EA Invests $80M in Star Wars MMO Development

"Star Wars: The Old Republic" may not be released until January 2012

Analysts announced earlier this week that EA has invested over $80 million in the
development of BioWare's first MMO "Star Wars: The Old
Republic."

"Star Wars: The Old Republic" is a new massively multiplayer online (MMO) game
that is currently under development by BioWare and LucasArts. The game takes
place 300 years after the events of "Star Wars: Knights of the Old
Republic" and thousands of years before Luke Skywalker and Darth Vader, which is a
fairly unexplored era of "Star Wars" chronology.

Users will be able to choose from many different character roles such as Jedi or
Sith, and give context to their personal story with the option to follow the
light or the dark side of the Force. In addition, players can join friends
through the game's battles.



Now, EA has reported that its total investment in the "Star Wars" MMO has
reached $80 million in development alone.

"The contribution from the 'Star Wars' MMO is significant,"
said Michael Pachter, Wedbush Securities analyst. "Under the terms of its
deals 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 percent 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.


"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."

Pachter also noted that EA will not need a certain number of subscribers for "Star
Wars: The Old Republic" to make a profit.

"We estimate that EA will cover its direct
operating costs and break even at 500,000 subscribers (actual number
is closer to 350,000 subscribers), meaning that with 1.5 million paying
subscribers, EA will have 1 million profitable subs," said Pachter.
"We estimate that the incremental operating cost for each subscriber above
break even is around $5 per month, so if the revenue split is 33 percent 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."

EA also announced this week that the launch of "Star Wars: The Old Republic"
may be delayed until January 2012.

guess this is good news in the sense they pumping so much into a game.for a western mmo we can be pretty sure the game will be pretty polish from day 1 esp with that kind of funding.

they probably adding more race or classes and perfecting the events and end game content is my guess if they really delay it till jan next year.

tot they didn actually confirm and say it will be delay so we might still get it this year ^^

Frankly.. 80 Million is ALOT of cash to fund for a game R&D.

SWTOR was announced on Oct 2008 during the period of the financial crisis.. For EA to part with this cash reserve (profit) at such a time, it could only mean that they have their hopes set up very high for this game.

The proposal to fund that kind of money probably has been gone through a hundred times by EA business analysts and their top management lol.

As much as I would like to see the game succeed, I will always remember my FFXIV days and remember why proper funding and solid reputation doesn't always create good lasting games..