Analysts dismiss Kotick’s SWTOR unprofitability claims

Thursday, 1 December 2011 02:31 GMT By Brenna Hillier

In response to Activision Blizzard CEO Bobby Kotick’s claim that Star Wars: The Old Republic won’t turn a profit for EA, analysts have been scornful.

Both EEDAR’s Jesse Divnich and Wedbush Morgan’s Michael Pachter told Eurogamer that EA would see a return after LucasArts takes its slice.

“Licensors do take a piece of the pie and is an economical hurdle that entertainment has been struggling with for years,” Divnich commented.

“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.”

“The revenue split is around 35% to LucasArts after EA earns back their investment,” Pachter said.

“That means EA keeps most of the revenue from disc sales, 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 the game doesn’t even need to hit the half a million subscribers mark to bring a profit.

“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,” he said.

“That means they make money at 500,000 subscribers.”

“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,” Divnich added.

“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.”

The Old Republic releases exclusively for PC on December 20.