
"If half of what you tell me is a lie, how can I believe any of it?"
They basically said, if TOR is successful, developers will copy this model for years to come. The story based, subscription MMORPG, voiceover, expensive AAA title.
If devs from SWTOR, Bioware said anything of this sort...I wouldn't be surprised.
They have been doing alot of talking as though they are gods gift to the MMORPG world.
Subscriptions are new?
Voice overs are new?
Expensive? ...Yeah I'm sure what EALouse said was true because EA never denied the game costing more than what they said. And after seeing what Bioware has done with Mass Effect and Dragon Age...you can be sure they are going to find anyway they can to rip you off.
Not that I care what you waste your money on.
When they go off...continuously talking like EVERY other gaming company e.g. pretending their game offers something new and different, claiming that they have a story and no one else does...etc etc...you can almost be assured the game is going to flop.
Now I had hopes for the game...but the more Bioware talks about how much better it is....and the more they show footage that looks like Sci Fi WoW...the more I logically understand what will be the outcome.
"Their" model...is another WoW knock off...probably not as bad as Rift but close enough. "Their" model...um...I am sure not many companies have the money to blow on paying voice actors...but then again its the United States so I am sure they forced staff members to cover most of the voicing without paying them extra for it.
SWTOR...is not going to change anything. If it fails it will be the laughing stock off the MMO genre, plenty of staff at Bioware will get fired etc etc....if it succeeds....which it will do decently...at the start....it won't surpass what WoW has done...ever...
As much as WoW is a piece of crap game now, IMO, it brought alot of people who NEVER even played games to the most time consuming genre of gaming...and if Bioware thinks those people want to jump ship to play a clone...they are dead wrong.
"Their" model...is another WoW knock off...probably not as bad as Rift but close enough. "Their" model...um...I am sure not many companies have the money to blow on paying voice actors...but then again its the United States so I am sure they forced staff members to cover most of the voicing without paying them extra for it.
SWTOR...is not going to change anything. If it fails it will be the laughing stock off the MMO genre, plenty of staff at Bioware will get fired etc etc....if it succeeds....which it will do decently...at the start....it won't surpass what WoW has done...ever...
As much as WoW is a piece of crap game now, IMO, it brought alot of people who NEVER even played games to the most time consuming genre of gaming...and if Bioware thinks those people want to jump ship to play a clone...they are dead wrong.
Subscriber dead wrong.
1 million players in the west tried out Aion, the same goes for AoC, WAR and Rift, they all drew 750k-1million players.
Sounds to me it means that there are enough MMO gamers who don't care whether a game resembles WoW in several ways, they still want to give it a try. Those MMO's - except for LotrO and Rift, still have to see how its content in the long run will retain players - failed in the retention part, but the initial interest in them was there.
if those MMO's can attract close to a million of MMO gamers, I'm sure that an MMORPG based upon Star Wars and made by Bioware can even attract more MMO gamers.
As for gamers outside of the MMO playerbase: with the high profile that a Star Wars game by Bioware will have and EA maknig sure that people will be aware that it's out there via advertising, I'm sure that there'll also be quite some Star Wars fans, KOTOR players, RPG fans and Bioware fans that are interested enough to give it a try.
Of course, retention will always be a question mark, but SWTOR has one headstart upon these other MMO's I mentioned, and that is that SWTOR's content will be hugely more and dwarf the content those other MMO's brought to the table at launch. So if the gameplay is good, and so far player reports confirm that, then this would provide at least a higher level of retention than those other MMO's had.
The ease with which predictions are made on these forums: Fratman: "I'm saying Spring 2012 at the earliest [for TOR release]. Anyone still clinging to 2011 is deluding themself at this point."
Look guys, here is the skinny on boxed Software sales. If you do a little research (or actually have some experience in the field you can find this out for yourself). Here is the typical breakdown of where the money goes from what you hand the guy at the counter....
retailer - 50%
distributor - 10%
publisher - 30-35%
developer - 5-10%
Bigger names can sometimes negotiate better deals for themselves, but the above represents the typical breakdown. Now in this case, EA/Bioware is both developer & publisher...so they get both chunks of that pie....around 40%. The other thing to note is that out of the publishers percent comes the costs to produce the box & printed materials & DvD. They also typicaly handle the costs of localization if the product is being sold outside the U.S..... so you've got to subtract those amounts out of the publishers cut. Those can vary alot depending upon exactly what they are giving the consumer (and costs to localize) but you need to figure at least a couple bucks there. That's why I counted the revenue from box sales as equivalent to a regular $15 sub... If you figure a standard $50 retail price...the Dev/Publishers cut after you factor out costs ends up being around $17 on average...and they end up giving you 30 days game time with that. In order to be profitable with box sales a company has to do HUGE volume of sales.
It's why the services model is so popular, because you get regular recurring income that you don't need to split with any middleman. It's also why you end up seeing many companies who run services based software end up giving thier clients away for free. They make so little on the retail sale that it's almost the same as handing out the client for free with a signup for a 1 month sub. In reality most service based software companies look at retail boxed sales as more of a marketing mechanism then anything else.... it's a way to get thier product in front of the eyes of more consumers then would see it otherwise..... their NOT making alot of money of those sales in comparison to the other revenue streams.
Digitial distribution IS alot better...though more chancey (but it has been picking up in recent years) but it is NOT 100% profit as many think....even if you distribute on your own servers there is still a cost to you.... and if you are offering it through some-one elses services (i.e. Steam, Direct-to-Drive, Digital River, etc) also get a cut...not as much as the retailers but it's still there....plus don't forget about the payment providers.
Sorry to deflate your baloons but that is reality.
Note also that in your calculations, you folks are overlooking one big factor as well..... ROYALTIES. With this product you have a major IP holder. You can bet Lucas Arts will be getting it's pound of flesh. No one knows exactly what sort of deal it has structured...but dollars to doughnuts it includes some percentage of gross revenues.
Again, not trying to rain on anyones parade...but the bottom line is, even with the bottom end of budgets that has been thrown around, TOR needs a huge subscription base, bigger then anyone but WOW, in order to recoup it's costs in a reasonable amount of time. I'm certainly not saying they CAN'T do it.....I'm just saying with the budget that they've been throwing around....they can't afford to come in with the same sub numbers that most other AAA titles do...because most other AAA titles haven't sunk in nearly as much development costs. Either that...or they are going to have to find a way to squeeze alot more then the typical $15 per month sub from the average user....either through DLC, RMT...premium services or some other scheme.
Note....all I'm trying to do here is inject a little reality into the conversation here.
Look guys, here is the skinny on boxed Software sales. If you do a little research (or actually have some experience in the field you can find this out for yourself). Here is the typical breakdown of where the money goes from what you hand the guy at the counter....
retailer - 50%
distributor - 10%
publisher - 30-35%
developer - 5-10%
So basically what your saying here is that I need to adjust my model (above) to reflect that BioWare / EA with make a minimum of 40% from the box sales instead of 25%. In other words they will make MORE money than I stated, recover the costs of developing the game even quicker, and still cover the operating costs to maintain / expand the game? Thanks for proving my point for me.
"If half of what you tell me is a lie, how can I believe any of it?"
Note....all I'm trying to do here is inject a little reality into the conversation here.
I don't mind adding a touch of reality into the discussion, as long as you can respect other people's opinions and viewpoints without insulting them by typecasting them as 'raving fanbois' just because they don't agree with you or your calculations (especially since you hadn't shown them before).
As for the subs and cost coverage: ANET/NC Soft has managed to keep their game GW running with no sub fees at all, only the profit from the game and expansions, and while they have some items in the itemshop, it's far less than other sub-free MMO's, and no reasonable person would say that ANet has taken the squeeze-the-player road.
So that's reality too: an MMO (or COORPG) that had 6 million units sold, expansions included so probably more like 1.5-2 million players in total over those years, with a negligible itemshop, and still keeping their game running for 6 years now, all this time no sub revenues.
GW is still doing great in the player activity department, better than a lot of other MMO's, so no low costs there.
If sales revenues were that low and maintenance costs that high, it can only mean 1 thing: ANet is running GW as a welfare MMO, compensating themselves for the gap between revenues and maintenance costs so that everyone who wants to can play it.
Like said, based upon a projected 1.5 million sales and something like 500k digital of that 1.5 million (personally, I think it will be more looking at Rift), not even counting the Collector Editions (box + digital), it'll still rake up quite an amount of cash on top of the sub revenues it'll bring in based upon a projected 500k subs for the period of 1 year.
Enough to be 'substantially profitable' even if it iturns out to be the MMO with the biggest budget so far, whether you look at my speculative calculations or GMan3's or something inbetween.
The ease with which predictions are made on these forums: Fratman: "I'm saying Spring 2012 at the earliest [for TOR release]. Anyone still clinging to 2011 is deluding themself at this point."
Look guys, here is the skinny on boxed Software sales. If you do a little research (or actually have some experience in the field you can find this out for yourself). Here is the typical breakdown of where the money goes from what you hand the guy at the counter....
retailer - 50%
distributor - 10%
publisher - 30-35%
developer - 5-10%
So basically what your saying here is that I need to adjust my model (above) to reflect that BioWare / EA with make a minimum of 40% from the box sales instead of 25%. In other words they will make MORE money than I stated, recover then costs of developing the game even quicker, and still cover the operating costs to maintain / expand the game? Thanks for proving my point.
His numbers are WAY off. For a standard retailer, they'd love to get 50%, but that simply does not happen. The numbers he is showing are simply made up.
Devs will make the most of the money on the deal. Publishers ARE the distributors, that and advertising is pretty much all that they do, and in they'll make slightly more money than the retailer.
As it just so happens, I've worked on both the Retail and developer end of things, I've seen it from both sides.
Look guys, here is the skinny on boxed Software sales. If you do a little research (or actually have some experience in the field you can find this out for yourself). Here is the typical breakdown of where the money goes from what you hand the guy at the counter....
retailer - 50%
distributor - 10%
publisher - 30-35%
developer - 5-10%
So basically what your saying here is that I need to adjust my model (above) to reflect that BioWare / EA with make a minimum of 40% from the box sales instead of 25%. In other words they will make MORE money than I stated, recover then costs of developing the game even quicker, and still cover the operating costs to maintain / expand the game? Thanks for proving my point.
His numbers are WAY off. For a standard retailer, they'd love to get 50%, but that simply does not happen. The numbers he is showing are simply made up.
Devs will make the most of the money on the deal. Publishers ARE the distributors, that and advertising is pretty much all that they do, and in they'll make slightly more money than the retailer.
As it just so happens, I've worked on both the Retail and developer end of things, I've seen it from both sides.
I work for a SaaS provider (not in the entertainment vertical), have for the past 10 years. Those breakdowns are roughly accurate. Anyone that want's to do some independant research can verify it for themselves with a little leg work.
Publishers and distributors are distinctly different entities.... you can verify that with independant research as well. It's possible for a single company to cover both aspects...just as many of the big publishers own thier own development studios...but they are distinctly different business functions. No idea if EA/Bioware owns thier own distribution or uses a 3rd party.
Again, anyone is welcome to do thier own research and compare my breakdowns against your's. We'll see who's numbers hold up to scrutiny.
Note....all I'm trying to do here is inject a little reality into the conversation here.
I don't mind adding a touch of reality into the discussion, as long as you can respect other people's opinions and viewpoints without insulting them by typecasting them as 'raving fanbois' just because they don't agree with you or your calculations (especially since you hadn't shown them before).
As for the subs and cost coverage: ANET/NC Soft has managed to keep their game GW running with no sub fees at all, only the profit from the game and expansions, and while they have some items in the itemshop, it's far less than other sub-free MMO's, and no reasonable person would say that ANet has taken the squeeze-the-player road.
So that's reality too: an MMO (or COORPG) that had 6 million units sold, expansions included so probably more like 1.5-2 million players in total over those years, with a negligible itemshop, and still keeping their game running for 6 years now, all this time no sub revenues.
GW is still doing great in the player activity department, better than a lot of other MMO's, so no low costs there.
If sales revenues were that low and maintenance costs that high, it can only mean 1 thing: ANet is running GW as a welfare MMO, compensating themselves for the gap between revenues and maintenance costs so that everyone who wants to can play it.
Like said, based upon a projected 1.5 million sales and something like 500k digital of that 1.5 million (personally, I think it will be more looking at Rift), not even counting the Collector Editions (box + digital), it'll still rake up quite an amount of cash on top of the sub revenues it'll bring in based upon a projected 500k subs for the period of 1 year.
Enough to be 'substantially profitable' even if it iturns out to be the MMO with the biggest budget so far, whether you look at my speculative calculations or GMan3's or something inbetween.
Obviously you can make a living off of boxed sales (plenty of companies do) but the key to that is that you have to do a high volume of sales and keep your development costs down. It also helps to be able to release new versions on a frequent basis. Development costs for a new version (or in MMO cases expansion) can be substantialy less then a new development since you can reuse alot of existing assets in your development.
Obviously ANET's franchise was able to be profitable with the B2P model. The key is how much was thier initial development budget for GW?
That's the real kicker in the services based model. Actual operating costs aren't that bad. Majority of your costs come in Development (usualy).... it's all about recouping those costs once you get running. It's why you see so few MMO's (or service providers) closing thier doors.....unless you have an absolutely tiny user base...you can almost always scale and price (if your doing a fixed sub) so that your revenue's exceed your operating cost.... the excess going to pay off what you've already sunk in Development. Hosting doesn't cost alot (relatively)...nor does 1 or 2 engineers or CSR's if you're running in skeleton crew mode.... so for most companies it makes no sense to close down a title entirely....you'll always get something back to help recoup what you've already spent. What most companies will do is cut-back thier ongoing development staff as well as customer service.... as those tend to be the largest expenses in Operating Costs.
Again, it's not hard to scale so that your revenues exceed operating costs....that's why a statement like "we're running at a profit" is not particularly impressive....if they are defining that as "our revenues exceed our operating costs". The real kicker about whether a project is "successfull" or not is how long it takes to recoup your development costs...and how much you continue to make after that. Your investors aren't going to be happy (meaning funding for future products) if the time and rate of return isn't much better then they could do with a standard high-yield certificate of deposit from a bank or T-bill.
Again, not saying that TOR can't be very profitable....just that with a much larger development budget then most other titles....they are going to need a much larger sub base than most as well.
In terms of the business models....it's no surprise that so many companies are moving from traditional boxed sales to service provider/licensing models. Look at folks like Microsoft & Oracle....heck almost all the big traditional Tech companies are pushing the service aspect of thier businesses hard.... that's where the profit potential is. Recurring fees....whether it's from a fixed (subscription based) model....or something like F2P (RMT's, DLC, etc) model are where the real income potential is. That's why you see such growth in that model across pretty much all sectors of the Tech market.
Look guys, here is the skinny on boxed Software sales. If you do a little research (or actually have some experience in the field you can find this out for yourself). Here is the typical breakdown of where the money goes from what you hand the guy at the counter....
retailer - 50%
distributor - 10%
publisher - 30-35%
developer - 5-10%
So basically what your saying here is that I need to adjust my model (above) to reflect that BioWare / EA with make a minimum of 40% from the box sales instead of 25%. In other words they will make MORE money than I stated, recover then costs of developing the game even quicker, and still cover the operating costs to maintain / expand the game? Thanks for proving my point.
His numbers are WAY off. For a standard retailer, they'd love to get 50%, but that simply does not happen. The numbers he is showing are simply made up.
Devs will make the most of the money on the deal. Publishers ARE the distributors, that and advertising is pretty much all that they do, and in they'll make slightly more money than the retailer.
As it just so happens, I've worked on both the Retail and developer end of things, I've seen it from both sides.
I work for a SaaS provider (not in the entertainment vertical), have for the past 10 years. Those breakdowns are roughly accurate. Anyone that want's to do some independant research can verify it for themselves with a little leg work.
Publishers and distributors are distinctly different entities.... you can verify that with independant research as well. It's possible for a single company to cover both aspects...just as many of the big publishers own thier own development studios...but they are distinctly different business functions. No idea if EA/Bioware owns thier own distribution or uses a 3rd party.
Again, anyone is welcome to do thier own research and compare my breakdowns against your's. We'll see who's numbers hold up to scrutiny.
No need. Your numbers just proved that I was even more right than I thought. Thanks for the help. Even going by my own gloomier numbers though this game has no worries about covering it's developmental costs, annual budget costs (bug fixes and updates), AND making a tiddy profit in less than two years. Thank you for reminding everyone that math is our friend, it really inspired me to break out the calculator and prove just how inadequate some peoples arguments really are.
Here are those numbers again:
Box sales (partial profit of 25%) 400K x 60 x .25 = $7.5 mil (400K is extremely low by my estimation, but we'll see)
Electronic Sales (pure profit) 100K x 60 = $6.0 mil (100K is extremely low again by my estimation)
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (Can't forget only 11 months since the first one is free)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $96 mil (Completely profitable in first 2.25 years, including development costs of $150 million and your $30 million annual budget)
If we adjust this to 1 million sales though and only 500K subscriptions stay on board for the first year it looks more like this:
Box sales (partial profit of 25%) 800K x 60 x .25 = $12 mil (800K is still extremely low by my estimation, but we'll see)
Electronic Sales (pure profit) 200K x 60 = $12 mil (200K is also extremely low again by my estimation)
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (Still not forgetting about that free month)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $106.5 mil (Completely profitable in first 2 years, including development costs of $150 million and your $30 million annual budget)
Now slightly higher numbers of 1.5 million buyers and still only 500K subscribers:
Box sales (partial profit of 25%) 1.2 mil x 60 x .25 = $18 mil
Electronic Sales (pure profit) 300K x 60 = $18 mil
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (Can't forget only 11 months since the first one is free)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $118.5 mil (Completely profitable in first 1.75 years, less actually, including development costs of $150 million and your $30 million annual budget)
And Finally with purchase numbers of 2 million and still only 500K subscribers:
Box sales (partial profit of 25%) 1.6 mil x 60 x .25 = $24 mil
Electronic Sales (pure profit) 400K x 60 = $24 mil
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (1st month = free)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $130.5 mil (Completely profitable in first 1.5 years, including development costs of $150 million and your $30 million annual budget)
Notice I did not push the profit margin UP to 40%-50% on the box sales like you suggested and things still look pretty nice for BioWare / EA. Just imagine if this game ends up selling 4 to 5 million copies in the first year like some analysts have suggested.
"If half of what you tell me is a lie, how can I believe any of it?"
I am not so sure. The industry didn't really seem to react to any failures of the past, so why now?
If SWTOR is a success, they'll say it was a unique success because only Bioware can do story; if it fails they'll say it was their flaw from the beginning, they just didn't make it right.
Change would imply that people learn. Which I don't really believe in.
People don't ask questions to get answers - they ask questions to show how smart they are. - Dogbert
I am not so sure. The industry didn't really seem to react to any failures of the past, so why now?
If SWTOR is a success, they'll say it was a unique success because only Bioware can do story; if it fails they'll say it was their flaw from the beginning, they just didn't make it right.
Change would imply that people learn. Which I don't really believe in.
Now I do see this as a legitimate position. I would add though that on top of people beating there head against a wall several dozen times before they learn, you have to deal with peoples innate fear of change AND peoples general inability to admit they made a mistake.
"If half of what you tell me is a lie, how can I believe any of it?"
Gman those numbers are impressive , but 500k is that EA won´t shut down the servers. And the project is slated for a 5 year run .
So basically you need to make the calculations on a 5 year margins . That is more based on Bioware games usually increase in fanbase over years , rather then decrease in fanbase . Somthing similair to Blizzard games in the past where the starcraft/warcraft frenchise keep selling , even way past 5 years (the normal time for a big hit to stop getting support)
To make up for 30% of "late buyers" who will jump in somewhere after launch time, I'm cutting sub calculations down to 7 months average and a decreased average game price of $50 (it might be cheaper than that, a year in, but the $50 average makes up for the large chunk of buyers around launch time who will pay the $60).
Box sales: 1.5 mil x 50 x .25 = $18,75 mil
Electronic Sales: 1.5 mil x 50 = $75 mil
Monthly Subs: 1.8 mil subs x $15 x 7 months = $189 mil
Total: $282,75 mil in year one
And if it will indeed be a long term success, the total over year 2 will be even higher and you can expect bigger, more shiney expansions, only increasing its success.
drake_hound, my only point with those numbers was to show that the game could easily prove profitability on it's own in less then 2 years IF only 500K people bought the game and subbed to it for that long. The fact is though that thanks to the fan base for Star Wars AND BioWare, the initial sales alone is likely to be much higher, so recouping the costs of developing the game could easily be done much faster and then subscriptions only need to cover the costs of upkeep and improvement.
Some people want to throw around the financial "DOOOooommmm" argument, but I just have a hard time seeing that happening here and so I started with the math they gave me and put the more or less real numbers down instead of the blind guessing he was using. It really is funny, but his comment of "Math is our friend" is what prompted me to do it in the first place to see how right he was, and it proved VERY unfriendly to his argument.
In the end though, we will have to wait and see what happens in the future since none of our crystal balls can see into "A Long Time Ago in a Galaxy Far Far Away . . ."
"If half of what you tell me is a lie, how can I believe any of it?"
drake_hound, my only point with those numbers was to show that the game could easily prove profitability on it's own in less then 2 years IF only 500K people bought the game and subbed to it for that long. The fact is though that thanks to the fan base for Star Wars AND BioWare, the initial sales alone is likely to be much higher, so recouping the costs of developing the game could easily be done much faster and then subscriptions only need to cover the costs of upkeep and improvement.
Some people want to throw around the financial "DOOOooommmm" argument, but I just have a hard time seeing that happening here and so I started with the math they gave me and put the more or less real numbers down instead of the blind guessing he was using. It really is funny, but his comment of "Math is our friend" is what prompted me to do it in the first place to see how right he was, and it proved VERY unfriendly to his argument.
In the end though, we will have to wait and see what happens in the future since none of our crystal balls can see into "A Long Time Ago in a Galaxy Far Far Away . . ."
Actualy GMan3 if you read my origional post, it was NOT refuting the possibility that TOR might not be very profitable.... it was specificaly refuting the possibility that TOR could break even with 500K subs in ONE YEAR. Go ahead and re-read what I actually wrote.
The other thing you should also realize is that you are missing some very important aspects in your equation. Most important of which are Royalty payments to the IP holder (Lucas Arts). Now, none of us know what sort of deal LA structured for the rights to use it's IP..... but I don't seriously believe it will be such a neglibable amount as to not be worth considering, do you? The other thing I'm wondering about is cost for ongoing development. With the origional budget as high as it was, (fully voice acted, cinematics, etc).... will ongoing development costs be significantly higher then with other AAA titles as well? Will TOR follow a model where they are passing along the costs of ongoing development to subscribers through DLC more then the typical AAA title does? Will the cut some of the more expensive features to produce from updates (Full voice acting, cinematics, etc) or will they simply have enough of a sub base to be able to scale ongoing development without going down either route.
Taken all together, I find the Stern Agee's estimate more likely then those given out by EA/Bioware... guess we'll see though.
Note, I'm not predeicting DOOM.... I have no idea, at this point how TOR will do. What I am predicting is that with a Development Budget purportedly much higher then any other AAA title to date.... they are going to need to retain a sub base that is also proportionately much higher then other AAA titles as well to achieve the same sort of ROI. Either that, or they are going to have to find a way to get more money from each user then is typical for other AAA titles.
I DO think TOR will sell well.....but as I've tried to show....for the subscription model....initial sales, particularly boxed retail sales (where I think TOR will do VERY well) tend to be far less important then recurring sub fee's. What remains a very open question in my mind at this point is how well TOR will fair with long term retention. That is where I believe TOR COULD (not neccesarly WILL.... just COULD) run into some problems.
Note, I'm not predeicting DOOM.... I have no idea, at this point how TOR will do. What I am predicting is that with a Development Budget purportedly much higher then any other AAA title to date.... they are going to need to retain a sub base that is also proportionately much higher then other AAA titles as well to achieve the same sort of ROI. Either that, or they are going to have to find a way to get more money from each user then is typical for other AAA titles.
I DO think TOR will sell well.....but as I've tried to show....for the subscription model....initial sales, particularly boxed retail sales (where I think TOR will do VERY well) tend to be far less important then recurring sub fee's. What remains a very open question in my mind at this point is how well TOR will fair with long term retention. That is where I believe TOR COULD (not neccesarly WILL.... just COULD) run into some problems.
Well, I think that SWTOR will have substantial revenues even within 1 year, as my speculative figures showed, and in this I didn't even include figures like Collector's Editions, a not that farfetched assumption that SWTOR would have closer to 2 million sales instead of 1.5 million, or that SWTOR would follow more Rift's path in that the digital sales would be more than just 500k.
Regarding the highlighted parts: you are aware that if SWTOR maintains 500k subs for a year, then it'll already have a significantly higher sub base than most other AAA titles besides WoW, right?
I also would like to know what sources makes you think that SWTOR will have a budget that is so much higher than any other AAA title? Iirc the only statement made was that it was the 'biggest MMO' which can mean a lot of things, content wise but also that it could have a budget of 90 million dollars where the highest budget up till now might have been 80 or 85 million dollars (WoW had a budget of 50-60 million iirc, that was one of the highest budgets I think), but I admit that I could have overseen other statements that were made about this. So, sources please.
The ease with which predictions are made on these forums: Fratman: "I'm saying Spring 2012 at the earliest [for TOR release]. Anyone still clinging to 2011 is deluding themself at this point."
At Gman ,look EA and Bioware is investing millions into setting up European infrastructure for there MMO market .
It includes Secret world , Swtor and other to be announced MMO , there final server location isn´t even announced yet .
Doom sayer I am really tired of them >.< so bleh to them . but those math figures were really impressive
At grumpyme , you cannot Judge Lucas Arts that way , they thrown there fullsupport behind the project .
That EA bought them off is more cause LA should have helped creating the project with there software development teams.
(who they fired on mass grrrr ) They are not going to bail ship on this one .
Infact they are very constructive in letting Bioware Develope there game and solving technical consultant issues .
But I think all 3 companies want this product to be a success , or else the release date would have been enforced and pushed out already . let alone a system spec >.<
First time I see redtape didn´t work in enterprise setting .
But otherside DE statement on darthhater , the pressure is being put on to finish this product before end of the year .
They do want to keep the job and finish this product .
There won´t and will not be a another year of development .
So, basically, we all have to hope for TOR to fail horribly in order to get sandbox MMOs?
i think it would be rather dumb by the developers to conclude such a thing - but not saying they wont.
WoW has certainly shaped the industry for the past 10 years and the last thing this industry needs is further confirmation that that is what all people want.
but such a conclusion would ignore the fact that this is a very expensive endevour, using a highly popular IP by a respectful developer.
if those 3 elements were joined to produce a sequel of the original SWG id bet it would be successful, but i wouldnt bet on the industry thinking the same.
I find it hard to believe that an MMO could change the entire industry for the worst but look at WoW. Since everybody tried to make WoW clones it's just been failure after failure.
Maybe in the future we're going to start complaining about badly made TOR clones?
I doubt any studio can out-bioware Bioware itself. Maybe Bethesda.
That's like trying to be greedier than $OE, it just doesn't happen.
Comments
Someone is also not taking into account the box sales and digital downloads that will happen post launch. This game will recoup its initial costs and if it proves successful will make a lot of money. But really, who cares? Is this really a consideration that you are going to make when deciding to pick up a game?
Currently Playing: World of Warcraft
Look they guy is saying that u arent actually figureing in the initial box sales. So if tor sold 2 mil copies at 40 dollars avg then thats 80 million dolarrs in box sales alone. even if this game only sold 500 thousand boxes and im almost betting it will do 3-4 mil in box sales alone. thats 2 million dollars in revenue u arent even considering.
This game has 1.5 million beta sign ups. U have to figure bioware has to believe they will do more then 500 k in box sales.
So yoru numbers arent exactly correct. U arent figureing box sales at all. So instead of rippign guy who is telling u to figure box sales as a fanboi maybe u shoudl actually read what they say.
Rift which doesnt have star wars or biowares built in fan base sold 2 million copies in the first month tor will do at least that.
Then take 500 k subs that say past first month at 15 dollars thats 85 mil in sub fees alone. Thats 165,million in profit. This game at most has a 150 million dollar budget.
so lets not go to the 300 million dollar figure thats been debunked for almost 6 months now. So if bioware sells 2 million box copies and only keeps 500k subs they still make a 15 million dollar profit on the 150 million investment. Now thats not great but its ok.
Im still betting they do better then that though at least 1-3 mil will stay past the first monthh. and we dont know what the budget for this game really is so i belive bioware over u.
OK, I'll play the game, but here is a little better figures to work with. By the way, your $90 Million is off at the very start since the first month of play is always free.
Box sales (partial profit of 25%) 400K x 60 x .25 = $7.5 mil (400K is extremely low by my estimation, but we'll see)
Electronic Sales (pure profit) 100K x 60 = $6.0 mil (100K is extremely low again by my estimation)
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (Can't forget only 11 months since the first one is free)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $96 mil (Completely profitable in first 2.25 years, including development costs of $150 million and your $30 million annual budget)
If we adjust this to 1 million sales though and only 500K subscriptions stay on board for the first year it looks more like this:
Box sales (partial profit of 25%) 800K x 60 x .25 = $12 mil (800K is still extremely low by my estimation, but we'll see)
Electronic Sales (pure profit) 200K x 60 = $12 mil (200K is also extremely low again by my estimation)
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (Still not forgetting about that free month)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $106.5 mil (Completely profitable in first 2 years, including development costs of $150 million and your $30 million annual budget)
Now slightly higher numbers of 1.5 million buyers and still only 500K subscribers:
Box sales (partial profit of 25%) 1.2 mil x 60 x .25 = $18 mil
Electronic Sales (pure profit) 300K x 60 = $18 mil
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (Can't forget only 11 months since the first one is free)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $118.5 mil (Completely profitable in first 1.75 years, less actually, including development costs of $150 million and your $30 million annual budget)
And Finally with purchase numbers of 2 million and still only 500K subscribers:
Box sales (partial profit of 25%) 1.6 mil x 60 x .25 = $24 mil
Electronic Sales (pure profit) 400K x 60 = $24 mil
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (1st month = free)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $130.5 mil (Completely profitable in first 1.5 years, including development costs of $150 million and your $30 million annual budget)
As you can see GrumpyMel2, math is indeed my friend, especially when I put realistic numbers down. Keep in mind that I low balled the profit margin of box sales AND didn't take into account that BioWare is creating this game While EA is publishing it, so a much larger profit margin actually goes to the those companies than normal. Nor did I take into account the possiblilities of "Fluff" sales.
This math is exactly why I will trust a professional company over your wild guesses any time.
"If half of what you tell me is a lie, how can I believe any of it?"
Well, I did do some research of it in the past or read some articles about it. I don't feel inclined to go onto another long surfing tour again, but to dig up one example:
Aion's launch in the West led to something about 900-950k unit sales, which in turn led to increased revenues of about 35 million dollars, purely the sales.
It's a bit hilarious when you accuse me of ignoring anything that remotely hints at math and actual numbers, while you chose to ignore hard figures and actual numbers yourself. If you'd really be objective and watched my posting history, you'd see I've almost a ruthless passion for figures and actual numbers, whether that's MMO player numbers to server capacity to actual worldsizes. What I do though is take all the figures and statements that are given and not just ignore some because they appeal to my personal taste more. And if I'm wrong at first with any speculation I made, I adjust with any new (reasonably) trustworthy information that is given.
So, to take some figures:
- 500k * 12 * 13 (let's assume 2$ operating cost) = $ 78m
- Aion's launch generated 30-35 million dollar revenue for 900-950k units
- Rift box sales was only about 200k, looking at the player numbers that's maybe 20-40% of the total, the rest being digital.
We have no idea what calculations the outside analyst were using or what projected results the BW analysts were using, but to take 1 step further speculating:
- SWTOR will potentially sell 1.5 million units
- suppose a 500k digital sales (which would be less percentage than Rift had) and ignoring any Collector's Editions
- 500k digital sales would amount to like 25 million dollar revenues
- let's say that SWTOR's million units equals Aion's 900-950k units, this'd mean 35 million dollar.
This would result in a speculative 1yr subs + unit sales = 78m + 60m = 138 million dollars.
I don't think describing this as 'substantially profitable' would be that farfetched, especially if the break even point lies a lot lower, with the budget being less.
edit: meh, didn't see your post GMan3, must have been posted while I was busy with my post, I could've saved me the trouble
The ACTUAL size of MMORPG worlds: a comparison list between MMO's
The ease with which predictions are made on these forums:
Fratman: "I'm saying Spring 2012 at the earliest [for TOR release]. Anyone still clinging to 2011 is deluding themself at this point."
Well two things first of all no matter how you rationalize it, box sales will NEVER be enough to support an mmorpg based on a monthly sub base, NEVER.
Also In order for ANY product to have a positive change on the industry it well ahem has to CHANGE something. This product changes absolutely nothing. Its like trying to sell a new brand of Ramen noodle and claiming it will change food forever. Its just not going to happen. It might sell well, their might be a fierce debate over who has the best flavor packet and whatnot, or how many ounces of noodle etc. Mechanic wise TOR is nothing new, they just paid alot of voice actors is all.
Actually Faelson, if you take your Ramen analogy farther, it does show a potential for changing the RAMEN food scene. Say you make your Ramen package 4x bigger than all the other brands, make the quality superb, and then make sure there is a ton of variety in flavors. Finally you still charge the same price as every other Ramen Soup out there that is of inferior quality and quantity. Which one would YOU buy?
According to all accounts, that is what BioWare is trying to do here with SWTOR. Will they be as successful as they think? I don't know, but I still have not seen a single bad review from someone that actually played it, while I have seen a self admitted Star Wars hater that said the game was a lot of fun and now on his list to buy. Speaks pretty well of the game for me.
As usual though, you are welcome to your opinion and I will keep my own as well.
"If half of what you tell me is a lie, how can I believe any of it?"
If devs from SWTOR, Bioware said anything of this sort...I wouldn't be surprised.
They have been doing alot of talking as though they are gods gift to the MMORPG world.
Subscriptions are new?
Voice overs are new?
Expensive? ...Yeah I'm sure what EALouse said was true because EA never denied the game costing more than what they said. And after seeing what Bioware has done with Mass Effect and Dragon Age...you can be sure they are going to find anyway they can to rip you off.
Not that I care what you waste your money on.
When they go off...continuously talking like EVERY other gaming company e.g. pretending their game offers something new and different, claiming that they have a story and no one else does...etc etc...you can almost be assured the game is going to flop.
Now I had hopes for the game...but the more Bioware talks about how much better it is....and the more they show footage that looks like Sci Fi WoW...the more I logically understand what will be the outcome.
"Their" model...is another WoW knock off...probably not as bad as Rift but close enough. "Their" model...um...I am sure not many companies have the money to blow on paying voice actors...but then again its the United States so I am sure they forced staff members to cover most of the voicing without paying them extra for it.
SWTOR...is not going to change anything. If it fails it will be the laughing stock off the MMO genre, plenty of staff at Bioware will get fired etc etc....if it succeeds....which it will do decently...at the start....it won't surpass what WoW has done...ever...
As much as WoW is a piece of crap game now, IMO, it brought alot of people who NEVER even played games to the most time consuming genre of gaming...and if Bioware thinks those people want to jump ship to play a clone...they are dead wrong.
Subscriber dead wrong.
1 million players in the west tried out Aion, the same goes for AoC, WAR and Rift, they all drew 750k-1million players.
Sounds to me it means that there are enough MMO gamers who don't care whether a game resembles WoW in several ways, they still want to give it a try. Those MMO's - except for LotrO and Rift, still have to see how its content in the long run will retain players - failed in the retention part, but the initial interest in them was there.
if those MMO's can attract close to a million of MMO gamers, I'm sure that an MMORPG based upon Star Wars and made by Bioware can even attract more MMO gamers.
As for gamers outside of the MMO playerbase: with the high profile that a Star Wars game by Bioware will have and EA maknig sure that people will be aware that it's out there via advertising, I'm sure that there'll also be quite some Star Wars fans, KOTOR players, RPG fans and Bioware fans that are interested enough to give it a try.
Of course, retention will always be a question mark, but SWTOR has one headstart upon these other MMO's I mentioned, and that is that SWTOR's content will be hugely more and dwarf the content those other MMO's brought to the table at launch. So if the gameplay is good, and so far player reports confirm that, then this would provide at least a higher level of retention than those other MMO's had.
The ACTUAL size of MMORPG worlds: a comparison list between MMO's
The ease with which predictions are made on these forums:
Fratman: "I'm saying Spring 2012 at the earliest [for TOR release]. Anyone still clinging to 2011 is deluding themself at this point."
Look guys, here is the skinny on boxed Software sales. If you do a little research (or actually have some experience in the field you can find this out for yourself). Here is the typical breakdown of where the money goes from what you hand the guy at the counter....
retailer - 50%
distributor - 10%
publisher - 30-35%
developer - 5-10%
Bigger names can sometimes negotiate better deals for themselves, but the above represents the typical breakdown. Now in this case, EA/Bioware is both developer & publisher...so they get both chunks of that pie....around 40%. The other thing to note is that out of the publishers percent comes the costs to produce the box & printed materials & DvD. They also typicaly handle the costs of localization if the product is being sold outside the U.S..... so you've got to subtract those amounts out of the publishers cut. Those can vary alot depending upon exactly what they are giving the consumer (and costs to localize) but you need to figure at least a couple bucks there. That's why I counted the revenue from box sales as equivalent to a regular $15 sub... If you figure a standard $50 retail price...the Dev/Publishers cut after you factor out costs ends up being around $17 on average...and they end up giving you 30 days game time with that. In order to be profitable with box sales a company has to do HUGE volume of sales.
It's why the services model is so popular, because you get regular recurring income that you don't need to split with any middleman. It's also why you end up seeing many companies who run services based software end up giving thier clients away for free. They make so little on the retail sale that it's almost the same as handing out the client for free with a signup for a 1 month sub. In reality most service based software companies look at retail boxed sales as more of a marketing mechanism then anything else.... it's a way to get thier product in front of the eyes of more consumers then would see it otherwise..... their NOT making alot of money of those sales in comparison to the other revenue streams.
Digitial distribution IS alot better...though more chancey (but it has been picking up in recent years) but it is NOT 100% profit as many think....even if you distribute on your own servers there is still a cost to you.... and if you are offering it through some-one elses services (i.e. Steam, Direct-to-Drive, Digital River, etc) also get a cut...not as much as the retailers but it's still there....plus don't forget about the payment providers.
Sorry to deflate your baloons but that is reality.
Note also that in your calculations, you folks are overlooking one big factor as well..... ROYALTIES. With this product you have a major IP holder. You can bet Lucas Arts will be getting it's pound of flesh. No one knows exactly what sort of deal it has structured...but dollars to doughnuts it includes some percentage of gross revenues.
Again, not trying to rain on anyones parade...but the bottom line is, even with the bottom end of budgets that has been thrown around, TOR needs a huge subscription base, bigger then anyone but WOW, in order to recoup it's costs in a reasonable amount of time. I'm certainly not saying they CAN'T do it.....I'm just saying with the budget that they've been throwing around....they can't afford to come in with the same sub numbers that most other AAA titles do...because most other AAA titles haven't sunk in nearly as much development costs. Either that...or they are going to have to find a way to squeeze alot more then the typical $15 per month sub from the average user....either through DLC, RMT...premium services or some other scheme.
Note....all I'm trying to do here is inject a little reality into the conversation here.
So basically what your saying here is that I need to adjust my model (above) to reflect that BioWare / EA with make a minimum of 40% from the box sales instead of 25%. In other words they will make MORE money than I stated, recover the costs of developing the game even quicker, and still cover the operating costs to maintain / expand the game? Thanks for proving my point for me.
"If half of what you tell me is a lie, how can I believe any of it?"
I don't mind adding a touch of reality into the discussion, as long as you can respect other people's opinions and viewpoints without insulting them by typecasting them as 'raving fanbois' just because they don't agree with you or your calculations (especially since you hadn't shown them before).
As for the subs and cost coverage: ANET/NC Soft has managed to keep their game GW running with no sub fees at all, only the profit from the game and expansions, and while they have some items in the itemshop, it's far less than other sub-free MMO's, and no reasonable person would say that ANet has taken the squeeze-the-player road.
So that's reality too: an MMO (or COORPG) that had 6 million units sold, expansions included so probably more like 1.5-2 million players in total over those years, with a negligible itemshop, and still keeping their game running for 6 years now, all this time no sub revenues.
GW is still doing great in the player activity department, better than a lot of other MMO's, so no low costs there.
If sales revenues were that low and maintenance costs that high, it can only mean 1 thing: ANet is running GW as a welfare MMO, compensating themselves for the gap between revenues and maintenance costs so that everyone who wants to can play it.
Like said, based upon a projected 1.5 million sales and something like 500k digital of that 1.5 million (personally, I think it will be more looking at Rift), not even counting the Collector Editions (box + digital), it'll still rake up quite an amount of cash on top of the sub revenues it'll bring in based upon a projected 500k subs for the period of 1 year.
Enough to be 'substantially profitable' even if it iturns out to be the MMO with the biggest budget so far, whether you look at my speculative calculations or GMan3's or something inbetween.
The ACTUAL size of MMORPG worlds: a comparison list between MMO's
The ease with which predictions are made on these forums:
Fratman: "I'm saying Spring 2012 at the earliest [for TOR release]. Anyone still clinging to 2011 is deluding themself at this point."
His numbers are WAY off. For a standard retailer, they'd love to get 50%, but that simply does not happen. The numbers he is showing are simply made up.
Devs will make the most of the money on the deal. Publishers ARE the distributors, that and advertising is pretty much all that they do, and in they'll make slightly more money than the retailer.
As it just so happens, I've worked on both the Retail and developer end of things, I've seen it from both sides.
I work for a SaaS provider (not in the entertainment vertical), have for the past 10 years. Those breakdowns are roughly accurate. Anyone that want's to do some independant research can verify it for themselves with a little leg work.
Publishers and distributors are distinctly different entities.... you can verify that with independant research as well. It's possible for a single company to cover both aspects...just as many of the big publishers own thier own development studios...but they are distinctly different business functions. No idea if EA/Bioware owns thier own distribution or uses a 3rd party.
Again, anyone is welcome to do thier own research and compare my breakdowns against your's. We'll see who's numbers hold up to scrutiny.
Obviously you can make a living off of boxed sales (plenty of companies do) but the key to that is that you have to do a high volume of sales and keep your development costs down. It also helps to be able to release new versions on a frequent basis. Development costs for a new version (or in MMO cases expansion) can be substantialy less then a new development since you can reuse alot of existing assets in your development.
Obviously ANET's franchise was able to be profitable with the B2P model. The key is how much was thier initial development budget for GW?
That's the real kicker in the services based model. Actual operating costs aren't that bad. Majority of your costs come in Development (usualy).... it's all about recouping those costs once you get running. It's why you see so few MMO's (or service providers) closing thier doors.....unless you have an absolutely tiny user base...you can almost always scale and price (if your doing a fixed sub) so that your revenue's exceed your operating cost.... the excess going to pay off what you've already sunk in Development. Hosting doesn't cost alot (relatively)...nor does 1 or 2 engineers or CSR's if you're running in skeleton crew mode.... so for most companies it makes no sense to close down a title entirely....you'll always get something back to help recoup what you've already spent. What most companies will do is cut-back thier ongoing development staff as well as customer service.... as those tend to be the largest expenses in Operating Costs.
Again, it's not hard to scale so that your revenues exceed operating costs....that's why a statement like "we're running at a profit" is not particularly impressive....if they are defining that as "our revenues exceed our operating costs". The real kicker about whether a project is "successfull" or not is how long it takes to recoup your development costs...and how much you continue to make after that. Your investors aren't going to be happy (meaning funding for future products) if the time and rate of return isn't much better then they could do with a standard high-yield certificate of deposit from a bank or T-bill.
Again, not saying that TOR can't be very profitable....just that with a much larger development budget then most other titles....they are going to need a much larger sub base than most as well.
In terms of the business models....it's no surprise that so many companies are moving from traditional boxed sales to service provider/licensing models. Look at folks like Microsoft & Oracle....heck almost all the big traditional Tech companies are pushing the service aspect of thier businesses hard.... that's where the profit potential is. Recurring fees....whether it's from a fixed (subscription based) model....or something like F2P (RMT's, DLC, etc) model are where the real income potential is. That's why you see such growth in that model across pretty much all sectors of the Tech market.
No need. Your numbers just proved that I was even more right than I thought. Thanks for the help. Even going by my own gloomier numbers though this game has no worries about covering it's developmental costs, annual budget costs (bug fixes and updates), AND making a tiddy profit in less than two years. Thank you for reminding everyone that math is our friend, it really inspired me to break out the calculator and prove just how inadequate some peoples arguments really are.
Here are those numbers again:
Box sales (partial profit of 25%) 400K x 60 x .25 = $7.5 mil (400K is extremely low by my estimation, but we'll see)
Electronic Sales (pure profit) 100K x 60 = $6.0 mil (100K is extremely low again by my estimation)
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (Can't forget only 11 months since the first one is free)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $96 mil (Completely profitable in first 2.25 years, including development costs of $150 million and your $30 million annual budget)
If we adjust this to 1 million sales though and only 500K subscriptions stay on board for the first year it looks more like this:
Box sales (partial profit of 25%) 800K x 60 x .25 = $12 mil (800K is still extremely low by my estimation, but we'll see)
Electronic Sales (pure profit) 200K x 60 = $12 mil (200K is also extremely low again by my estimation)
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (Still not forgetting about that free month)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $106.5 mil (Completely profitable in first 2 years, including development costs of $150 million and your $30 million annual budget)
Now slightly higher numbers of 1.5 million buyers and still only 500K subscribers:
Box sales (partial profit of 25%) 1.2 mil x 60 x .25 = $18 mil
Electronic Sales (pure profit) 300K x 60 = $18 mil
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (Can't forget only 11 months since the first one is free)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $118.5 mil (Completely profitable in first 1.75 years, less actually, including development costs of $150 million and your $30 million annual budget)
And Finally with purchase numbers of 2 million and still only 500K subscribers:
Box sales (partial profit of 25%) 1.6 mil x 60 x .25 = $24 mil
Electronic Sales (pure profit) 400K x 60 = $24 mil
Monthly Subs (pure profit) 500K x 15 x 11 = $82.5 mil (1st month = free)
Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $130.5 mil (Completely profitable in first 1.5 years, including development costs of $150 million and your $30 million annual budget)
Notice I did not push the profit margin UP to 40%-50% on the box sales like you suggested and things still look pretty nice for BioWare / EA. Just imagine if this game ends up selling 4 to 5 million copies in the first year like some analysts have suggested.
"If half of what you tell me is a lie, how can I believe any of it?"
I am not so sure. The industry didn't really seem to react to any failures of the past, so why now?
If SWTOR is a success, they'll say it was a unique success because only Bioware can do story; if it fails they'll say it was their flaw from the beginning, they just didn't make it right.
Change would imply that people learn. Which I don't really believe in.
People don't ask questions to get answers - they ask questions to show how smart they are. - Dogbert
Now I do see this as a legitimate position. I would add though that on top of people beating there head against a wall several dozen times before they learn, you have to deal with peoples innate fear of change AND peoples general inability to admit they made a mistake.
"If half of what you tell me is a lie, how can I believe any of it?"
And the project is slated for a 5 year run .
So basically you need to make the calculations on a 5 year margins .
That is more based on Bioware games usually increase in fanbase over years , rather then decrease in fanbase .
Somthing similair to Blizzard games in the past where the starcraft/warcraft frenchise keep selling , even way past 5 years (the normal time for a big hit to stop getting support)
Nice number crunching Gman3.
Geat to notice the HUGE importance of sub retention and the relatively tiny influence of box sales.
Lets think a little more positive though, *eats slice of happy cake*.
The "the-game-will-be-a-great-success-already-in-the-first-year" scenario:
1,5 mil boxes sold + 1,5 mil digital dl's (50% = around the current pc game average) and 60% sub retention over the first year.
To make up for 30% of "late buyers" who will jump in somewhere after launch time, I'm cutting sub calculations down to 7 months average and a decreased average game price of $50 (it might be cheaper than that, a year in, but the $50 average makes up for the large chunk of buyers around launch time who will pay the $60).
Box sales: 1.5 mil x 50 x .25 = $18,75 mil
Electronic Sales: 1.5 mil x 50 = $75 mil
Monthly Subs: 1.8 mil subs x $15 x 7 months = $189 mil
Total: $282,75 mil in year one
And if it will indeed be a long term success, the total over year 2 will be even higher and you can expect bigger, more shiney expansions, only increasing its success.
My brand new bloggity blog.
drake_hound, my only point with those numbers was to show that the game could easily prove profitability on it's own in less then 2 years IF only 500K people bought the game and subbed to it for that long. The fact is though that thanks to the fan base for Star Wars AND BioWare, the initial sales alone is likely to be much higher, so recouping the costs of developing the game could easily be done much faster and then subscriptions only need to cover the costs of upkeep and improvement.
Some people want to throw around the financial "DOOOooommmm" argument, but I just have a hard time seeing that happening here and so I started with the math they gave me and put the more or less real numbers down instead of the blind guessing he was using. It really is funny, but his comment of "Math is our friend" is what prompted me to do it in the first place to see how right he was, and it proved VERY unfriendly to his argument.
In the end though, we will have to wait and see what happens in the future since none of our crystal balls can see into "A Long Time Ago in a Galaxy Far Far Away . . ."
"If half of what you tell me is a lie, how can I believe any of it?"
Actualy GMan3 if you read my origional post, it was NOT refuting the possibility that TOR might not be very profitable.... it was specificaly refuting the possibility that TOR could break even with 500K subs in ONE YEAR. Go ahead and re-read what I actually wrote.
The other thing you should also realize is that you are missing some very important aspects in your equation. Most important of which are Royalty payments to the IP holder (Lucas Arts). Now, none of us know what sort of deal LA structured for the rights to use it's IP..... but I don't seriously believe it will be such a neglibable amount as to not be worth considering, do you? The other thing I'm wondering about is cost for ongoing development. With the origional budget as high as it was, (fully voice acted, cinematics, etc).... will ongoing development costs be significantly higher then with other AAA titles as well? Will TOR follow a model where they are passing along the costs of ongoing development to subscribers through DLC more then the typical AAA title does? Will the cut some of the more expensive features to produce from updates (Full voice acting, cinematics, etc) or will they simply have enough of a sub base to be able to scale ongoing development without going down either route.
Taken all together, I find the Stern Agee's estimate more likely then those given out by EA/Bioware... guess we'll see though.
Note, I'm not predeicting DOOM.... I have no idea, at this point how TOR will do. What I am predicting is that with a Development Budget purportedly much higher then any other AAA title to date.... they are going to need to retain a sub base that is also proportionately much higher then other AAA titles as well to achieve the same sort of ROI. Either that, or they are going to have to find a way to get more money from each user then is typical for other AAA titles.
I DO think TOR will sell well.....but as I've tried to show....for the subscription model....initial sales, particularly boxed retail sales (where I think TOR will do VERY well) tend to be far less important then recurring sub fee's. What remains a very open question in my mind at this point is how well TOR will fair with long term retention. That is where I believe TOR COULD (not neccesarly WILL.... just COULD) run into some problems.
Well, I think that SWTOR will have substantial revenues even within 1 year, as my speculative figures showed, and in this I didn't even include figures like Collector's Editions, a not that farfetched assumption that SWTOR would have closer to 2 million sales instead of 1.5 million, or that SWTOR would follow more Rift's path in that the digital sales would be more than just 500k.
Regarding the highlighted parts: you are aware that if SWTOR maintains 500k subs for a year, then it'll already have a significantly higher sub base than most other AAA titles besides WoW, right?
I also would like to know what sources makes you think that SWTOR will have a budget that is so much higher than any other AAA title? Iirc the only statement made was that it was the 'biggest MMO' which can mean a lot of things, content wise but also that it could have a budget of 90 million dollars where the highest budget up till now might have been 80 or 85 million dollars (WoW had a budget of 50-60 million iirc, that was one of the highest budgets I think), but I admit that I could have overseen other statements that were made about this. So, sources please.
The ACTUAL size of MMORPG worlds: a comparison list between MMO's
The ease with which predictions are made on these forums:
Fratman: "I'm saying Spring 2012 at the earliest [for TOR release]. Anyone still clinging to 2011 is deluding themself at this point."
At Gman ,look EA and Bioware is investing millions into setting up European infrastructure for there MMO market .
It includes Secret world , Swtor and other to be announced MMO , there final server location isn´t even announced yet .
Doom sayer I am really tired of them >.< so bleh to them . but those math figures were really impressive
At grumpyme , you cannot Judge Lucas Arts that way , they thrown there fullsupport behind the project .
That EA bought them off is more cause LA should have helped creating the project with there software development teams.
(who they fired on mass grrrr ) They are not going to bail ship on this one .
Infact they are very constructive in letting Bioware Develope there game and solving technical consultant issues .
But I think all 3 companies want this product to be a success , or else the release date would have been enforced and pushed out already . let alone a system spec >.<
First time I see redtape didn´t work in enterprise setting .
But otherside DE statement on darthhater , the pressure is being put on to finish this product before end of the year .
They do want to keep the job and finish this product .
There won´t and will not be a another year of development .
i think it would be rather dumb by the developers to conclude such a thing - but not saying they wont.
WoW has certainly shaped the industry for the past 10 years and the last thing this industry needs is further confirmation that that is what all people want.
but such a conclusion would ignore the fact that this is a very expensive endevour, using a highly popular IP by a respectful developer.
if those 3 elements were joined to produce a sequel of the original SWG id bet it would be successful, but i wouldnt bet on the industry thinking the same.
I find it hard to believe that an MMO could change the entire industry for the worst but look at WoW. Since everybody tried to make WoW clones it's just been failure after failure.
Maybe in the future we're going to start complaining about badly made TOR clones?
I doubt any studio can out-bioware Bioware itself. Maybe Bethesda.
That's like trying to be greedier than $OE, it just doesn't happen.