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Scott Jennings: Great Expectations - SW:TOR

Column By Scott Jennings on March 24, 2010

Something I've been harping on, probably annoyingly, is how the MMO industry needs more independence - specifically independent developers, free to experiment with innovative designs, veer from the path of cranking out more of the same, and avoid a lot of the misery involved in the codependent relationship that much of the gaming industry suffers through with publishers and associated developers.

Electronic Arts has a different idea. Unsurprising, since EA isn't exactly a scrappy indy! Electronic Arts' different idea, apparently, is to spend every other MMO developer into the ground. Or maybe just spend themselves into the ground. Because, as industry analyst Arvind Bhatia reported from an EA investor's conference:

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Although "earnings are somewhat depressed due to ongoing expenses of the Star Wars MMO, management has high hopes for this and believes 2M+ subs is possible." He added that a little over 1 million subscribers is needed to reach the break-even point, but the ultimate goal is to get several million subscribers.

The expectation of two million subscribers isn't surprising - although it would be only the second western MMO to reach those numbers (and remember, F2P mavens, that refers to subscribers, not players), if any developer can deliver two million pairs of eyeballs, it would be the combination of Bioware's writing chops and EA's muscle. No, the frightening part of the equation is that last part:

1 million subscribers, to break even.

Mull that over a moment. Again, only one western MMO has reached that plateau (Lord of the Rings Online is believed to have approached that number, but given the lack of press releases, it's doubtful they ever made it). And The Old Republic has to reach that level, just to make their production costs back.

The implications of this figure are even more staggering when you think it through a bit more. Take for purposes of back-of-the-envelope speculation that EA is willing to give The Old Republic a year to earn back their investment (a very aggressive figure, by the way). And let's just assume that out of your stereotypical $15-a-month subscription fee (which Bioware has hinted is not the only possible revenue source for the game), much of that is taken up due to operational expenses - bandwidth, facilities costs, keeping a live team on the payroll. It's safe to say that Bioware will need probably close to a 25-person live team (an expansion presumably having its own budget). Assume $250,000 a month in payroll and facilities costs (and I am probably vastly underestimating here). Figure $2 per person per month in bandwidth, facilities, and server support (a very rough estimate based on prior performance, and assuming the MMO provider is hosting their own servers and buying bandwidth in bulk). Everything else - ignoring for the sake of discussion marketing, community, any other cost - is operating profit, which by EA's own estimation has to go back to fund that initial investment so that they can break even.

So, what do we have? First, let's reduce that $15 a month subscription fee to $13 to account for bandwidth and other per-user expenses. So, EA is seeing $13 million per month in revenue. Take away $250,000 in payroll costs - and we're at $12.75 million per month in profit. A gross generalization, but let's go with that.

This means that, assuming EA is only giving The Old Republic a year to break even (remember, an aggressive measure), EA is requiring $153 million from The Old Republic to break even. Round that down a bit to $150 million, and that starts to look suspiciously like the sort of round number batted around in executive planning sessions, doesn't it?

$150 million dollars.

This would easily make The Old Republic the most expensive computer game ever produced.

And that is what I mean by EA attempting, at one swoop, to spend the rest of the industry into the ground. Because EA is one of the few publishers that can even consider a $150 million project. By purposes of comparison, World of Warcraft is believed to have cost around $80 million to produce. Everquest? $8 million.

 

It's hard to avoid the conclusion that our industry is quite literally going insane. Either this is a calculated effort by EA to ensure that MMO production is priced at the point that only they and a few of their competitors can compete, or that the arms race of "more stuff, bigger stuff, done faster" production has resulted in production costs that result in what by every right should be one of the most successful MMO projects of our time being judged a failure because it only - it only - brings in $10 million a month in profit.

And this is why we as an industry have to move beyond this broken blockbuster production model. Because it is literally unsustainable. EA may well have priced EA out of the MMO market with this project. And in today's economy, rolling $150 million on a bet that you can reproduce the best success in the MMO market, despite a history of failure within your company to do exactly that, is not a mistake you can make twice.

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Scott Jennings
Scott Jennings is a veteran MMO designer and the Internet personality once known as Lum The Mad. He has previously worked for Mythic Entertainment, NCsoft and others. His popular blog can be found at BrokenToys.org.

Aside from this column, Scott is also currently contracting with NCsoft.

Every Wednesday he provides us an insider's look at the MMO industry.
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