14 DAY TRIAL // Michael Pachter, who is an analyst watching the video game industry for Wedbush Morgan, has said that in his evaluation the development costs associated with Star Wars: The Old Republic, the upcoming MMO from developer BioWare and publisher Electronic Arts, amount to about 80 million dollars, which means that the game has a good chance of being profitable once launched.
Pachter wrote in an investor note that, "Fortunately for investors, the company expenses R&D spending, meaning that its revenues on sales of the Star Wars MMO will be pure profit. EA will be required to spend marketing dollars on the game, and we estimate total manufacturing, marketing, and distribution spending will total around $20 million, meaning that at 2 million units sold, EA will generate $60 million of operating profit on the sales.”
He added, “We estimate that EA will cover its direct operating costs and break even at 500,000 subscribers (this is exceedingly conservative, and the actual figure is probably closer to 350,000), meaning that with 1.5 million paying subscribers, EA will have 1 million profitable subs.”
A source from inside publisher Electronic Arts, which was critical of the company's efforts to get into the MMO space, has previously said that the development costs for Star Wars: The Old Republic came in at about 300 million dollars, which would mean that the company needs many more subscribers to break even.
The company has not yet announced an exact launch date for The Old Republic but during an investor call last week it has said that it aims to get it out during the second half of this year, probably during the all important fall launch schedule.
But EA also says that there's a chance that a delay could push the new Star Wars MMO back into the first months of 2012, when it could face less high level competition.