Electronic Arts invested more money and firepower into Star Wars: The Old Republic than it has on any game in its 30-year history. Starting this week, the company will find out if the bet pays off.
If it succeeds, the game, which features the Star Wars movies’ familiar Jedis, Wookies, and Siths, could bring EA riches for years to come. If it fails, EA’s earnings will be hurt in future quarters.
“A lot is at stake for EA,” said Robert W. Baird & Co. analyst Colin Sebastian, who estimates the company spent more than $300-million to make “the Old Republic.”
Other analysts think between $100-million and $300-million was spent on the game. EA has not divulged the cost.
“This caps years of development and hundred of millions of dollars. It’s a very important part of their pipeline for the next several years. If it’s a failure, it’s a huge loss for EA,” Mr. Sebastian said.
Star Wars: The Old Republic is different from other recent high-profile releases by EA such as Battlefield 3 in that it is a massive multiplayer player online game, or MMO, that allows thousands of people to play simultaneously for a monthly subscription fee as opposed to a one-time purchase.
Gamers will pay $60 up front and then about $15 a month for Star Wars: The Old Republic, reflecting a move by the video game industry to evolve into a cable television business model. Companies like EA are trying to create a steady and predictable revenue stream from subscribers as opposed to a current Hollywood-like business model where games can be one-time blockbuster events.
Despite the film franchise’s commercial pedigree, however, the game is no slam dunk. The success of MMO games is hard to predict and early reviews by critics may not gauge its success since it can take months to test the hundreds of hours of playing time.
EA has made no secret that it is using the game, developed in Austin by Edmonton-based BioWare Studio over three and a half years, to go after World of Warcraft, the title made by its biggest competitor, Activision Blizzard.
World of Warcraft represents the genre’s gold standard, in some years generating $1-billion in revenue by itself. To help compete, EA hired more than 1,000 voice actors for Star Wars: The Old Republic, which broke an industry record.
“There hasn’t been a big MMO release in many years, not since World of Warcraft, that is this ambitious in scope and broadly appealing,” said Frank Gibeau, president of EA labels.
Mr. Gibeau said that monthly subscriptions giving players constant access to new content could make the game a “10-year business.” The company has previously said it needs 500,000 subscribers to break even on the game and that more than 1 million subscribers would make it “a very profitable business.”
According to Arvind Bhatia, a Sterne Agee analyst, EA should have no trouble reaching that milestone. Bhatia expects the game to sell 3 million copies at the start and sign up 1.5 million subscribers by the end of 2012.
Mr. Bhatia, underscoring how much EA has riding on this one game, added that the company’s annual earnings next year could take a 15 to 20 cent hit if the game is a bust.
“If it’s a flop, then it’s bad for the sentiment of the stock and from an earnings standpoint,” Mr. Bhatia said.
It’s not impossible Old Republic will fail to catch: BioWare is not the first developer to bring the “Star Wars” franchise into the multiplayer gaming world. Sony Online Entertainment launched the highly anticipated Star Wars Galaxies in 2003, but the game failed to live up to expectations and was ultimately cancelled, with the servers going offline for good last week.
