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noreply@blogger.com (GameFinance) — Sat, 23 Jul 2011 19:50:00 +0000

So...what's it going to be? Empire, or Rebels? Sith or Jedi?

The pre-launch trailer for Star Wars: The Old Republic MMO is generating some buzz around MMO circles...despite no firm release date.

With most other MMORPG titles switching to a free to play option, it's more interesting that EA, BioWare, and Lucas Arts are joining the fight with a subscription based title.

It may be a tougher battle than they think.

The Numbers Game

Back in February, John Riccitiello stated that The Old Republic would be profitable with 500,000 subscribers.

That can't be possible.

Riccitiello stated at the time that the $300 million reportedly sunk into the game's development was wrong, and that it cost "significantly less" than that to develop.

Okay, so what is significantly less?

No idea.

BioWare has spared no expense on developing the game...and we can be certain that EA will spare no expense on the marketing push. If the game comes in costing less than $150 million, I would be shocked.

So let's say that The Old Republic costs about $150 million to market. Riccitiello's numbers don't add up.

The Old Republic will release with three editions: a Collectors Edition, a Deluxe Edition, and a Standard edition. If the market trends stay true to form, the bulk of gamers will opt for the Standard edition.

Five hundred thousand at $60 nets EA/BioWare $30 million.

If those 500,000 subscribe for the full year, that's ($15*11)*500000=$82.5 million. Remember, purchase of the game gets you 30 days game time, so one month is free on launch year.

So at best, with 500,000 subscribers, The Old Republic would generate $112.5 million.

You would need to go into year 2 before the game would be profitable.

Making The Numbers Work

So where does The Old Republic break even? Well, each Standard Edition buyer generates $225 in revenues, assuming they stay subscribed for the remainder of the year, and that there are no ingame purchases available.

The Old Republic breaks even at 666,667 users. That's the number they have to hit year one, just to cover costs.

When the game went into Beta testing, 1.5 million users requested Beta Keys. That's a good indication of initial interest.

Back of the napkin, if all 1.5 million beta key seekers bought the game and stayed subscribed for a full year, then EA/Bioware generates $337.5 million in revenues.

Now we're talking!

Micheal Patcher of Wedbush Securities reckoned that 2 million would be purchasing on launch, with 1.5 million hang around past the free 30 day period.

Using our $225 number, that's $120 million in unit sales, and $247.5 million in subscriptions for the first year, for a total of $367.5 million in revenues year one.

Not too shabby!

I have no idea if the game is profitable at $367.5 million though. It depends on what it's going to cost to keep the persistent world up and running, and the cost of continuing content development.

Let's just take it as given for the moment that at that level, there is ample incentive for EA/Bioware to continue working on the game.

If You Build It, Will They Come?

The key issue is, now that the game is built, and nearing release, will the subscribers come?

Faced with a decision between a $15 per month subscription fee, and a high quality F2P title, such as Lord of the Rings Online, many gamers are now opting for the free option.

BioWare/EA/LA can't be thinking that they will unseat World of Warcraft.

That's a fools errand!

The players that were going to leave, have already left, and there are still more than 11.5 million subscribers to the game!

At best, you could get some of those players to holiday in the Star Wars universe for a while...but social is the glue that holds World of Warcraft together. The only way players will leave is if their friends all leave en masse, and that's highly unlikely at this point.

Still, with Star Wars Galaxies shuttering, it may be able to make a go of it simply for being the only Star Wars game in town.

Come In, Sit Down, Stay Awhile!

The more interesting question is: will there be enough game there to make people want to stay?

EA's own MMO experience can best be described as...troubled. They went full on into the MMO space purchasing Mythic, but the results have been mixed; Dark Age of Camelot persists as a niche product, and Warhammer Online was bobbled at launch and never really recovered.

Since then, under their own name, EA has basically trotted out online versions of FIFA, and browser based strategy games.

BioWare certainly knows a thing or two about role playing games, but this is their first MMO. BioWare certainly has been a better steward for the Star Wars intellectual property than it's own creator, but that doesn't mean they have the experience to run an MMORPG.

Perhaps that's why EA moved Mythic under BioWare? Maybe it wasn't just "saving face" after all?

So, we have two publishers with very little experience or success in the MMO arena pushing a AAA subscription based title out the door.

Only Mythic is used to supporting an MMO title long term, producing content every year, even when no one was really looking. I wonder if BioWare or EA really have the stamina for that?

I wish them luck!

They're going to need it.

Games Mentioned

World of Warcraft
Star Wars: The Old Republic
WarHammer Online

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