LucasArts to take "around 35%" of Old Republic revenue - report

By Fred Dutton Published 30 November, 2011

But EA should still make money, reckon analysts.

LucasArts will take "around 35 per cent" of the revenue from forthcoming Star Wars MMO The Old Republic after EA has earned back its investment, according to Wedbush Morgan analyst Michael Pachter.

Following Activision boss Bobby Kotick's suggestion earlier this week that EA's game is unlikely to turn a significant profit thanks to its licensing agreement with LucasArts, Eurogamer canvassed opinion from a number of industry commentators about the publisher's chances.

The consensus? LucasArts will earn plenty from the deal but both parties should see a healthy return.

"I think [EA] will make a profit," said Pachter.

"The revenue split is around 35 per cent to LucasArts after EA earns back their investment. That means EA keeps most of the revenue from disc sales (they have marketing expenses and need to staff up the server farms), so they should earn a nice profit there.

"Keep in mind that EA expensed the development cost when incurred, so much of the disc sales revenue will be profit."

Pachter estimated that the MMO will pull in around 1.5 million subscribers, representing around $80 million a year in profit.

"On an ongoing basis, they will split revenue from running the subscription business. My best guess is that they will attract 1.5 million subscribers paying around $15 a month, so they should generate around $270 million in revenue. If LucasArts gets 35 per cent and if EA incurs around 35 per cent operating expense, they make 30 per cent, or around $80 million per year, in profit. That's not bad."

He also backed up EA CEO John Riccitiello's assertion that the game only needs 500,000 subscribers to be profitable.

"Most MMOs require around 250,000 subscribers to cover the direct operating expense of the server farms. Given LucasArts' revenue split, SWTOR would require around 400,000 subscribers to break even. That means they make money at 500,000 subscribers."

EEDAR VP Jesse Divnich also argued that Kotick was wide of the mark, citing EA's noted ability to negotiate a good deal.

"Based upon user commentary and consumer surveys, the profit potential for The Old Republic is high. We see little risk of failure for The Old Republic," he told Eurogamer.

"Kotick's comments are valid in the sense that licensors do take a piece of the pie and is an economical hurdle that entertainment has been struggling with for years. In the same respect, how successful would EA's MMO be without the Star Wars brand?

"It's a give and take scenario, but given EA's historical ability to negotiate favorable license terms, I don't believe Lucas's share is a detriment to the game's profitability."

Divnich pegged The Old Republic's potential user base a little higher than Pachter, predicting it will attract three million subscribers by next June.

"Taking into account multiple years in service and expansion packs, $500 million in total revenue is not a far stretch. If an MMO can't be profitable at $500m in revenue, than we are all doomed."

Screen Digest's Piers Harding-Rolls was rather more circumspect, arguing that the title will need to be well marketed and of a high quality straight out of the gate if it hopes to succeed.

"I think that any expensive AAA subscription MMOG represents a very high commercial risk," he explained.

"Many companies have tried to succeed in this sector over the years and have failed. EA itself has had hits and costly misses.

"The risk accumulates the higher the upfront investment," he continued, "and in that context The Old Republic must be considered high risk, although EA has a number of factors on its side, which helps mitigate that risk.

"This includes the strength of the IP, the easing competitive landscape for subscription MMOGs (Rift from Trion Words shows it is the best time since 2005 to compete with World of Warcraft), EA's experience in distributing, promoting and managing MMOGs and the game's strong beta testing."

He added that the specifics of the LucasArts deal will also be key to EA making a profit, as will its willingness to "change the service if it is not working, specifically with regards to business models."

The BioWare-developed title is due to launch on 20th December. See Eurogamer's recent Old Republic preview for more.

Picture of Fred.

About Fred Dutton

Fred Dutton is Eurogamer's US news editor, based in Washington DC.

Read more articles from Fred by visiting the Fred Dutton archive page.

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Comments (30) Latest comment 3 months ago

Comments threads automatically close after 30 days, but please feel free to continue chatting on the forum!

  • rawtheory #1 3 months ago

    The thought of George Lucas making more millions off of this game after the travesty of his prequel films....makes me want to puke. :)

  • Kanjin #2 3 months ago

    Just cut Kotick's salary, that'll give more profit.

    35% does sounds a lot, and with the upkeep 30% ain't bad. We'll see i bet.

  • Cjail #3 3 months ago

    Will this teach Kotick to shut up?!
    I hope so.

  • Centrifugal #4 3 months ago

    @rawtheory

    He may have made the prequel movies, but don't forget that without him we wouldn't have Star Wars at all. He created this wonderful universe and although he may not have always managed it well, he still deserves all he gets from it.

  • CaptainQuint #5 3 months ago

    Funny how no one ever seems to mind how this particular franchise is "milked" for all its worth.

    Bloody fanboys.

  • Cowbomb #6 3 months ago

    Why does anyone care what Michael Pachter thinks?

  • Springchicken #7 3 months ago

    Damn. Does this mean Activision won't make any more Jedi Knight games?

  • CrashT #8 3 months ago

    @Cowbomb Eurogamer does apparently.

  • Hunam #9 3 months ago

    You can't really claim it's "milking" a franchise when its a franchise people consatntly want more of.

  • Cjail #10 3 months ago

    I am proud to be a Star Wars fan but when they do something objectively poor I am the first one to say: "shame on you".
    Edited by 1 at 30/11/11 @ 18:42

  • Ramboness #11 3 months ago

    Kotick is just mad because he did not come up with the idea to part up with LucasArt to make a Starwars mmo.

  • George-Roper #12 3 months ago

    But PC gaming is dead. Isn't it?

    /rolleyes

    Although I don't see this lasting more than 6 months, I'm sure it will make a ton of cash off the initial sales alone.

  • Ryboy #13 3 months ago

    Owner of franchise makes money. Fucking shocker.

  • Zapatero #14 3 months ago

    "...the profit potential for The Old Republic is high. We see little risk of failure for The Old Republic."

    But if Activision have obtained a complete technical readout of the game, it is possible, however unlikely, that they might find a weakness and exploit it.

  • xuiton #15 3 months ago

    while i'm no massive EA fan. I think what they are paying lucas arts is too much. Essentially 35% for the name and brand. Of course people will play this because it is star wars. Still, I think it is far too much.

    I enjoyed the beta, but apparently you can hit max level (50) in around a week. This direction that mmos took of hitting max level so fast is stupid.

  • epiazk #16 3 months ago

    @xuiton Well they bought into a franchise. Part of the appeal is that it gives at least a little assurance the product will lift off as opposed to a totally new IP.

    It's also likely that this rate will decline or be open to re-negotiation in a year or two (i'd be shocked if they didn't).

    Played the beta, was fun! And finance aside, new fun games are what we need more of :)

  • Subdominator #17 3 months ago

    @Cjail Why, because Pachter says something? This is the guy that suggested that Nintendo should release a Wii HD three years ago when sales were starting to decline. And recently said something about Nintendo being stupid for waiting too long. At even more recent he said that Microsoft would be stupid if the next Xbox came out before 2014. So according to Pachter:

    waiting l

  • Inmediasress #18 3 months ago

    I don't know, what does Lucas do with all that money anyway?
    Not that I think TOR will be that successful, though sadly I also can't imagine utter failure.
    I'm sure as hell it will strugle and further derail Bioware into oblivion instead of giving them a merciful death.

  • romelpotter #19 3 months ago

    Ok so the question is:

    How much would the game make per year without the Star Wars lore?

  • Farzlepot #20 3 months ago

    @Springchicken

    Do Activision make anything that isn't CoD-related anymore?

    Oh yeah. That new Spyro game where you have to pay 8 like twenty times just to unlock content already on the disc!

    I am glad that the Dark Forces / Jedi Knight series died before Activision turned to the dark side, personally. I love that series too much to see it sullied so.

  • King_of_Hyrule #21 3 months ago

    @romelpotter, exactly, if having a star wars license (as opposed to a mass effect mmo or new IP) generates more than 35% in extra profit (and I think it will) then it's a win-win for everyone involved.
    Edited by 1 at 30/11/11 @ 22:24

  • Springchicken #22 3 months ago

    @Farzlepot I don't know, Raven Software are still alive and kicking, aren't they? And they still have talent, based on the awesomeness that was Singularity. Give 'em JK4. Can't be any worse than The Force Unleashed.

  • ubergine #23 3 months ago

    QuestCantina: "Oh! I need someone to collect 10 lightsaber crystals! Would you do that for me?"

    [] Yes.

    [] NOOOOOOOOOOOOOooooooooooo!

  • killuminati2911 #24 3 months ago

    This shows one clear thing: the best assets of Blizzard is that the IP his theirs, no need to pay anyone else, they even get that 35% for themselves. Just saying

  • Lukree #25 3 months ago

    Ok, Lucas invented the whole saga, but truth be told, I'm pretty sure the franchise would be in better shape if someone would have taken over after the first three movies.

  • mastablasta #26 3 months ago

    This game is going to lose subscribers at an alarming rate as the product is average at best if you take away the star wars license.

  • jonfon #27 3 months ago

    @CaptainQuint
    True, but KOTOR was one of the few Lucas things I've seen in the last 15 years where it *didn't* feel like it was being milked.

  • actionfitz #28 3 months ago

    I'm only worried about possible lack of content.
    From what i've seen and read about I cant see whats there lasting more than the first month or so. Hopefully they have more that just hasn't been talked about yet.

    The biggest hurdle for an MMO is turning the 1st month subs into recurring ones.

    A poor launch with bugs or lack of server infastructure can kill a new MMO in its infancy.

  • Zomeguy #29 3 months ago

    The only worthwhile content is the leveling storyline for each class. And then you can quit.

  • SheffAl #30 3 months ago

    More money for George Lucas's neck.
    Edited by 1 at 01/12/11 @ 18:31