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Star Wars: The Old Republic -- the costliest game of all time?

January 20, 2012 | 10:29 am

Star Wars The Old Republic

With a price tag approaching $200 million, Star Wars: The Old Republic is likely to be the most expensive game of all time to produce -- and a colossal gamble for the game's publisher, Electronic Arts Inc.

BioWare, the EA studio responsible for the online game, had spent close to six years on the title, hiring hundreds of programmers, writers and artists, as well as a legion of contract workers. The hope is that The Old Republic will attract millions of players, each willing to spend $60 to buy the game and $15 or so a month to play out their fantasies of being Jedi knights or Sith warriors.

But creating an online universe that can satisfy the demands of both hard-core "Star Wars" fans and players of multiplayer online role-playing games is an epic undertaking, as our story in the Times describes.   

"It's the single largest bet of J.R.'s career," said P.J. McNealy, a game analyst with Digital World Research in Boston,  referring to EA's chief executive, John Riccitiello, who plunked down $860 million in 2007 to buy BioWare and Pandemic, a Los Angeles game studio that EA shut down in 2009.

EA declined to comment on the amount it spent to create The Old Republic. That hasn't stopped Wall Street analysts from pegging the game's production costs at $150 million to $200 million or more, a figure that people knowledgeable with the game's budget don't dispute.

Unlike films, whose budgets are routinely reported, game development expenses are closely guarded secrets. As a result, cost comparisons are difficult to come by.

"You hear about RockStar Games as having the richest budgets in the business and spending over $100 million on a Grand Theft Auto game," said John Taylor, managing partner with Arcadia Investment Corp. in Portland, Ore. "Star Wars seems to have gone way above that."

The good news for EA is that the Redwood City, Calif., company has already absorbed those costs into its finances, expensing them as they were incurred.

"It's all sunk costs," said Atul Bagga, an analyst with Lazard Capital Markets.

Not quite all. EA must continue to devote significant amounts of resources to keeping the game running. That means maintaining a vast network of computers, a dedicated staff to deal with customers who have technical or billing issues, as well as a core team of developers constantly adding new content to the game to keep players interested.

EA has said that covering the game's operating costs will require 500,000 paying subscribers. At $15 a month, the figure implies that the game costs at least $7.5 million a month to maintain, including an undisclosed royalty fee to Lucasfilm, which owns the "Star Wars" license.

"Very few companies can afford to make this sort of bet," Taylor said, "And EA is one of them."

EA executives insist the company, with about $3.6 billion in annual revenue last year and about $1.5 billion in cash and short term investments, will not collapse should Star Wars fail to hit its marks.

"We're not betting the company on Star Wars," said Frank Gibeau, president of EA Labels, which oversees the Star Wars game. "While it's a major undertaking, it's one aspect of a larger strategy to transform EA from a company that sells discs to one that derives the bulk of its revenue from digital games and services."

The upside, however, is undeniably lucrative. Should the game win 4 million subscribers -- compared with over 10 million for World of Warcraft, the big Kahuna of the genre -- EA's operating profit rises to $395 million a year, representing a 50% margin, according to Doug Creutz, an analyst for Cowen & Co.

RELATED:

Star Wars: The story behind the galactic gamble

Star Wars: The Old Republic sells 1 million copies

No high score for games in 2011

-- Alex Pham

Photo: Jeff Hollis, left, his wife Deirdre, and David Moore are co-founders of TORWars, a fan site devoted to Star Wars: The Old Republic. Credit: Anne Cusack / Los Angeles Times

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