Why SWTOR Will Fail. With Numbers. Again.

This morning’s post drew some spirited responses in defense of SWTOR. I thought I’d made my feelings on the matter plain enough, but it’s been a while, and I’ve been rather dancing around the point (rhetorically) since then. So for the sake of refreshing the memories of the readersship, let me lay it out again.

I expect SWTOR to be a good game, possibly a great one. I think there’s some doubt as to how much virtual world it’s going to give us, but whether the game provides a good experience or not is independent of that, even if it happens to be among my personal preferences. Everything I’ve seen points to SWTOR as sort of the ultimate embodiment of the Theme Park, where each and every component of the user experience is carefully hand-crafted. This is not bad game design, but I’d personally prefer to see MMOs in particular move away from it.

My main concern with SWTOR, and the reason that I think it will fail, is the huge budget behind it. I think it’s inevitable that it will sell a lot of copies, but it’s now considered all but confirmed that it’s getting $200+ million in development money, and it needs to be a monumental hit – meaning a WoW-challenging hit – to make that huge cost back in a reasonable amount of time.

There is also the issue of managing expectations. We should all remember the example of Warhammer Online, the title that was going to revolutionize MMOs, that was going to have two million subs in six months and challenge WoW for top title. That this was pretty unrealistic is obvious now, but almost everybody bought into that hype at least in part for the month of two before WAR’s launch, inflamed by a beta that disguised the game’s gaping flaws. Artificially inflated expectations did more harm to WAR than the design flaws did. Had it started more modestly successful, it might have had time to stabilize and fix its issues and have been better positioned for growth. As it was, when it failed to meet expectations that were unreasonable if not impossible, overwhelmingly negative world of mouth took over, and it crashed utterly. A lot of folks remember this and are keeping their expectations more modest this time around – probably somewhat embarrassed by having bought into the WAR hype at the time. *cough*

So even though the aggravating phrase “WoW-killer” only gets mentioned once or twice a day now, there is still value in vigilance. Because it’s the expectations that SWTOR is going to be judged against, not its simple survival. WAR is universally considered a failure, even though it survives – albeit with fewer servers than Star Wars Galaxies has, eight years along. We talk a lot about how many MMOs fail, but the fact is that if they make it as far as launch, they tend to stick around, at least on life support, for a good long while.

Without going over the numbers again in full, I’ll reiterate my earlier conclusion: SWTOR is almost certainly doomed if Bioware is spending $300 million on it. This is because, in order to make its money back at launch, it has to sell 5 million copies. Which is better than WoW is doing, by all accounts, in the western market, maybe by quite a bit. In order to make its investment back after 6 months, it only needs to sell 2.5 million boxes… which could happen, but then it needs to retain a staggering 90% of those box sales as subscriptions, and the subscribing population needs to stabilize at around 1 million.

With more realistic but still optimistic numbers, say 2 million boxed sales and a 70% retention rate (still astoundingly high, and far higher than we have seen with any game to date including WoW,) and a stable subscriber base around 500K, we start talking about making the initial investment back in 18 or 24 months, with money trickling in after that at about $7 million a month. All this is without taking into account a single dime of operating costs or paying a development team moving forward.

This realistic expectation makes SWTOR, to us, easily the second most-successful MMORPG of all time, taking a big chunk out of WoW and getting a very big foothold in the marketplace while doing booming business. But because the game cost $300 million to make, to the investors that’s not just a failure, it’s a freaking catastrophe. The problem is not the game, or how good it is. How good a game SWTOR turns out to be is simply not relevant.

This is not my opinion. This is math. For SWTOR to not fail, it must be the WoW-killer that we all laugh about uncomfortably whenever it’s mentioned, because the very idea has come to seem ridiculous.

If that happens… well, I’ll be happy to announce that I was wrong. It’ll have shaken up the complacent marketplace of big-ticket MMOs, and that’s good.

8 responses to “Why SWTOR Will Fail. With Numbers. Again.

  1. With regards to how much virtual world you will get a dev had mentioned 90% will be open world with only personal story quest lines bein instanced id add a link but im on my phone.

    Ill await till release and the real figures arise before I make a comment on whether it ‘fails’ however I would expect the devs and money men would be the folks to decide if its a failure i.e. Doesnt recoup the initial outlay fast enough or fulfill the devs vision on what they wanted from the game.

  2. Actually, you need to double the box sales that you quoted. Your assumption is based on a $60 box sale. Unless all of the sales are directly through EA, the retailers get a 40-50% margin to sell the product.

    • Retailers take is more like 8-12%, and hasn’t been as high as 20% since the 80’s at best. Trust me I was a multiunit manager for a software retailer in the 80’s and 90’s.

      Your point is well taken that unless they are selling directly they don’t realize the full box revenue.

  3. This is math based on a lot of speculation and assumption. The $300 million number has never been verified outside of a rumor-laden, unproven post.

  4. Your math is correct, but it assumes a solely box and subscription model. What is likely to happen based on all the eyes on this basic math you have laidout is a highly intrusive ingame store, Wether the store sells game changing or solely vanity items, I believe it is a safe prognositication to belive that many unique and highly soughtafter items will only (or substantially more easily than via ingame play) be available via the ingame store.

    A well stocked ingame store at launch has the highest chance of Bioware making it’s money back as it can attempt to get many of the SW fanbois to make increased high dollar purchases as soon as possible. This will achieve 2 results, 1) higher “box” type sales at the outset. (assume they hope to get an additional $50/gamer for vanity items). Using your 2 million purchaser number, if they succeed would get it ALMOST to the initial 5 million you laid out. If you tweak the model and see if they try to target getting 25% to buy an additional $50 per quarter you get the same result, spread out over a year.

    The secondary, and arguably more important effect this will have for the game is the increased buy in will help retain community. This is critical at the 3-6-9-12 month windows and as you pointed out with WoW, once the numbers start falling, they can freefall dramatically.

    REgardless, i disagree with Syp, I think the projected budget numbers being bandied about are probably more accurate than not. However if we are going to speculate, I would propose we speculate on whatsteps EA will take to MAKE this a success rather than simply stating that if they follow conventions they are doomed.

  5. @Pirelli: Maybe – we can certainly hope so, anyway. This is the kind of area where we just won’t know until it’s at least closer to release.

    @Syp, @Hunter: Sure. That’s why I have put in the conditional statement “if this number is about correct” every time I’ve mentioned this.

    @Vrykyl119: Ah, now this is a good point, and indeed Bioware has pretty much confirmed that SWTOR will use microtransactions. There’s actually less firm data that I’ve found to confirm that there will be a subscription fee.

    How intrusive it will be is anybody’s guess. Offhand, I can think of a few ways they might do it, but that’s probably worth a whole post in its own right.

    I do think there will be great resistance against a game with a big cash shop and a sub fee, as evidenced by the fallout with Cryptic. Bioware will need to tread a fine line here.

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