EA Share Price Slides Over Old Republic Concerns

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EA Share Price Slides Over Old Republic Concerns

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Electronic Arts' share price slid by nearly four percent today after an analyst expressed "creeping concerns" about the performance of Star Wars: The Old Republic.

First things first: let's not turn this into a "The Old Republic cures cancer/shot my dog" conversation. Some people like it, some people don't and the general consensus seems to be that while it suffers from issues of various sorts, it's certainly not the ugliest MMO launch ever. Neither I nor anyone else cares what you think about The Old Republic.

People do seem to care what Brean Murray, Carrett & Co. LLC analyst Todd Mitchell thinks, however, and he thinks that EA's shiny new MMO isn't quite living up to expectations. In an investor's note to clients expressing "creeping concerns" about the game, he wrote, "Specifically, initial sales appear to be below expectations, and casual observation of early play is causing us to rethink our churn assumptions."

In the wake of Mitchell's note, which included a reduction in price target from $28 to $22, EA's value took a tumble. After opening at $18.23 and climbing briefly to $18.40, it fell as low as $16.85 before closing at $17.54, a loss of 3.94 percent for the day - not enough to make anyone jump out a window, but hardly cause for celebration.

Sub-par performance or not, a big part of the investor/analyst uncertainty almost certainly stems from recent reports that making The Old Republic may have cost EA as much as half a billion dollars. Half a billion dollars! That's a mighty big roll of the dice, and "pretty decent" under those circumstances just isn't good enough.

Source: MarketWatch

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Andy Chalk:
First things first: let's not turn this into a "The Old Republic cures cancer/shot my dog" conversation. Some people like it, some people don't and the general consensus seems to be that while it suffers from issues of various sorts, it's certainly not the ugliest MMO launch ever. Neither I nor anyone else cares what you think about The Old Republic.

In that case where's the discussion value in this thread?

How are we supposed to discuss this if we can't talk about why we think TOR is or isn't living up to expectations?

Sixcess:

Andy Chalk:
First things first: let's not turn this into a "The Old Republic cures cancer/shot my dog" conversation. Some people like it, some people don't and the general consensus seems to be that while it suffers from issues of various sorts, it's certainly not the ugliest MMO launch ever. Neither I nor anyone else cares what you think about The Old Republic.

In that case where's the discussion value in this thread?

How are we supposed to discuss this if we can't talk about why we think TOR is or isn't living up to expectations?

I second this.
OP: EA went all in with a promising hand, and the flop hasn't given them anything.

I really dislike EA/Bioware lately. Thanks to Origin mostly and other stupid nonsense.

I am almost, almost just hoping for them to crash and burn. In the hopes that if/when they reborn, they actually allow me to get their games where ever I want, and not touch Origin if I don't want to. And just generally thinking customers a bit instead of just their corporate bottom line.

Sigh, whatever. Right now, I'm just curious about what Lucasarts will have in store following TOR. While it doesn't interest me as a game, its success or failure could affect future star wars titles.

Sixcess:

Andy Chalk:
First things first: let's not turn this into a "The Old Republic cures cancer/shot my dog" conversation. Some people like it, some people don't and the general consensus seems to be that while it suffers from issues of various sorts, it's certainly not the ugliest MMO launch ever. Neither I nor anyone else cares what you think about The Old Republic.

In that case where's the discussion value in this thread?

How are we supposed to discuss this if we can't talk about why we think TOR is or isn't living up to expectations?

I gotta agree here. The cost, quality, and predicted success of this game is the whole crux of these happenings thus they need to be discussed at least in part.

Also, if you didn't care, you wouldn't need to say you don't care. By finding the need to reference that you do indeed not care, you demonstrate that you care a great deal. Kinda like the guy in every horror movie who needs to be asked "What, are you scared to go?" before replying "Pff, I'm not scared." before walking in, instead of just going in unprompted.

Sylveria:

Sixcess:

Andy Chalk:
First things first: let's not turn this into a "The Old Republic cures cancer/shot my dog" conversation. Some people like it, some people don't and the general consensus seems to be that while it suffers from issues of various sorts, it's certainly not the ugliest MMO launch ever. Neither I nor anyone else cares what you think about The Old Republic.

In that case where's the discussion value in this thread?

How are we supposed to discuss this if we can't talk about why we think TOR is or isn't living up to expectations?

I gotta agree here. The cost, quality, and predicted success of this game is the whole crux of these happenings thus they need to be discussed at least in part.

Also, if you didn't care, you wouldn't need to say you don't care. By finding the need to reference that you do indeed not care, you demonstrate that you care a great deal. Kinda like the guy in every horror movie who needs to be asked "What, are you scared to go?" before replying "Pff, I'm not scared." before walking in, instead of just going in unprompted.

You might as well disable the comments for this article because it basically prohibits any discussion on the subject.

Let me get this straight, an MMO that got over a million subscribers in under two weeks, making it the fastest growing MMO at launch ever, isn't doing good enough? What do you want? Your computer to start laying golden eggs every time your character gains a level?

Azuaron:
Let me get this straight, an MMO that got over a million subscribers in under two weeks, making it the fastest growing MMO at launch ever, isn't doing good enough? What do you want? Your computer to start laying golden eggs every time your character gains a level?

Is that a feature? I'd put up with Origin datamining my PC if I got gold eggs out of it.

Azuaron:
Let me get this straight, an MMO that got over a million subscribers in under two weeks, making it the fastest growing MMO at launch ever, isn't doing good enough?

Not if EA's expectations were that it'd launch with two million. I stress if because I don't know, but it wouldn't surprise me - they've been very very ambitious with TOR. EA didn't throw this kind of money around to get a moderately successful MMO.

One million isn't really that good. Warhammer Online, an infamous flop, launched with 800,000 subscribers, and that wasn't hyped to near the level of The Old Republic.

TOR runs the real risk of being unable to live up to the unrealistically high expectations of not only its playerbase, but of its investors, and that's not a good place for it to be at.

I understand what others are getting at here, but I think Andy is just making a somewhat sarcastic jab at the flame wars that have popped up in all the past threads. Groups do seem rather polarized, with everything canceling each other out landing us back smack-dab in the middle where we started

As much as I love to bash on EA whenever possible I must ask when we started taking analysts seriously again.

For my part though, i've got several friends who bought the game, praised it highly, reached max level and seem to have stopped really playing it now, im thinking the game would do far better as a B2P with paid for expansion content (Like Guild Wars) than a P2P game since it seems to be very story based and from what i've seen that's why most of the people I know kept playing it.

I am of course speaking from what i've seen of others since I haven't played the game personally except for a couple of minutes during beta so disregard what I say if half of it is bollocks.

Hey I've got an idea: How about we wait and see how many people ACTUALLY KEEP THEIR SUBSCRIPTIONS after tomorrow before we start jumping overboard/to conclusions? But no that would be the rational thing to do.

Ickorus:
As much as I love to bash on EA whenever possible I must ask when we started taking analysts seriously again, because I was sure they'd become some sort joke in the gaming industry.

People love sensationalism. Any excuse to drive themselves into a frenzy.

I'm highly doubt that it cost half a billion dollars to make. Assuming that they spent 100 million dollars on advertising and that they started right after KotR2 came out, that means that they had to spend just a little over 57 million dollars per year. Unless they were paying voice actors obscene amounts of money, as well as their employees at Bioware Austin. I doubt that the half billion dollar analysis is correct.

Haha, if it had been made by DICE, you could have said, "That's a mighty big roll of the DICE."

Haha

Ha

Oh, screw it.

DVS BSTrD:
Hey I've got an idea: How about we wait and see how many people ACTUALLY KEEP THEIR SUBSCRIPTIONS after tomorrow before we start jumping overboard/to conclusions? But no that would be the rational thing to do.

Ickorus:
As much as I love to bash on EA whenever possible I must ask when we started taking analysts seriously again, because I was sure they'd become some sort joke in the gaming industry.

People love sensationalism. Any excuse to drive themselves into a frenzy.

Well... considering their stock took a substantial drop, apparently people with far more money than you or I will ever have are taking the analysts seriously.

Sylveria:

DVS BSTrD:
Hey I've got an idea: How about we wait and see how many people ACTUALLY KEEP THEIR SUBSCRIPTIONS after tomorrow before we start jumping overboard/to conclusions? But no that would be the rational thing to do.

Ickorus:
As much as I love to bash on EA whenever possible I must ask when we started taking analysts seriously again, because I was sure they'd become some sort joke in the gaming industry.

People love sensationalism. Any excuse to drive themselves into a frenzy.

Well... considering their stock took a substantial drop, apparently people with far more money than you or I will ever have are taking the analysts seriously.

And if those people were collectively rational and intelligent, the market would not react to every little word said. These people take pretty much everything seriously regardless of merit.

Sixcess:

Andy Chalk:
First things first: let's not turn this into a "The Old Republic cures cancer/shot my dog" conversation. Some people like it, some people don't and the general consensus seems to be that while it suffers from issues of various sorts, it's certainly not the ugliest MMO launch ever. Neither I nor anyone else cares what you think about The Old Republic.

In that case where's the discussion value in this thread?

You're obviously expected to discuss the economical intricacies of EA's shares. I mean, it's not like you're on a gaming forum where your opinion on a game is of any interest to anyone!

OT: I've no idea why/how anyone can expect TOR to start turning profit on day one. This is a long term investment, as is any good MMO (though granted, one can be forgiven for not noticing it, considering there's barely a handful of those on the market). They said they can break even with 500k subscribers, last confirmed thing I saw was 2 million and unconfirmed that it's creeping up to 4, but really, we won't know until a few months in when the subscriptions stabilize.

The better thing to write instead of that ridiculous bolded comment by Chalky would be "Neither I nor anyone else cares what you think about The Old Republic as EA's financial investment". It's nothing but an invite to anyone who'd got a grudge against EA or just likes to bitch about any large company (mostly the same group actually) to wail on it.

It's not about TOR turning a Day 1 profit, It's about TOR spending anywhere from 300 t0 500 MILLION DOLLARS and the fact that with the hit of 1.1 people were unsubscribing by the truckloads, to the point Bioware had to throw out a "Stick with us for 1 more month and get a shiny medal and useless title!"

Guess what, They were NEVER going to sell enough copies of the game to make up for the costs, because 30% of all earnings go to Lucas, this is discounting the fact they owe money to the Hero Engine dudes because of licensing to them as well. Though I'm not sure about the total percentage there.

Factor in all other expenditures and the thing that will turn a profit? that's people sticking with and subscribing.

So how's the community doing in that regard? In short, poorly. And why wouldn't it be doing poorly? They not only failed to adhear to the beta testers, but when confronted with an obviously unfinished product making its way into users hands, their solution is to clasp their hands over their ears and pretend nothing is wrong.

And that's really the crux of it, predicted sales are below expectations, predicted subscribers are below expectation, the profit for TOR seems further and further away with each passing day. Not to mention the HUGE PA disaster that was 1.1

But really here's the total kicker (Although only through my limited interaction with typical stock market trends) the only people who would sell that fast? would be EA employees, because they get their hands on the data first. That's when the domino effect of stocks kick in. Mass selling leads to other investors jumping out through fear, leads to people with bot set ups scooping up 'low costing' stocks otherwise while sales would have fallen, it wouldn't have been immediately as the Stockmarket opened for the day.

For those not on the up and up? it near dropped to -8% decrease, for a market that usually works on a +/- 0.33% as average that was a HUGE drop (which climbed again and currently sits at, If I'm reading this right -3.94%) Really the whole stockmarket thing is a whirlwind of confusion.

Sylveria:

Azuaron:
Let me get this straight, an MMO that got over a million subscribers in under two weeks, making it the fastest growing MMO at launch ever, isn't doing good enough? What do you want? Your computer to start laying golden eggs every time your character gains a level?

Is that a feature? I'd put up with Origin datamining my PC if I got gold eggs out of it.

Unless you get it digitally, you never need to deal with origin software.

really?

form my very limited perspective it seems it could have gone ALOT worse

really?

huh ....

spending stupid amounts of money on a high risk game isn't working out as planned

who'd a thunk it *rolls eyes*

I think there are quite a few people who want to invest in this MMO, but they just can't or won't. I'm broke, so I can't afford a subscription to something like this, and even if I could afford it I wouldn't buy it because EA is making us use Origin to play it. Doing away with Origin and making TOR stand-alone, like every other MMO out there, I think their sales would improve.

So, they invest 500 million in a game that is mostly singleplayer oriented. Based on that assumption most player will level 1-2 characters and lay this game aside. One game purchase + 1-2 months worth of subscription fees.

Oh no, how could it have possibly be not such a big financial success?

Well, on a market which is mainly dominated by WoW, which adds tons of endgame content in regular intervalls and only keeps its players because of that it is not such a surprise that a game with focus on the level expirience will lose subscriptions after such a fuck up like the last patch.

Excellent.

That's what you get for not making KotOR III or a re-imagining of Throne of Bhaal.

Congratulations to everyone who managed to figure out how to have a conversation about EA's fortunes as they relate to TOR without turning things into yet another idiotic fanboy flame war. And thanks to the rest of your poor, oppressed souls for giving me my morning laugh.

It's easy to dismiss what analysts do as mere guesswork, but the fact is that these are, generally speaking, very smart, educated and knowledgeable people who really know their shit. Things get murky in a hurry when you start piling one estimate on top of another, but there has to be some sort of guidance for investors when they don't have any real information to go on. And in this case, if EA sunk $500 million into creating and marketing the game, and if it doesn't serve up fried gold on demand to every single person who plays it, then there's a good likelihood that it will be one mighty heavy albatross hung around EA's neck for a long, long time. There's a lot of supposition there, but when it comes from professionals who do this for a living, investors tend to take notice.

Wasn't TOR one of the fastest selling MMO's in history or something? What kind of impossible goal were they expecting? Even WoW took some time to get where it is now.

Speaking as a guy who's never played much MMO's before, I'm really enjoying myself with it. I'd have still much prefered a KOTOR 3, but they've done well with it.

Andy Chalk:
Congratulations to everyone who managed to figure out how to have a conversation about EA's fortunes as they relate to TOR without turning things into yet another idiotic fanboy flame war. And thanks to the rest of your poor, oppressed souls for giving me my morning laugh.

Welcome to the world of MMO discussion.

SWTOR is the most divisive MMO to launch since WoW, for a number of very good reasons - I'll give just two, neither of which, in accordance with this thread, will touch on the quality of the game itself.

1. Bioware have been acting like arrogant pricks over this, for months. In typical EA style they've spent as much time saying why other MMOs are bad as why theirs is good. This has not endeared them to many MMO players.

2. Idiot TOR fanboys have been clogging up global channels and game forums for months telling everyone how "this game is dead once TOR comes out", with 'this game' being whichever MMO they are actually playing at the time. Again, this has not endeared the game to many MMO players.

People get heated when discussing games that they may very well play, or have been playing, for years. If you can't handle critical discussion of TOR then don't run stories on it.

Sixcess:

Azuaron:
Let me get this straight, an MMO that got over a million subscribers in under two weeks, making it the fastest growing MMO at launch ever, isn't doing good enough?

Not if EA's expectations were that it'd launch with two million. I stress if because I don't know, but it wouldn't surprise me - they've been very very ambitious with TOR. EA didn't throw this kind of money around to get a moderately successful MMO.

One million isn't really that good. Warhammer Online, an infamous flop, launched with 800,000 subscribers, and that wasn't hyped to near the level of The Old Republic.

TOR runs the real risk of being unable to live up to the unrealistically high expectations of not only its playerbase, but of its investors, and that's not a good place for it to be at.

Well, let's make up some numbers and do some math here:

Star Wars: The Old Republic retails for $60, and you get a 1 month subscription with that. You can buy the thing straight from Origin, so retailers don't necessarily get a cut, and there are also a collector's edition and "security key" thing that you can buy. Ultimately, let's say they average to $50 profit per sale for the first month (I think that's probably low). It has now been a month, and, while EA/Bioware haven't released precise sales figures, current estimates place subscriptions at 1.5 million, and are expected to reach 3 million by the end of the year.

Which means EA/Bioware have currently made $75 million on the game, and will probably make $150 million by the end of the year on initial sales alone. I can't cite actual figures of MMO dropout rates, but, for the sake of mathematical simplicity (and because the numbers happen to line up that way), let's say that every time someone drops out, another person takes their place, so, at the end of the year, with 3 million initial sales, there will still be 1.5 million current subscribers. 1.5 million $12/month (they have deals, so we take the low number) for 11 months (initial month came with the game) comes out to about $200 million. Which means that, after one year, they'll have made back around $350 million.

For a non-MMO, this would be very bad. A non-MMO would need to make its money back, plus profit, basically on launch day to be considered a success, but EA/Bioware are, obviously, in this for the long haul. With 1.5 million subscribers following the first year, they'll hit the half a billion mark around August 2013, but that's assuming zero dropouts and zero newcomers. Every newcomer is $50 additional profit plus $12/month, while every dropout is only $12 loss per month. After that, everything is pure profit while they work on expansions, and expansions are much cheaper to make and easily make back their money quickly while getting new subscribers and encouraging veteran subscribers to stick around longer.

I expect EA and Bioware are perfectly happy with their sales figures. A year and a half ROI isn't bad, if you're thinking about the long term, and after that they're making millions a month while doing very, very little.

Sixcess:
People get heated when discussing games that they may very well play, or have been playing, for years. If you can't handle critical discussion of TOR then don't run stories on it.

I see plenty of worthwhile conversation taking place in here. If you can't handle an "MMO discussion" that doesn't involve acting like a pissant howler monkey, then maybe you're in the wrong thread.

Azuaron:
Well, let's make up some numbers and do some math here:

I don't know what the margins are on digital but I can assure you that EA isn't making anywhere near $50 per unit at retail. I have no idea what sort of markup EA would bring in but retail margins are very tight. There are also maintenance costs to cover, salaries, possibly ongoing licensing costs and god knows what else. I don't think it'll be quite as easy to cover off its investment as you say.

I'd love to see EA release some hard numbers in its next quarterly report, but I doubt that'll happen unless it becomes a runaway success. "Sure, we spent half a billion dollars on it, but we're making 17 quazillion every year! We're GENIUSES!"

Andy Chalk:

Azuaron:
Well, let's make up some numbers and do some math here:

I don't know what the margins are on digital but I can assure you that EA isn't making anywhere near $50 per unit at retail. I have no idea what sort of markup EA would bring in but retail margins are very tight. There are also maintenance costs to cover, salaries, possibly ongoing licensing costs and god knows what else. I don't think it'll be quite as easy to cover off its investment as you say.

I'd love to see EA release some hard numbers in its next quarterly report, but I doubt that'll happen unless it becomes a runaway success. "Sure, we spent half a billion dollars on it, but we're making 17 quazillion every year! We're GENIUSES!"

25-30% ($15 to $18) tends to go to the retailer, making each retail sale $42 to $45 profit for EA/Bioware, but anything through Origin only has to pay credit card merchant fees which are 2.5% + $0.30 ($1.8), making each Origin sale profit $58. Between the large number of preorders (which were mostly through Origin because that allowed play 48 hours before official release) and the collectors' edition's $150 price tag, $50 per unit average seems about right.

Retail margins are thin, but for the retailers, because the publisher takes so much (which is why Gamestop loves selling used games: no cut to the publisher).

Sounds like investors in an mmo yet again went in with stupidly optimistic expectations. Just because blizzards mmo makes silly money doesn't mean yours instantly will.

Kind of on topic, but does anyone remember wow's launch? Jeez, they would have been lynching blizzards dev team if it had released like that today.

I guess it's just another case of someone having WoW sized stars in their eyes. Not every MMO (aka pretty much no MMO other than the perfectly timed lightning in a bottle that is WoW) will have 10 million+ subscribers. It's just not going to happen.

Then againd, given the amount that EA is rumoured to have spent plus the respectable but not in any way remarkable number of day 1 subs, I'd probably be a tad concerned too. Most brand spanking new MMOs these days gather in the neighbourhood of 500K subs at launch, if not more, and given the muscle of both Star Wars and Bioware, I would say they are trending rather lower than they "should" be.

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