SWTOR Will Fail, With Numbers to Prove It

Tobold thinks SWTOR will fail. Syncaine hopes it will. The common thread is the EALouse scandal that’s got all the MMO Blogosphere up in a tizzy.

And Bioware? Don’t make me laugh. They’ve spent more money making the Old Republic than James Cameron spent on Avatar. Shit you not. More than $ 300 million! Can you believe that?

Now, some of the stuff EALouse has said has been confirmed, if indirectly. Some of the other stuff he said has been strongly implied to be false. The piece quoted above is not confirmed either way, and I don’t know that I’d want to take his word for it without independent information. Certainly, the $300 million figure is higher than the numbers that were already in circulation.

But let’s say, for the sake of the argument, that the real budget for SWTOR, marketing and all, is $200 million. Let’s run some numbers based on that. Bear in mind that we’ll be making some assumptions here: namely, that SWTOR will sell a retail box for approximately $59.99, and charge a monthly sub fee of $14.99. These are both reasonable but not confirmed.

Let us assume further that SWTOR will sell two million boxes, an intentionally very optimistic estimate. I’d be surprised if it surpassed that, but equally surprised if it didn’t sell at least one million. Also, after the first (free) month, half of the people who bought retail boxes will elect to subscribe. After a second month, half of those people will elect to continue paying, and the percentage of subscribers retailed will gradually increase until we hit the 6 month mark, at which point the population will be more or less stable. These are big assumptions, but they are all weighted toward optimism. That’s important.

It’s important because after 12 months of operation, boosted by tremendous box sales, Bioware will have made a bit more than $146 million in gross revenue. That doesn’t count operating expenses like staff salaries or whatever it costs to operate the servers or the cost of developing content moving forward. It doesn’t take into account the very substantial cut (at the very least about 40%,) that will be taken out of the box sales revenue by retailers and distributors. It doesn’t take into account some players paying less than $14.99 per month by buying multi-month packages. It doesn’t take into account a whole bunch of costs that I don’t have enough information to estimate. So let’s take that number, again, optimistically, and say it’ll all go to Bioware. Every last cent.

After 1 year, all this gives us an estimated paying subscriber base of around 151k. This too is optimistic. But it’s a pretty healthy number for an MMO. So after two years, total gross revenue would be a bit more than $173 million. SWTOR would still not have made its budget back. Not until the end of year three would gross revenue top the $200 million mark.

Okay, so it’ll take three years to make its money back and start turning a profit. And maybe that’s not so bad. But I’m making some fantastically optimistic guesses here, and leaving out a ton of costs. What if SWTOR only sells 1.5 million boxes? Then it will take six years to pay off what it cost to make. By then a generation or two of newer games will have shown up to pull interest away. What then?

I think you can see where this is going. If Bioware is going to spend $200 million on SWTOR, let alone the $300 million that EALouse claims, they must be really freaking nuts. On the other hand, if they spend $100 million and sell one million boxes, and my retention estimates are anything like accurate, it’s back to three years.

My guess is that the budget is likely going to hit at least $100 million when the final tallies are made. If that’s true, Bioware is almost inevitably going to take a bath on the project. Things aren’t looking good, whether you think the game will be outstanding or not.

ADDENDUM: It’s possible that SWTOR will go with some kind of minipay system rather than subscriptions. If that’s the case, the player numbers are likely to be much higher but the amount sent by the average player into Bioware’s coffers is likely to be lower. Either way, I think my estimate of roughly $1.2 million in monthly gross revenue is like to not be too far off.

It’s also possible that SWTOR’s budget is in fact closer to $50 million than $200 million. If that’s the case, the situation looks a whole lot rosier for the game and for its long-term sustainability. My gut feeling is that total budget will end up being in the $100 million range at minimum, however, and that’s where we start to tread in the dangerous waters that this post talks about. If you spend more than that, you need numbers at least comparable to WoW or you’ll faceplant.