By James Brightman
Star Wars: The Old Republic could potentially miss this year and launch in January 2012, EA revealed on its earnings call yesterday, but regardless of when the game finally ships EA remains supremely confident in BioWare’s first-ever MMO. EA is betting big on the title, reportedly investing $80 million in development alone, according to Wedbush Securities analyst Michael Pachter.
“The contribution from the Star Wars MMO is significant. Under the terms of its deal with LucasArts, EA is required to pay a royalty, but was required to front all of the development, marketing and distribution costs, as well as the costs of building out servers for the game. We estimate that LucasArts’ share is 33% of revenues, AFTER EA recoups its investment in game development. Given that the game was in development for over four years, with an estimated 200 full-time developers working on it, we estimate that EA’s investment exceeds $80 million,” he said.
“Fortunately for investors, the company expenses R&D spending, meaning that its revenues on sales of the Star Wars MMO DVD will be pure profit. EA will be required to spend marketing dollars on the game, and we estimate total manufacturing, marketing and distribution spending will total around $20 million, meaning that at two million units sold, EA will generate $60 million of operating profit on the DVD sales.”
EA has said before that it doesn’t need a ton of subscribers to actually make a profit on The Old Republic, and Pachter echoed this sentiment.
“We estimate that EA will cover its direct operating costs and break even at 500,000 subscribers (this is exceedingly conservative, and the actual figure is probably closer to 350,000), meaning that with 1.5 million paying subscribers, EA will have 1 million profitable subs. We estimate that the incremental operating cost for each subscriber above breakeven is around $5 per month (also quite conservative), so if the revenue split is 33% to LucasArts ($5 per subscriber per month), EA will be left with $5 per subscriber per month in operating profit. At 1 million profitable subscribers over the last six months of its fiscal year, EA should generate $30 million in operating profit from subscribers.”