BioWare's first steps into the MMO world will come in the form of Star Wars: The Old Republic. Star Wars: The Old Republic is a new MMO that is in development between BioWare and LucasArts where it pits players in a world that 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.
Players will have the choice of 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. EA has now reported that its total investment in the new Star Wars-based MMO has reached $80 million, in development alone. Michael Pachter, Wedbush Security analyst says:
The contribution from the 'Star Wars' MMO is significant. 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.
On the flip side, Pachter says that EA will not require a certain amount of subscribers for Star Wars: ToR to make a profit, where he says:
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. 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.
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