BioWare - Too Expensive?

Next Gen has an article that discusses the $860M price tag for BioWare/Pandemic with several analysts, raising the outrageous idea that Riccitiello might have paid too much. Luckily, analysts are good at backing both sides:

“We really like EA’s acquisition of BioWare/Pandemic, but the price paid ($860 million) on surface seems high to us—more than $1 million per developer,” he said in an investor note Friday. “That being said, if EA can generate mid-teens ROI or higher (as per its plan), the acquisition should be nicely accretive and worth the price. We may have to wait a few years to find out, though.”

Bhatia also said that in light of Disney’s recent $350 million acquisition of Club Penguin makes the BioWare/Pandemic deal appear more reasonable.

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On the other hand, Gamasutra's group of analysts think the acquisition is "prudent", in part because one of them speculates BioWare's MMO is Star Wars-based:

Citi's Brent Thill noted that the "industry is buzzing over [BioWare's] mystery MMO," predicting, "based on past development work" that Bioware is quietly working on the Star Wars MMO. As said, Thill calls the potential of the title a "strong positive" for the publisher, and one that "bolsters [its] MMO exposure."

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More information.

Um Star Wars MMO?

So the little project funded by a little company called Lucasarts and developed by another little company called Sony is being cancelled? There will be 2 competing Star Wars MMOs? These guys are clueless?

Answer: C

I agree. My random bet is a BioWare IP - possibly the Dragon Age setting. But not Star Wars.

If LucasArts sees how much WoW is raking in (and I'm sure they do), I doubt they'd hesitate to give the MMO liscence for KoToR to Bioware. What reason do they have not to? So a game that could be a cash cow doesn't compete against a current mmo that is anything but?

Remember when EA cancelled UO2 when the market was starved and dry and waiting for a new mmo so it wouldn't compete against UO 1? Yeah, that was brilliant. LucasArts and Bioware all have many reasons to want to make a SW mmo that can compete with wow, and zero reason not to want to make a SW mmo.

Whats the Opportunity Cost of LucasArts and Bioware not making a KoTor MMO? What other company could compete with Blizzard making a mmorpg that has established themselves selling SW rpgs? How much are LucasArts and Bioware willing to give up in order to not make a Kotor mmo?

Do you guys think Hasbro would hesitate to sell their D&D mmo liscence to anyone but Turnine at this point?

The new Star Wars RPG with Bioware rumour has been around since day 1 since they launched their Austin studios.

I don't believe it will be a Dragon Age universe type thing because its not being made in Edmonton but Austin. However, since they recruited two designers for that studio from the NWN community, skill with Bioware tools is definitely an asset.

eeeeeepppppp said:

How much are LucasArts and Bioware willing to give up in order to not make a Kotor mmo?

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Do you see KotOR2 from BioWare? They walked away from that because they recognise the real money is in their own IP, not helping someone else develop theirs.

This is just my guess, of course.

If they are developing a Star Wars MMO, just how interesting do you think that sounds to EA, given that much of the money will flow back to their competitor, LucasArts? On the other hand, if they are working on their own IP, that means EA gets to keep it all - much more interesting as a purchase.

Bioware has already said, ME is intended to be a huge and expanding Space based game world.

It's really not hard to guess that ME at least to some degree is the foundation if not the actual and intended Space based world for a PW, so DA is a foundation for building a Medieval based world as a PW.

eeeeeepppppp said:

If LucasArts sees how much WoW is raking in (and I'm sure they do), I doubt they'd hesitate to give the MMO liscence for KoToR to Bioware. What reason do they have not to? So a game that could be a cash cow doesn't compete against a current mmo that is anything but?

Remember when EA cancelled UO2 when the market was starved and dry and waiting for a new mmo so it wouldn't compete against UO 1? Yeah, that was brilliant. LucasArts and Bioware all have many reasons to want to make a SW mmo that can compete with wow, and zero reason not to want to make a SW mmo.

Whats the Opportunity Cost of LucasArts and Bioware not making a KoTor MMO? What other company could compete with Blizzard making a mmorpg that has established themselves selling SW rpgs? How much are LucasArts and Bioware willing to give up in order to not make a Kotor mmo?

Do you guys think Hasbro would hesitate to sell their D&D mmo liscence to anyone but Turnine at this point?

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How do you know that KotOR is its own separate IP that Lucas can just licence out to BioWare w/o getting in conflict with SOE? For all we know, SOE has the exclusive licence to develop Star Wars MMO(s).
Secondly, I believe that BioWare has exactly zero interest in becoming anyone's slave again and LucasArts are well known to be slave-driving control freaks. BioWare made a conscious decision to no longer be anyone's bitch when they handed off KotOR 2/NWN 2 to Obsidian. BioWare was big enough at that point (remember that we're talking about a -what at last count?- 300+ employees "mega" corporation when we're talking about BioWare and not a small "indie" dev studio as some people still seem to be thinking of them) to go their own ways and to build up their own IPs. To become Lucas' bitch again would be a step backwards and not ahead. That's just not gonna happen.

Moriendor said:

How do you know that KotOR is its own separate IP that Lucas can just licence out to BioWare w/o getting in conflict with SOE? For all we know, SOE has the exclusive licence to develop Star Wars MMO(s).
Secondly, I believe that BioWare has exactly zero interest in becoming anyone's slave again and LucasArts are well known to be slave-driving control freaks. BioWare made a conscious decision to no longer be anyone's bitch when they handed off KotOR 2/NWN 2 to Obsidian. BioWare was big enough at that point (remember that we're talking about a -what at last count?- 300+ employees "mega" corporation when we're talking about BioWare and not a small "indie" dev studio as some people still seem to be thinking of them) to go their own ways and to build up their own IPs. To become Lucas' bitch again would be a step backwards and not ahead. That's just not gonna happen.

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They don't want to be slaves so they sell out to EA? Come on.

I'm not saying that Bio is making a Kotor mmo, I'm just asking what the opportunity cost would be? Whats the cost in relation to the opportunities they pass up to make a sw mmo, or vice versa? What will it take to knock Blizzard of the top of the hill, or at least share the hill with them in a global mmo market? Blizzard already had asian penetration with SC, they made WoW with Asians in mind. Turbine tried hard with both ddo and lotro and couldn't even get a foothold, they failed worse than whirlpool.

Bio is owned now, and if I was an executive at EA my thinking wouldn't be, "will we have to share the profit with LA?" It would be, "what the fuck can we do to even have a chance of competing with WoW, and whatever else Blizzard throws at the mmo market in the future? "

1. Global IP thats popular in Asia (Star Wars)

2. Company known for making action, crappy rpgs like Blizzard (Bioware)

3. Lots of money (EA)

4. Keep the Asian market in mind from the getgo (aka orientals)

5. Do what it takes to take, steal, plunder, or force market share away from Blizzard (enemy)

Either it works and the game has a good cash flow or its a big lose. The given is the big boys aren't going to sit back and not chase after the huge amounts of economic profit Blizzard is reaping. The only viable long term business goal is the search for economic profit. If EA can bust into the market, they can worry about improving future cash flows. But they can't not be thinking about Blizzards bank roll.

Would anyone hear with 20/30 million dollars take the risk of financing a Dragon Age or MAss Affect mmo? I can't stand Bioware or their games, but out of all the prospects I can think of, I would feel safest giving my imaginary 20/30 million to bio to make a SW mmo (If I couldn't finance Blizzards next mmo, which I can't since they aren't puplic and don't need it since wow made them mega-gazillionares).

So if I would feel safest financing Bio for a SW mmo with imaginary money, keeping opportunity cost in mind (this is a business discussion, not a gaming taste one), how do you think the people actually risking the cash feel? If you were CEO of EA what would you finance keeping in mind you have a fiduciary duty and your goal is to chase and create economic profit?

I see your direction but I still disagree. I wouldn't finance an MMO but if I did, I wouldn't be looking to take Blizzard head-on with my first project. I'd look for something modestly profitable to build on (EVE Online) - and I'm not even sure SW is a license to print money you think it is. SOE knows it's hard -- everyone wants to be a Jedi but it's hard creating good gameplay with 500,000 Jedi running around. BioWare also likes iterative development; they like to build on previous experience and technology.

Time will tell but I don't think they expect to beat Blizzard with their first attempt.

When it gets announced, how about I necro this thread and we'll see if it was SW or not?

eeeeeepppppp said:

They don't want to be slaves so they sell out to EA? Come on.

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Dude, I made my post before the acquisition was made public . Regardless, I don't think that they will become EA's "slaves". BioWare has too much critical mass of its own and is remote enough from EA to pretty much continue to exist as a nearly independent entity. But only time will tell, of course...

1. Global IP thats popular in Asia (Star Wars)

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Yep. In fact it's so popular that EA (who were cooperating with SOE/LucasArts in bringing Star Wars Galaxies to Japan) and SOE/LucasArts shut down the Japanese servers after about a year in service .

Nah. It's not gonna be Star Wars. And I agree with Dhruin that Blizzard is not necessarily anyone's target. From what I've read, most industry people seem to agree that WoW is a one of a kind type of phenomenon that can not easily be repeated or competed with. Blizzard are playing in a league of their own but everyone is grateful for the huge success of WoW. It has gotten people interested in online games. The goal of most Blizzard competitors is "only" to draw some of those people away from WoW to their own product but I don't think that there is a single (serious) developer or publisher out there right now who believes that they have a WoW killer in the making.

Reyla said:

Um Star Wars MMO?

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I think I just got som puke into my mouth. The memory of galaxies is hard to come off.

$860 Million is a shitload of money for a company like this. It's probably more than twice what it is worth. In order to generate mid-teens ROI like that linked article says, the company will have to generate somewhere in the neighborhood of $200-$250 Million per year in pre-tax profit. Think about this -- if a company sells 5 Million copies of a game every year for $50, it will just reach $250 million in revenue, much less profit. Even Bungie and Rockstar probably haven't done that on average over the past six years. Probably the only developer that generates that kind of profit is Blizzard.

Yes, that may be true for one company, but we're talking about two companies here that combined are expected to sell about 2½ million units pr. game. This shouldn't be to difficult, I think...

Personally, however, I think that the 860 million US dollars EA have used to buy Bioware is way too much. But what are you to do with this money if you just happen to have about 600-800 million US dollars laying around - in cash? Oh, I know. Let's buy some companies.

Let's first buy a little Danish started company that will help us with the MMO-business we're going into soon. The price? oh, a mere ½ million dollars...just to warm up And hey, while we were in the Vault to get this we discovered some more money, so let's juse the ½ billion dollars in here to buy a RPG and a action/adventure company. Let's see now: Bioware & Pandemic seems to be up for sale now. Let's get those. And on top of that - offer 150 million US dollars in shares & stocks to selected Bioware & Pandemic employees, mainly the management, I think...

aries100 said:

Yes, that may be true for one company, but we're talking about two companies here that combined are expected to sell about 2½ million units pr. game. This shouldn't be to difficult, I think...

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That might be tough. Neither of Bioware or Pandemic's recent games have come close to that amount. Last I heard, Jade Empire was well south of 1 Million, and I read that sales for Mercenaries weren't that great. Mass Effect and Mercs 2 certainly won't be flops, but they won't be anything close to the super cash cows that they will need. I guess the MMO could be a big money generator, but the odds still aren't that great. Right now nobody can come close to competing with WoW. The MMO also probably won't be out for at least two years, which is a big time value of money issue.

Dhruin said:

I see your direction but I still disagree. I wouldn't finance an MMO but if I did, I wouldn't be looking to take Blizzard head-on with my first project. I'd look for something modestly profitable to build on (EVE Online) - and I'm not even sure SW is a license to print money you think it is. SOE knows it's hard — everyone wants to be a Jedi but it's hard creating good gameplay with 500,000 Jedi running around. BioWare also likes iterative development; they like to build on previous experience and technology.

Time will tell but I don't think they expect to beat Blizzard with their first attempt.

When it gets announced, how about I necro this thread and we'll see if it was SW or not?

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You forgot to necro. I was right BTW if you haven't heard.

Touche!

I was wrong about SW. It still won't be as successful as they want but, yes, I was wrong about the IP.

I'm glad we had a resident necromancer to return it because I've been wanting to make a point: since the acquisition the following has been released;

Mass Effect - Microsoft Windows, Xbox 360
Sonic Chronicles: The Dark Brotherhood - Nintendo DS
Mass Effect Galaxy - iOS
Dragon Age: Origins - Microsoft Windows, PlayStation 3, Xbox 360, Mac OS X
Mass Effect 2 - Unreal Engine 3 Microsoft Windows, Xbox 360, PlayStation 3
Dragon Age: Origins, Awakening - Microsoft Windows, PlayStation 3, Xbox 360
Dragon Age II - Microsoft Windows, PlayStation 3, Xbox 360

and of course, as part of Mythic, Warhammer Online: Age of Reckoning.

in development

Star Wars: The Old Republic[17] Q3 / Q4 2011 Microsoft Windows development
Mass Effect 3 Q1 2012 Unreal Engine 3 Microsoft Windows, PlayStation 3, Xbox 360
Dragon Age III[19] TBA Microsoft Windows, PlayStation 3, Xbox 360


WAR and ME, of course, were already in development at the time of the acquisition.

Has EA got its $860 million back yet? Its seen (technically) the addition of four new engines developed since.

Plus a lot of DLC.

EA should still be pretty far away from 860M$ + the ongoing costs. I'm pretty sure though that Bio earns them money, even when including the costs for developing the MMO. 50M$+ for a full game here, 20M$+ for a quick sequel there, plus a lot of peanuts for DLC, budget releases, Steam sales, merchandising, Special Editions, etc.

You don't buy a company for that sum because you expect to have a large return on your investment in a few years.

As long as Bioware stay profitable like they have always been, they'll definitely be worth it. Unless they somehow plummet and lose their reputation, they'll still be worth tons if EA should decide to separate from them in the future.

I don't really think there's much to worry about for EA.

Well, not quite true, as I suspect SWTOR might not be the hit they want it to be - and I get the feeling they may have over-extended themselves. But I'm not sure how the financials work with that game - as LucasArts are involved.