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12-24-2011 @ 8:13AM
To the OP !!!Great article but also some serious errors in the calculation set up.Revenue = NOT simply a matter of calculating the END price of a product * numbers.For instance the author says $ 14.99 times X = ... for the subscriptions. The problem is that the paid subscription cards bring in only around $10 for each subscription card sold.So the revenue of say 2 M subscriptions of which 50% depend on subscription cards is only 25 $M dollars per month instead of 30 $M. In regards to the basic box sales of a game at least 40 % is lost due to distribution costs and retail.So a game that sells 1M copies at 60 dollars, has a revenue between 30-40 M dollars instead of 60 M.2. Revenue is not profit (of course). Mostly the gross revenue/profit ratio is around 80/20 %. 3. From what we know Lucas The Hutt gets a 30% cut on all gross profits from SW TOR.So I made a calculation about the "business model" of EA's SW and it doesn't look great at all. I won't go into the detailed calcsn but ...In the assumption SW will sell around 2.5 M copies at 60 dollars retail ($ 40 + retail and distribution), that would make for: $ 100 M gross revenue.If the game would have 1M subscriptions for 6 months long (doubtful), the gross revenue would be $ 60 M coming from subscriptions.On a yearly basis at 1 M subscribers this would come to a global gross revenue of $ 120M.With a 80/20% turnover/profit ratio and the fact of sustained support for a game with 200+ servers, , it would mean SW TOR will have until the beginning of 2013 to begin making profits if the rumours are true the production, launch and marketing took over $200 M dollars for this game.Now that's a VERY long period, IF they can sustain 1 M subscriptions throughout the coming year. If ANYTHING happens to the subscription based markets, ... they are screwed.Now here it comes: the average retention rate of subscription based MMORPG's is far less than 40% over the first 6 months. I think launching a subscription based game these days - with a huge franchising scope AND development costs - that will HAVE to make 1 M subscriptions for a full year before taking profits - is a VERY dangerous operation.You know there is a reason why Bob Kotick took an ailing Activision in 1994 at 40 million dollars and let it grow to 4.3 billion yearly revenue. ... The estimated worth of Activison Blizzard is estimated now to be around 13.5 billion dollars these days.Not bad for an "idiot" I guess.This is all about economics, NOT a thing to be calculated by gamers.
12-25-2011 @ 3:37AM
I'm sorry, but there are several things here. 1) EA has gone on record to say that if TOR passes the 500k mark, they will be profitable. That's their "desired" mark. 2) Typically games try to make the development cost back from the box cost. Until NPD releases sales numbers, its impossible to know for sure, but the estimates I saw said anywhere from 1.5 to 4 million copies sold. We know that there are 1.5 million subs at the moment, and considering the fact that we're just 5 days in from launch, that's kinda nuts. With 30 days of free play, its very likely the sub count will be much higher. In any event, its very likely that the vast majority of the production cost is already paid for. 3) The profit to revenue ratio is not what you said. It is much much higher with MMOs. It boils down to economies of scale. I have heard people say that WoW enjoys a 50% or so net profit margin. Obviously TOR isn't going to have that, but if its not a large cash cow for EA, I will be shocked. 4) The 30% number is useless. My understanding is these licensing agreements are tiered and can have front payments. There's also likely incentives as well. BK is used to making failing Star Wars games, not successful ones. Given Bioware's success with KOTOR, I would be surprised if the agreement wasn't more friendly towards Bioware. 5) I don't see TOR in much danger. Even if EA only retains 40% of the current subs they'll still exceed their own internal expectations. They may take a hit from Wall Street, but that's not as simple as ATVI, as EA is more divested. Its likely the NBA lockout will hurt them more than if TOR were to only hit 600k subs. However, I predict that by the 1 year mark, you will see TOR at between 3-4 million active subs. 6) On the other hand I do see Blizzard in some danger. The annual pass does give them some security, but come October of next year, that will evaporate. Either MoP will have to be amazing, and more so than TOR, or 2012 could be a bad year for ATVI.
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