EA has stated that they needed to sell 1.5million boxes in order to make SWTOR a success. I am pretty sure they surpassed that number just on their opening weekend. That means that SWTOR is a success for EA which means that it will continue on unhindered for years to come. I take my word from EA not from a random analyst who dislikes SWTOR.
The quote was 1.5 million subscriptions made to investors, otherwise making a monthly profit off of a one time box sale is something new to me and I would be all ears.
EA has stated that they needed to sell 1.5million boxes in order to make SWTOR a success. I am pretty sure they surpassed that number just on their opening weekend. That means that SWTOR is a success for EA which means that it will continue on unhindered for years to come. I take my word from EA not from a random analyst who dislikes SWTOR.
I know of one person who has purchased the game for 3 of his friends alone, he is one person in 1.1 million subbers so far, and while TOR has hardcores like this, EA/Bioware have a massive future
Bioware do make other games as well. Both Mass effect and Dragon age gets in money so counting in what EA paid for Bioware in the development cost for TOR really isn't relevant.
Bioware is still worth money even if TOR flops totally, and EA could always sell them to Activision, Microsoft or some other company for at least a rather large sum.
If they would have bought BW just for TOR and it was the only game they made then OK, it wouldn't still be perfect but at least partially true but now it just seems silly.
For me as gamer, speculating is idle and relatively useless. I assume they invested a LOT, that much can be assumed. I am more sceptic about the relation, when so much went into VO and so little effort went into the entire rest. SWTOR will face mayor server merges before the year is over. And then what? So far it seems Bioware just adds "more of the same", more flashpoints etc. It is more a mental problem than a monetary one. "No path is as dark as the one you walk with your eyes shut.", to quote Flemeth; a fact that seems to describe Biowares current course entirely.
Agreed. They could haveused the huge sum of money they invested in TOR better than they did but counting in the cost to buy Bioware without even subtracting the money they already did on DA 1 & 2 and ME2 is just dumb.
Bioware is not the company I really liked 10 years ago anymore but they are still a lot more than just TOR. ME2 sold great and ME3 will get in plenty of money for EA. And even if TOR loses most of it's subs it already sold a lot of boxes so it will at least bring in part of what it cost BW to make even in worst case.
Still, they should have based their MMO on NWN instead and kep the original mechanics (but made leveling slower since NWN is a bit too quick for a MMO). Heck, NWN actually had better crafting than TOR.
Makes EA louse's $300 million not as outlandish as once claimed though.
Something tells me we will see some heads roll at the next quarterly.
Doubtful head will roll, didn't they say they only needed 250k subs to regain the loss of the cost in investment?
No, more like 500K was to break even or profit, but estimated 3-4 million box sales. Investors were anticipating to make SWTOR a cash cow. But were angry that Lucas was taking 35% right off the top of every dollar.
This is conjecture, unless you can show me that EA/BW people themselves stated that their estimation used 3-4 million box sales, which there isn't.
As much as this analist's report seems to use conjecture and a false premise, but I can see how haters/critics of the game or EA might love to believe it (pretty obvious).
The guy seems to attach the invested money of $775 million largely to SWTOR, but that's like saying that Youtube has a development budget of billion dollars when it was acquired by Google, or that of each game company that was ever bought, 70% of the acquisition money was the development budget of their next game.
That's just silly thinking.
Cowen & Company made the 3-4 million claim they could take that many from WOW alone. during an investors meeting and confrence call with EA ceo. Based on EA's view of retaining possibly 1.5 million subs to make them $80 million a month PROFIT. But conjecture is the main staple of investors, otherwise it wouldn't be called risk.
Hickey, at the prodding of Activisions CEO, already pointed out back in January that investors were betting against EA's positions due to bad negotiations with Lucasarts, then Riccitiello admitted EA was "incurring significant development costs" after the $80 million development costs were already reached. So anyone who knows anything about business also knows development is only a fraction of actual costs overall to a product. Rule of thumb is marketing, production and manufacturing, and distribution is usually two to three times development costs for games.
Do I think $500 million is blowing smoke, absolutley, would it be fraud to say the game will cost $100-120 million to produce, absolutely. The $300 million range is not only quite possible, it seems quite rational even for an investor to bet against it. Your not seeing CEO's or PR guys battling over this, this is investors betting one way or the other, what they are mad about is Lucas is the only guy in the room with a sure thing.
Thinking otherwise is provincial.
You do realize the LA invested around 30% of ToR dev costs right? guess who did the voice over? - LA, guess who signed on the actors? - LA, guess who provided the music score, and most sound effects in the game? - LA. They have also done some extensive wirting for the stories and the quests, as well as provided the motion capture and other production facilities.
Yes LA is probably making around 25-35 cents on the dollar, but they've payed just as much tho get this project of the ground.
BW Austin costs for the pass 3-4 years were about 20-25M a year, this includes the development costs for ToR in terms of sallaries(which for a project this size are about 10-15M a year for a 100 person team) and other costs such as hardware and licensing. Those operational costs also included EA funding as part of the BW take over deal, and the reorganization of EA's RPG/MMO devision(frm EA Mythic) under BW's wing. So the actual development costs of the game should be around 100-130M US including LA's part. But these are internal costs, they do not including extertnal deliver-to-market costs which include manufactoring the media's, and game boxes, distribution, and marketing which can theoratically if EA spent more money on this than MS did on Halo could add around additional 100M to the external costs of this project. That said there is a diffrence between operational expenses and investor, or personal capital costs, since most opertaional expenses are tax deductbale, meaning that EA/BW/LA will be able to get some if not most of the money back(depending on how good their tax lawyers are) in tax returns over the next several fiscal years.
EA has stated that they needed to sell 1.5million boxes in order to make SWTOR a success. I am pretty sure they surpassed that number just on their opening weekend. That means that SWTOR is a success for EA which means that it will continue on unhindered for years to come. I take my word from EA not from a random analyst who dislikes SWTOR.
The quote was 1.5 million subscriptions made to investors, otherwise making a monthly profit off of a one time box sale is something new to me and I would be all ears.
Actually...Riccitiello was quoted as saying that 500K subs would be significantly profitable. Anything more than a million would be very profitable.
EA has stated that they needed to sell 1.5million boxes in order to make SWTOR a success. I am pretty sure they surpassed that number just on their opening weekend. That means that SWTOR is a success for EA which means that it will continue on unhindered for years to come. I take my word from EA not from a random analyst who dislikes SWTOR.
The quote was 1.5 million subscriptions made to investors, otherwise making a monthly profit off of a one time box sale is something new to me and I would be all ears.
Actually...Riccitiello was quoted as saying that 500K subs would be significantly profitable. Anything more than a million would be very profitable.
Thats not what I was responding to. BTW, the break even number was actually 400K.
"Most MMOs require around 250,000 subscribers to cover the direct operating expense of the server farms. Given LucasArts' revenue split, SWTOR would require around 400,000 subscribers to break even. That means they make money at 500,000 subscribers."
But these are sales pitches to investors, not to us the consumers.
The $80 million a month pitch was that they estimated 1.5 million subscritptions. Not sales.
It appears that perhaps EA might have bitten off more than it can chew.
----
Upon his return to EA, Riccitiello was approached by Frank Gibeau, who ran the company’s games-label business, with a suggestion that EA acquire BioWare/Pandemic. Riccitiello retained an ownership stake in Elevation — and thus in the studio — so a special committee led by Gibeau was set up to evaluate the deal and make a recommendation to the board. The deal got done in October 2007 for about $775 million, making it EA’s largest acquisition ever at the time.
“Knowing we would work with John again was a tremendous plus to make us want to join the company,” says BioWare co-founder Ray Muzyka. “At every step along the way, they worked with us to focus on our core values.”
That deal brought aboard what many expect to become EA’s next major growth property. The company launched “Star Wars: The Old Republic” on Dec. 20. As a PC-based multiplayer game, “The Old Republic” will sell an initial retail pack plus monthly subscriptions allowing users to continue playing.
In a Dec. 23 statement, EA boasted that “The Old Republic” had attracted more than 1 million registered subscribers in just three days on the market.
Doug Creutz of Cowen & Co. says that Riccitiello’s tenure as CEO has featured misfires along with its successes but that “Star Wars” may represent his biggest bet of all, considering both the purchase price of BioWare/Pandemic and the development costs poured into the game since then.
“I think it’s safe to say that the total all-in investment in ‘Star Wars’ is probably approaching half a billion dollars,” Creutz says. “EA has minimized its risks as much as it can on this bet, but it’s still a risky bet. To the extent that any one game defines his tenure, it’s going to be how ‘Star Wars’ performs.”
Originally posted by namelessbob EA has stated that they needed to sell 1.5million boxes in order to make SWTOR a success. I am pretty sure they surpassed that number just on their opening weekend. That means that SWTOR is a success for EA which means that it will continue on unhindered for years to come. I take my word from EA not from a random analyst who dislikes SWTOR.
I don't know if thats all true, but they have sold over 1.5 million boxes alone. That doesn't include Digital sales.
Thats not what I was responding to. BTW, the break even number was actually 400K.
"Most MMOs require around 250,000 subscribers to cover the direct operating expense of the server farms. Given LucasArts' revenue split, SWTOR would require around 400,000 subscribers to break even. That means they make money at 500,000 subscribers."
But these are sales pitches to investors, not to us the consumers.
The $80 million a month pitch was that they estimated 1.5 million subscritptions. Not sales.
Actually, the 80 million dollars was another analist's report that referred to the investment into SWTOR development. Also an estimation of course, but a hell of a lot more realistic than the 500 million dollar quote which would make SWTOR have a development budget that would surpass all the money poured into developing all the AAA MMORPG's and A MMORPG's of the past 8 years put together -_-
Thats not what I was responding to. BTW, the break even number was actually 400K.
"Most MMOs require around 250,000 subscribers to cover the direct operating expense of the server farms. Given LucasArts' revenue split, SWTOR would require around 400,000 subscribers to break even. That means they make money at 500,000 subscribers."
But these are sales pitches to investors, not to us the consumers.
The $80 million a month pitch was that they estimated 1.5 million subscritptions. Not sales.
Actually, the 80 million dollars was another analist's report that referred to the investment into SWTOR development. Also an estimation of course, but a hell of a lot more realistic than the 500 million dollar quote which would make SWTOR have a development budget that would surpass all the money poured into developing all the AAA MMORPG's and A MMORPG's of the past 8 years put together -_-
Its all analist's reports, because the companies submit reports quaterly. However, the $80 million was not only confirmed by the non-denial by EA 's ceo, after the EA louse blog, he admmited that those cost's were actually higher, but not to the $300 million level, which he scoffed at.
The whole profit pitch was based on some very high expectations. Which is why analists pounced on EA initially, of course with some prodding from Activion's CEO
It's easy to say the total outlays for this game are well over $200 million but well under $500 million.
I do not envy Riccitiello's probable sleep patterns at this current juncture.
Explain why he would be worried?
The Game is fully expensed.
EA is still (and has been for 2 years) MASSIVELY profitabled (To the tune of a quarter of a billion dollards in the last 2 quarters)
The only thing he's going to be worried about is how big his paycheck will actually get (for doing really...not...much)
Oh, he may well be worried, allright...
IF the earnings from TOR are merely flat (it breaks even), then shareholders are going to be very unhappy. The company will then have spent a considerable amount of money and time to essentially achieve... nothing. It will have been a massive waste of resources, and all on Ricci's watch.
The fact that EA still generates good revenue will be irrelevant, the focus will be on the massive wasted opportunity. Phrases like "bad leadership" and "lack of vision" start circulating.
If SWTOR generates mediocre profits, he will also feel plenty of heat, and that is never a comfortable position to be in, especially not in the current economic climate.
No MMO is ever a dead cert, MMO gamers are notoriously fickle.
But I don't believe SWTOR will tank. The next 3-6 months will be interesting.
I do not envy Riccitiello's probable sleep patterns at this current juncture.
Explain why he would be worried?
The Game is fully expensed.
EA is still (and has been for 2 years) MASSIVELY profitabled (To the tune of a quarter of a billion dollards in the last 2 quarters)
The only thing he's going to be worried about is how big his paycheck will actually get (for doing really...not...much)
MASSIVELY profitable? Lets take a look at the last quarter 10/27/2011.....
On a GAAP basis, the company had revenues of $715m for the quarter with a loss of $340m. On a non-GAAP basis, which includes fewer expenses, the company had revenue of $1.034b, with profit of $17m. EA had previously projected non-GAAP revenue of $925m-$975m for the quarter, and so the figure came in well above expectations. In the previous September quarter non-GAAP revenue reached $884m with a profit of $32m while the non-GAAP loss was $201m. By either measure EA's profitability dropped from the September 2010 quarter to September 2011 quarter despite increasing revenue.
EA expects GAAP revenue to reach $1.0-$1.1b in the December 2011 quarter and $1.55b to $1.65b on a non-GAAP basis. For the non-GAAP method of accounting which excludes some expenses, EA forecasts to earn 85-95 cents of profit per share, about $300m in profit give or take $17m on either side. Including the extra expenses, EA says it will lose about $210m - $257m in the next quarter
So not using generally accepted accounting practices EA on paper shows profit but when using GAAP they lose money.......that is not MASSIVELY profitable it is barely profitable when they do not take all expenses into account.
Its all analist's reports, because the companies submit reports quaterly. However, the $80 million was not only confirmed by the non-denial by EA 's ceo, after the EA louse blog, he admmited that those cost's were actually higher, but not to the $300 million level, which he scoffed at.
The whole profit pitch was based on some very high expectations. Which is why analists pounced on EA initially, of course with some prodding from Activion's CEO
It's easy to say the total outlays for this game are well over $200 million but well under $500 million.
'confirmed by the non-denial'? Lol, sorry, but that makes no sense at all. If every rumor or outside estimation that isn't immediately debunked or responded upon is 'confirmation by non-denial', then I have a whole list that you can hunt down about a lot companies and games, a lot of them often contradicting themselves drastically.
And yes, the fact that they stated in a shareholders or corporate conference meeting that the budget was a whole lot lower than the rumored 300 million dollars and that most of the estimations project a 80 to 130 million dollar budget, makes that 500 million simply beyond ridiculous. It looks like the analist wants to put as good as the whole merger investment cost of BW by EA on the feet of SWTOR.
Try to see reason: as good as all AAA MMORPG's have had a development cost of 40-50 million dollars. To expect that SWTOR would have the cost of 6-10 AAA MMO's is simply absurd. I cannot believe that people really believe that; but it's maybe telling that in the course of the past 1-1.5 year it's the biggest TOR critics and EA/BW opponents that want to believe such preposterously high figures the most.
Its all analist's reports, because the companies submit reports quaterly. However, the $80 million was not only confirmed by the non-denial by EA 's ceo, after the EA louse blog, he admmited that those cost's were actually higher, but not to the $300 million level, which he scoffed at.
The whole profit pitch was based on some very high expectations. Which is why analists pounced on EA initially, of course with some prodding from Activion's CEO
It's easy to say the total outlays for this game are well over $200 million but well under $500 million.
'confirmed by the non-denial'? Lol, sorry, but that makes no sense at all. If every rumor or outside estimation that isn't immediately debunked or responded upon is 'confirmation by non-denial', then I have a whole list that you can hunt down about a lot companies and games, a lot of them often contradicting themselves drastically.
And yes, the fact that they stated in a shareholders or corporate conference meeting that the budget was a whole lot lower than the rumored 300 million dollars and that most of the estimations project a 80 to 130 million dollar budget, makes that 500 million simply beyond ridiculous. It looks like the analist wants to put as good as the whole merger investment cost of BW by EA on the feet of SWTOR.
Try to see reason: as good as all AAA MMORPG's have had a development cost of 40-50 million dollars. To expect that SWTOR would have the cost of 6-10 AAA MMO's is simply absurd. I cannot believe that people really believe that; but it's maybe telling that in the course of the past 1-1.5 year it's the biggest TOR critics and EA/BW opponents that want to believe such preposterously high figures the most.
Wow, you laugh? When a group of investors jump down your throat over reports of spending $300 million instead of 80, and the CEO says, we have been "incurring significant development costs" but the $300 million is laughable.
That's an admission that the $80 million was already spent but but but we haven't gone to $300 million. But you ignore that marketing, production and distribution is always more costs than development for any game. Maybe not the three times ratio because of how much they spent on development, but even $80 million means at least $160 million (and that is nearly impossible considering the marketing SWTOR had) total expenditures.
I would be more than willing to bet next investors meeting we will be hearing for someone's head on a platter if subs drop below 700K. And that is highly probable.
Comments
The quote was 1.5 million subscriptions made to investors, otherwise making a monthly profit off of a one time box sale is something new to me and I would be all ears.
I know of one person who has purchased the game for 3 of his friends alone, he is one person in 1.1 million subbers so far, and while TOR has hardcores like this, EA/Bioware have a massive future
Agreed. They could haveused the huge sum of money they invested in TOR better than they did but counting in the cost to buy Bioware without even subtracting the money they already did on DA 1 & 2 and ME2 is just dumb.
Bioware is not the company I really liked 10 years ago anymore but they are still a lot more than just TOR. ME2 sold great and ME3 will get in plenty of money for EA. And even if TOR loses most of it's subs it already sold a lot of boxes so it will at least bring in part of what it cost BW to make even in worst case.
Still, they should have based their MMO on NWN instead and kep the original mechanics (but made leveling slower since NWN is a bit too quick for a MMO). Heck, NWN actually had better crafting than TOR.
Explain why he would be worried?
The Game is fully expensed.
EA is still (and has been for 2 years) MASSIVELY profitabled (To the tune of a quarter of a billion dollards in the last 2 quarters)
The only thing he's going to be worried about is how big his paycheck will actually get (for doing really...not...much)
You do realize the LA invested around 30% of ToR dev costs right? guess who did the voice over? - LA, guess who signed on the actors? - LA, guess who provided the music score, and most sound effects in the game? - LA. They have also done some extensive wirting for the stories and the quests, as well as provided the motion capture and other production facilities.
Yes LA is probably making around 25-35 cents on the dollar, but they've payed just as much tho get this project of the ground.
BW Austin costs for the pass 3-4 years were about 20-25M a year, this includes the development costs for ToR in terms of sallaries(which for a project this size are about 10-15M a year for a 100 person team) and other costs such as hardware and licensing. Those operational costs also included EA funding as part of the BW take over deal, and the reorganization of EA's RPG/MMO devision(frm EA Mythic) under BW's wing. So the actual development costs of the game should be around 100-130M US including LA's part. But these are internal costs, they do not including extertnal deliver-to-market costs which include manufactoring the media's, and game boxes, distribution, and marketing which can theoratically if EA spent more money on this than MS did on Halo could add around additional 100M to the external costs of this project. That said there is a diffrence between operational expenses and investor, or personal capital costs, since most opertaional expenses are tax deductbale, meaning that EA/BW/LA will be able to get some if not most of the money back(depending on how good their tax lawyers are) in tax returns over the next several fiscal years.
Actually...Riccitiello was quoted as saying that 500K subs would be significantly profitable. Anything more than a million would be very profitable.
Thats not what I was responding to. BTW, the break even number was actually 400K.
"Most MMOs require around 250,000 subscribers to cover the direct operating expense of the server farms. Given LucasArts' revenue split, SWTOR would require around 400,000 subscribers to break even. That means they make money at 500,000 subscribers."
But these are sales pitches to investors, not to us the consumers.
The $80 million a month pitch was that they estimated 1.5 million subscritptions. Not sales.
http://www.eurogamer.net/articles/2011-11-30-lucasarts-to-take-around-35-percent-of-old-republic-revenue-report
You gotta give George Lucas credit. he knows how to make mad money with starwars.
Just for comparison purposes, SW:TOR will have cost just as much to film & produce AVATAR LOL (WITH the new fancy 3D technology)
I don't know if thats all true, but they have sold over 1.5 million boxes alone. That doesn't include Digital sales.
Actually, the 80 million dollars was another analist's report that referred to the investment into SWTOR development. Also an estimation of course, but a hell of a lot more realistic than the 500 million dollar quote which would make SWTOR have a development budget that would surpass all the money poured into developing all the AAA MMORPG's and A MMORPG's of the past 8 years put together -_-Its all analist's reports, because the companies submit reports quaterly. However, the $80 million was not only confirmed by the non-denial by EA 's ceo, after the EA louse blog, he admmited that those cost's were actually higher, but not to the $300 million level, which he scoffed at.
The whole profit pitch was based on some very high expectations. Which is why analists pounced on EA initially, of course with some prodding from Activion's CEO
It's easy to say the total outlays for this game are well over $200 million but well under $500 million.
Oh, he may well be worried, allright...
IF the earnings from TOR are merely flat (it breaks even), then shareholders are going to be very unhappy. The company will then have spent a considerable amount of money and time to essentially achieve... nothing. It will have been a massive waste of resources, and all on Ricci's watch.
The fact that EA still generates good revenue will be irrelevant, the focus will be on the massive wasted opportunity. Phrases like "bad leadership" and "lack of vision" start circulating.
If SWTOR generates mediocre profits, he will also feel plenty of heat, and that is never a comfortable position to be in, especially not in the current economic climate.
No MMO is ever a dead cert, MMO gamers are notoriously fickle.
But I don't believe SWTOR will tank. The next 3-6 months will be interesting.
MASSIVELY profitable? Lets take a look at the last quarter 10/27/2011.....
On a GAAP basis, the company had revenues of $715m for the quarter with a loss of $340m. On a non-GAAP basis, which includes fewer expenses, the company had revenue of $1.034b, with profit of $17m. EA had previously projected non-GAAP revenue of $925m-$975m for the quarter, and so the figure came in well above expectations. In the previous September quarter non-GAAP revenue reached $884m with a profit of $32m while the non-GAAP loss was $201m. By either measure EA's profitability dropped from the September 2010 quarter to September 2011 quarter despite increasing revenue.
EA expects GAAP revenue to reach $1.0-$1.1b in the December 2011 quarter and $1.55b to $1.65b on a non-GAAP basis. For the non-GAAP method of accounting which excludes some expenses, EA forecasts to earn 85-95 cents of profit per share, about $300m in profit give or take $17m on either side. Including the extra expenses, EA says it will lose about $210m - $257m in the next quarter
So not using generally accepted accounting practices EA on paper shows profit but when using GAAP they lose money.......that is not MASSIVELY profitable it is barely profitable when they do not take all expenses into account.
'confirmed by the non-denial'? Lol, sorry, but that makes no sense at all. If every rumor or outside estimation that isn't immediately debunked or responded upon is 'confirmation by non-denial', then I have a whole list that you can hunt down about a lot companies and games, a lot of them often contradicting themselves drastically.
And yes, the fact that they stated in a shareholders or corporate conference meeting that the budget was a whole lot lower than the rumored 300 million dollars and that most of the estimations project a 80 to 130 million dollar budget, makes that 500 million simply beyond ridiculous. It looks like the analist wants to put as good as the whole merger investment cost of BW by EA on the feet of SWTOR.
Try to see reason: as good as all AAA MMORPG's have had a development cost of 40-50 million dollars. To expect that SWTOR would have the cost of 6-10 AAA MMO's is simply absurd. I cannot believe that people really believe that; but it's maybe telling that in the course of the past 1-1.5 year it's the biggest TOR critics and EA/BW opponents that want to believe such preposterously high figures the most.Wow, you laugh? When a group of investors jump down your throat over reports of spending $300 million instead of 80, and the CEO says, we have been "incurring significant development costs" but the $300 million is laughable.
That's an admission that the $80 million was already spent but but but we haven't gone to $300 million. But you ignore that marketing, production and distribution is always more costs than development for any game. Maybe not the three times ratio because of how much they spent on development, but even $80 million means at least $160 million (and that is nearly impossible considering the marketing SWTOR had) total expenditures.
I would be more than willing to bet next investors meeting we will be hearing for someone's head on a platter if subs drop below 700K. And that is highly probable.