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RPGWatch Forums » Comments » News Comments » KoA: Reckoning - Failed to Meet Sales Expectations, CFO Says

Default KoA: Reckoning - Failed to Meet Sales Expectations, CFO Says

July 14th, 2012, 04:49
WPRI is reporing that according to CFO Richard Wester and COO William Thomas KOA: Reckoning needed to sell at least 2 million copies [in total] before 38 Studios would make any money. This info was revealed in a hearing held in a Delaware Courthouse where they met with the creditors for 38 Studios, the company behind the game. Link to WPRI:
http://www.wpri.com/dpp/news/local_n…udios-forecast

A relevant quote:
Wester estimated "Reckoning" has sold 1.3 million copies so far, which he said failed to meet 38 Studios' internal projections even though it beat Electronic Arts' more conservative forecast. Each copy sold for an average of about $50, and the company spent $30 million developing the game over 30 months, Thomas said. "I don't believe the company would see any more cash" from future sales of "Reckoning," Wester said. "If it gets up around 2 million, then I think you're at a point where [38 Studios] potentially will start to see some cash come in." Most games achieve 80% of their all-time sales during their first three months on the market, Thomas added.
More information.
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July 14th, 2012, 04:50
This is kind of odd. In the text it says that "38 Studios gets 30% of "Reckoning" royalties and EA gets the remaining 70% under the terms of their deal."

While this sounds bad, one could assume that the split occurs after the 30m$ development costs are covered, or the 28.7m$ dept to EA is repaid, leaving about 35m$ to divide between EA and 38 Studios. This would actually result in profit for the latter. However, if not the profits were split but rather the total income from sales, before repaying any liabilities, this really is an exceptionally bad deal.

Anyway, I suspect that the underfunded Copernicus MMORPG project and the requirement to hire developers by Rhode Island were the main reasons for failing to survive as a company.
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July 14th, 2012, 05:17
I'd like to see a breakdown of game development costs. Things like programmer salaries, computers, etc. I'd also like to know how much goes for executive salaries and perks, glitzy offices, travel and lodging, schmoozing the gaming press, that sort of thing. It might make for some interesting reading as to where all the money really goes.
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July 14th, 2012, 06:18
Originally Posted by coyote View Post
the requirement to hire developers by Rhode Island were the main reasons for failing to survive as a company.
Or rather - their decision to agree to do so.
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July 14th, 2012, 06:40
The author of the article seems to be confusing making any money at all on the project with the point at which 38 Studios would have begun to receive overages in excess of EA's advance.

Lots of developers never see a dime beyond the advance, and in this case, what kind of reckless "projections" are nearly double the publisher's projections? As the publisher is the one ultimately paying out royalties, you'd think they would pay closer attention to EA's forecast.
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July 15th, 2012, 02:20
Really makes me want to be a game developer!

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July 15th, 2012, 12:07
The industry is slowly killing itself with how the business side dominates.

That's pretty good, actually, because it's driving all the passionate developers to indie/kickstarters.

I guess the kickstarter concept is what Hollywood missed

It's a win-win.
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July 16th, 2012, 01:42
Originally Posted by DArtagnan View Post
The industry is slowly killing itself with how the business side dominates.

That's pretty good, actually, because it's driving all the passionate developers to indie/kickstarters.
I'd like to see aa Kickstarter project generate $30 million, though…
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July 16th, 2012, 01:44
Originally Posted by Thaurin View Post
I'd like to see aa Kickstarter project generate $30 million, though…
Would be really interesting if a large publisher puts some potentially risky project on Kickstarter to test the waters and see if there is enough interest.
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July 16th, 2012, 11:35
Originally Posted by Thaurin View Post
I'd like to see aa Kickstarter project generate $30 million, though…
For what reason? The budget should fit the game - that's it.

Oh, I get it - you want a kickstarter "experience" - right?
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July 16th, 2012, 16:50
Originally Posted by DArtagnan View Post
The industry is slowly killing itself with how the business side dominates.
There are vastly more companies that die because they haven't the slightest clue on how to run a business. I've seen several companies run into the ground by people I know who had fabulous ideas but didn't know what they were doing. You need product ideas AND business acumen.
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July 16th, 2012, 17:43
only and idiot would agree to terms like that.
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July 16th, 2012, 17:55
Originally Posted by BillSeurer View Post
You need product ideas AND business acumen.
Yes. Of course.

But nowadays the big ones in the gaming industry only consist of bussines acumen and nothing else.

That's the sad part !

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July 16th, 2012, 18:42
That happens to a lot of companies. They start off with good ideas but run into business issues so they get some business people (often derisively called "suits") to help out. But then the suits take over and push out the idea people.
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July 17th, 2012, 12:02
Originally Posted by BillSeurer View Post
There are vastly more companies that die because they haven't the slightest clue on how to run a business. I've seen several companies run into the ground by people I know who had fabulous ideas but didn't know what they were doing. You need product ideas AND business acumen.
My point is that we won't need that last part if the Kickstarter thing takes off. What a wonderful thing that would be.

But you're right, bad business practice leads to a lot of dead companies. But what the industry is discovering - is that you can't "business" your way out of having no talent or interest for the art.
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July 17th, 2012, 13:41
Originally Posted by BillSeurer View Post
That happens to a lot of companies. They start off with good ideas but run into business issues so they get some business people (often derisively called "suits") to help out. But then the suits take over and push out the idea people.
Yes, but how can people prevent being "squeezed out" ?

My only attempt at an solution thought is a kind of union.

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July 17th, 2012, 18:56
Originally Posted by DArtagnan View Post
My point is that we won't need that last part if the Kickstarter thing takes off. What a wonderful thing that would be.

But you're right, bad business practice leads to a lot of dead companies. But what the industry is discovering - is that you can't "business" your way out of having no talent or interest for the art.
Kickstarter is a different way to get funding but I guarantee that if any of these projects don't have people who know something about business they are going to run into trouble. I took some classes about business at where I work and it was quite eye opening. I still despise "suits" who only know the business stuff (i.e., "empty suits") but I now understand better what it is that they do.
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July 18th, 2012, 10:14
Originally Posted by BillSeurer View Post
Kickstarter is a different way to get funding but I guarantee that if any of these projects don't have people who know something about business they are going to run into trouble. I took some classes about business at where I work and it was quite eye opening. I still despise "suits" who only know the business stuff (i.e., "empty suits") but I now understand better what it is that they do.
I wouldn't equate it to "business" knowledge - but a fundamental knowledge of managment.

Definitely, you can't go by artistic integrity alone - but you'd have to be blind not to recognise how the business dominance has tainted the industry to a point where art is something you have to use a microscope to find.

If you think I have anything against businessmen, you're dead wrong. They're just human beings doing a job. Naturally, some are greedy pieces of shit - but that's true for all human beings.

But the business isn't good for the art when it takes precedence. It has been absolutely necessary because of the publishing system - and we've seen many examples of the business side enabling games that would never have worked otherwise. Skyrim being an excellent recent example.

But it has become so very rare - and even a game like Skyrim is tainted in a thousand ways because of it.

So, I just think it would be a fantastic thing to behold a game with respectable production values - focusing 100% on the art itself.
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July 18th, 2012, 11:05
Originally Posted by DArtagnan View Post
So, I just think it would be a fantastic thing to behold a game with respectable production values - focusing 100% on the art itself.
I think this would be possible only with some sort of grant or funding from some local government Ministry of Culture, etc., or a very small scale indie project.

Some developers may have corporate cultures that foster creativity and innovation, etc., but their primary concern is always going to be to generate profits for the owners / shareholders, as is the case for every viable business.
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July 18th, 2012, 11:09
Originally Posted by CountChocula View Post
I think this would be possible only with some sort of grant or funding from some local government Ministry of Culture, etc., or a very small scale indie project.

Some developers may have corporate cultures that foster creativity and innovation, etc., but their primary concern is always going to be to generate profits for the owners / shareholders, as is the case for every viable business.
How can you say it's not possible without knowing what I mean by respectable production values?
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