Star Wars: The Old Republic has cost EA $80 million - Analyst
Wedbush's Michael Pachter says that the megapublisher's MMORPG will likely break even with just 350,000 subscribers.
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Yesterday, Electronic Arts reported its earnings estimates for its past fiscal year and gave some predictions for the year ahead. The company forecast that the much-anticipated Star Wars: The Old Republic should be released sometime during the second half of the 2011 calendar year. However, company executives also said there was an "outside" chance that the game could be delayed into the first quarter of calendar 2012.
Whenever it comes out, The Old Republic will likely make a not-so-small fortune for its now-sole publisher, according to one analyst. Wedbush's Michael Pachter believes EA has spent just $80 million on development costs for the massively multiplayer online role-playing game since it bought BioWare/Pandemic in 2007 for $860 million.
"Fortunately for investors, the company expenses R&D spending, meaning that its revenues on sales of the Star Wars MMO will be pure profit," wrote Pachter. "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 2 million units sold, EA will generate $60 million of operating profit on the [game disc] sales. 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."
Pachter went on to estimate the cost per subscriber to keep Star Wars: The Old Republic operational will be around $5. That means even if EA has to give Star Wars license holder LucasArts 33 percent in royalties on a $15 per month subscription fee, the publisher will still pocket $5 each month per account in profits. If the game acquires 1 million subscribers during the back half of its fiscal year (October 2011-March 2012), EA should profit $30 million from the game, according to Pachter's estimate.