A few quick primers before I get into the details. BioWare Austin is the development studio for Star Wars: The Old Republic and is owned by Electronic Arts (EA). Very little information is released publicly about the finances of the game and as a subsidiary, BioWare Austin does not even file its own financial reports. However, EA is required to file a significant amount of its financial reports with the Securities and Exchange Commission (SEC) as a publicly traded corporation in the United States. All of the source documents that I’ve used in my analysis are located on EA’s Investor Relations page if you would like to see the original reports.
*I’ve added bold, red highlights (like this note) to the keynote summary of paragraphs when possible, so if it gets too dense those will give you the main points.
Why Does It Matter?
The reason that I decided to review the financial reports for myself is that our recent discussions as a community often seem to devolve into arguments about whether various types of content are more or less desired by players or profitable for BioWare. There is an answer to these questions, but no one outside of BioWare and EA can say with absolute certainty that they know the exact financial state of the game. My analysis simply takes my experience in extracting useful information from financial reports that all publicly traded companies file on an ongoing basis and applying it to Star Wars: The Old Republic within EA’s financials.
My hope is that by providing an accurate picture of the game’s revenue trends over the past four years we can have more informed discussions about the current concerns of the community regarding the game. My goal is to make the concepts accessible to everyone, so I will try to provide clear statements and avoid too much finance and economics minutia. It is important to note though that EA’s fiscal year (FY) ends on March 31st of each year, so fiscal year 2015 (FY15) was the period of April 1st, 2014 through March 31st, 2015. We are currently about 65% of the way through EA’s 2016 fiscal year even though that is counter-intuitive.
Looking Back: The Annual Reports
Star Wars: The Old Republic launched during fiscal year 2012 for EA and instantly jumped to being the first game listed in its revenue category. The way that EA classifies revenue means that the purchase of the game and subscriptions (and later cartel coins) are combined into this one revenue category. The game launched at about this time in the fiscal year, so the fact that it was listed as the primary driver of the revenue category is impressive but not especially surprising.
The game appears prominently again the following year. In fiscal year 2013, SWTOR is once again listed as the primary driver of revenue in its category and is listed as one of the games with noteworthy contributions to the increase in revenue for the category. These financial statements are not written to provide specific information on each game since it’s intent is to inform investors in EA of the corporations general financial situation, but I am confident saying the follow things about the first 18 months of the game (1) Star Wars: The Old Republic was generating a significant amount of revenue from launch through March 31st, 2013 and (2) during that time the general trend in revenue for Star Wars: The Old Republic is positive as well.
Beginning with the fiscal year 2014 report the game appears to have reached an inflection point. It is cited as having declining revenues in fiscal year 2014 compared to the prior year and is no longer listed as the top attribution to the category’s total revenue for the fiscal year. In the most recently completed fiscal year 2015, which ended on March 31, 2015, Star Wars: The Old Republic is no longer even listed among the top revenue attributions for the category and again appears in the list of games with decreasing revenue.
The aggregate picture that emerges from the fiscal year 2014 and fiscal year 2015 annual reports is much less positive than the first two annual reports it appears on. While we cannot be certain of the magnitude, we now know that (1) Star Wars: The Old Republic had declining revenue in fiscal year 2014 compared to the prior year, (2) revenue then declined even more in fiscal year 2015 relative to that fiscal year 2014 decline, so (3) over this period, spanning April 2013 through March 2015, revenue did not just decrease, the rate of that decrease appears to have been consistently accelerating.
Looking Back: Most Recent Quarterly Reports
Hopefully you’re still with me, I promise we’re almost finished. There is some silver lining in the two quarterly reports since that fiscal year 2015 annual report. The rate of decline in revenue has stopped accelerating it seems because SWTOR is no longer being cited for declining revenue year-over-year in the middle six months of calendar year 2015. However, the game was also not listed as having increasing year-over-year revenue in either quarter. This means that Star Wars: The Old Republic is only experiencing the same revenue decline as last year, not continuing to accelerate the rate of decline as it had over of the prior 24 months.
We are only talking about revenue right now though. None of this means that SWTOR is losing money necessarily. There’s less money coming in the door, but if you also cut expenditures you can remain profitable with less revenue. The primary takeaway for me is that the next quarterly report, which should be available in February, is going to be very interesting to read. If the game is not cited for significant revenue improvement I will become very concerned. BioWare has made their move with this expansion and if revenues cannot increase relative to the same time period last year it will be an indictment of their decision to release an expansion like Knights of the Fallen Empire instead of one more similar to Shadow of Revan unless the production cost of the former was significantly lower than the latter.
I can’t say that I feel better after reading through all of these financial reports. It is also somewhat incredible how little EA speaks about this game in earnings calls and such. If an analyst or two covering EA’s stock couldn’t tell you the name of BioWare Austin’s MMORPG it would be difficult to blame them because it is rarely mentioned in more than a passing fashion. I hope that BioWare knows something that I don’t, but I’m more skeptical than ever about the course their management team has chosen. EA is paying a lot of money to have exclusive rights to develop a Star Wars MMO and that’s a big issue. The game have had decreasing revenue for about 2.5 years it seems and you can only cut so many costs to stay in the black while maintaining a game of this magnitude.
I hope that the next quarterly report from EA lauds the success of Knights of the Fallen Empire and cites large revenue increases for the game. If it doesn’t, I am very concerned about what that would mean going forward for the game. I’m not trying to be negative, but the numbers don’t lie and three years would be a long time to have consistently declining revenue for a game with an IP that’s not cheap in a genre that has higher ongoing costs than most EA games.
As always, thanks for reading and I apologize for any typos, writing this at the end of a work day has fried my brain a bit.
Andrew | SWTOR Economics
25 thoughts on “An Analysis of Star Wars: The Old Republic from EA’s Financial Reports”
To those who play it that is no surprise at all.
If it makes you feel any better, EA only mentions a handful of games in most reports, and usually the ones just recently launched or about to launch.
EA also mentioned in their most recent call that subs were up 31% (from what, who knows, the last sorta number they gave was just under 500k right after F2P launched) bringing them to the highest they have been since Feb of 2014.
That’s not really surprising as the new expansion KotFE is only available for subs
You can also hope that SWTOR can ride the wave of general Star Wars excitement with the release of Episode VII. Thanks for the analysis!
nope not even a mention of swtor in a force awakens DISNEY wants nothing to do with swtor since EA and BW have ran it into the ground but we did have two blizzard game advertisements before the movie Seems Disney didnt my Blizzard getting their foot in on the hype aka $$$$$$$
You realize Disney isn’t supposed to have anything to do with swtor even if it wasn’t run into the ground? Thats the point of paying for the rights to exclusively make star wars games lol.
It’s good news for those hoping Star Wars will get another/better MMO (SWTOR 2?).
But remember SWG had far fewer players/subs and less revenue from things like SWTOR’s cash shop – and that went on for 8 years, even with the IP cost. I think KOTFE has also done relatively well, at least in the short term. It remains to be seen if rolling chapters can keep people subbed (when they start rolling out their chapters). It also remains to be seen what TFA is going to do for SWTOR once the movie’s frenzy is in full swing.
“But remember SWG had far fewer players/subs and less revenue from things like SWTOR’s cash shop – and that went on for 8 years, even with the IP cost.”
Also bear in mind SWG existed in a completely different market, back when MMOs where a niche market. In a post-WoW world, where video games have gone from niche to mainstream, and players have come to expect certain standards and staples with regards to MMOs, a game such as SWG couldn’t succeed. Take a look at the wide swath of games that have tried to get away from the WoW model.
I’m hoping the movie drives up interest, but I’m also suspecting Disney will want to start their own game that ties in more directly with the current IP, especially since they have made a a very vocal point of cutting all ties to any expanded universe material outside of the movies themselves. Also, I highly doubt it would be a MMO, since the glut on the market, and the derth of triple-A MMOs with big IPs or big budgets, have wound up being financial flops, or have wound up going F2P in a year or less. I suspect it’ll be a MOBA or mobile game of some kind.
One assumption from a cost point of view, hosting services for the game servers will have been decreasing year on year. You just need to look at the costs of Bare Metal Servers or Dedicated VMs from the big providers (SoftLayer, Amazon, etc). So the server consolidation and general cost of machines will have helped protect some of the GP. Whilst a lack of organic growth will be a huge concern there is obviously enough commitment to try KOFTE as a “re-launch” to see what revenue can be captured with the new film driving sign-ups and subs.
FYI as a compare within the SaaS offerings the rough rule of thumb is that 2% of your visitors to a service will create an account, and of those free accounts about 2% will go on to spend money. I have no insight into that sort of metric from a MMO point of view. But I would expect the conversion from F2P to Sub/Paid to be better.
I disagree with your methodology, while you are more than likely correct, just because SWTOR “no longer even listed among the top revenue attributions for the category” does not necessarily mean its decrease in revenue was accelerating, it may just mean that its % of the whole in that category was going down. This could be because the revenue as a whole was increasing and SWTOR’s revenues were decreasing, but maybe not at an increased Rate. Now, I did not look at the SEC report, but at the very least the writing there is vague.
Although, as I said, you are probably correct despite the methodology flaw.
I had to cut some details to avoid it being too long, but there’s a lot more to it than that. The rate of change analysis isn’t related to whether or not it appears in the top contributors to category revenue. The reports always include a series of four statements: (1) current period revenue with top attributions, (2) how that compares to the prior period, (3) what’s increasing, and (4) what’s decreasing.
“For fiscal year 2015, service and other revenue was $1,947 million, primarily driven by FIFA Ultimate Team, Titanfall, and Battlefield 4 Premium. Service and other revenue for fiscal year 2015 increased $506 million, or 35 percent, as compared to fiscal year 2014. This increase was driven by a $660 million increase primarily from Titanfall and the FIFA and Plants vs Zombies franchises. This increase was partially offset by a $154 million decrease primarily from SimCity franchise, Star Wars: The Old Republic, and Pogo-branded online games services.”
The last sentence is what allows an analysis of the rate of change. When 2014 was already cited for a decrease, and now in the above it’s telling us that 2015 decreased relative to 2014, and the magnitude of the decrease is larger.
Hope that helps clarify, there were definitely a lot of details left out of the blog for brevity, but happy to fill in the gaps if people are interested.
Having some experience in this sort of analysis, I’m a bit disappointed. There’s a lot of highly subjective conjecture in this analysis and it shows some distinct biases. Products revenue line of any industry decrease over time thats a fairly standard constant in any industry, using it as a doom bell is rather amateurish. So it would have been rather shocking if SWTOR had increased revenue from its game launch which typically is the TOP revenue level for a new product.
This is only intended as a summary, there’s a lot more that went into this than what’s covered in the summary. I also talked to some off the record contacts at work which reinforced my confidence in the validity of this summary.
It’s not the falling revenues that are the issue, but the trend and pace of that decline.
Thank you, Andrew, for bringing your perspective to bear on an interesting question. It’s always great to hear your perspective on things.
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Thank you! Humbled by the response to my recent writing.
Thank you for posting this.
My own observations of in-game activity over the past two years, and the predictions and analyses I’ve made of the game design and operational decisions being made, as I saw them come out, point in exactly the same direction. It is nice to see some actual data bearing on the question, although a bit depressing to find I’m correct.
EA has never looked kindly on marginal success, to say nothing of outright failure. I expect that by midsummer 2016 this game will be staring shutdown in the face. It’s too bad. I’ve had fun with it.
I totally agree I am surprised we have lasted this long with swtor but look what EA does to every mmorpg it gets it’s dirty useless hands on. I have NO love for EA…and I am getting into Blade and Soul run by NCsoft who i hate as much as EA however that game is cutting edge a light year ahead of the useless engine EA bought for next to nothing for swtor.
Yeah it is a common Korean grinder but everything looks so vivid and NCsoft is far more client friendly then EA is and that is saying something for NCsoft… I played Lineage 2 for a few years I got hacked twice from inside of NCsoft yet they always fixed my account.
I am just about to put a new computer online all next gen intel system twice this machine easy and if I do not see a huge improvement I will turn off my account…and walk away with more hate toward EA then ever.
What perplexes me is your use of IP costs as a concern. Unless you’re privy to info about the agreement, how do you know its an ongoing burden?
There are a lot of different ways these contracts are handled, and this one could well of been payed up front for the agreed amount of time, then a new deal and payment struck to renew it and the end of that time.
I’ll have to go back and find the articles, but it’s been publicly cited before as an annual licensing fee paid for the IP license.
Q32016 quarterly results from EA indicate that “STAR WARS™: The Old Republic grew to its highest subscriber level in nearly three years.”
Where are all these new subscribers most servers are damn near empty. Maybe the SUBS are up but not fro NEW players just old ones checking in the lame ass 4.0…but there are SO few fresh meat in swtor…
Everything EA says is a deception always has been…some how they get away with their financial deceptions .
2017 the lights go out for swtor
I’m interested to see your analysis of the 2016 Report. I think that the marketing of this product is generally shoddy. Down to the core of it, the game is a great product, however, they are not marketing the game well enough to entice a substantial enough of new customers.
“it is rarely mentioned in more than a passing fashion”
Check. It was mentioned exactly once in passing in the latest quarterly call.
“I hope that the next quarterly report from EA lauds the success of Knights of the Fallen Empire and cites large revenue increases for the game.”
KOTFE was not specifically mentioned. SWTOR was mentioned as having increased revenue; Jorgenson, answering Merwin’s question, said “We saw continued growth of our original Star Wars product, Star Wars The Old Republic,”
Now, I hope someone with more understanding of quarterly financials can chime in here. It is my understanding that the numbers and growth being discussed are some months in the past at the time a given quarterly report is given. My own observations of the game were that there was a spike in the playerbase back in October/November, some continued growth through January, a levelling off through February, and a steady decline since then to the point that there are fewer active players now than there were summer 2015. If the quarterly report refers to events multiple months in the past, the “continued growth” mentioned could track with my observations through January, in which case I would expect very big problems to show up in the numbers for the _next_ quarter.
I am very curious to know if this is the case.
I want to add something here. I have been a rather big fan of Galactic Starfighter, the space PVP minigame. GSF is an interesting case in that it is very reliably a very small fraction of the overall playerbase that actually likes it. Making the statistical assumption (which I feel is a safe one) that the proportion of any given server population that likes and plays GSF will be fairly constant regardless of server, and in line with the overall proportion of the playerbase that likes and plays GSF across the whole game, the popularity of GSF can be used as a proxy for the game overall, since as a server population declines, the number of people playing GSF will decline at the same rate. This is useful because measuring GSF activity is much easier and more visible than just about anything else – there are a very limited number of GSF instances to search for, and people who are queueing for GSF often queue only and specifically for it, so there’s no confusion with other activities.
I spent some time in January actively measuring GSF activity: going around to various servers, counting how many players were active in GSF instances at any given time, measuring how long various regular players tended to stay online, when people tended to log on, and so on, and then extrapolating from that to get general usage patterns. My focus was on getting an estimate for actual human beings logged into the game and playing, with no regard to what alts they might have – just counting actual people playing. I feel reasonably confident in my results; I came to the conclusion that, across all servers – North America and Europe combined – there were approximately one thousand human beings playing GSF on a regular or semi-regular basis. I freely admit this was a rough estimate and I could be off by a factor of about 2 in either direction, but it’s a number in which I had a high degree of confidence.
Right now, in May, I would estimate that number has dropped by about half. A year ago, I would estimate it was about two or three times that level.
In March, noticing an apparent drop in the rate at which flashpoints and warzones were popping, as well as an apparent decrease in fleet population numbers, I applied the same methods to the game as a whole. This was a lot more rough, and the major factor for error here is how often the average player (as opposed to the average GSF player, who is probably significantly more hardcore) logs in and plays; it could be anything from once every three days to once per week, depending on how many very casual players there are who seldom log in. Keeping that in mind, using similar methods to the GSF estimation, I came to the conclusion that across all North American and European servers, there are a total of between 150 thousand and 300 thousand human beings who actually play SWTOR. Again, this estimate is highly dependent on the login frequency; the more intermittent the average, the higher the potential total number of players. I am rather confident that the range specified (150k-300k) is close to the right ballpark, however, and I would be very surprised if I was even one order of magnitude off.
If I’d had to guess what proportion of the players like GSF, I’d have said one half of one percent; that fits with my estimates given here. When I see the rate at which GSF matches occur has dropped to nearly zero on my server (which is still fairly well populated) and is also lower than in the past and trending downward on all but the destination servers of Harbinger and Red Eclipse, the implications for the game as a whole are clear.
So when I see pieces like the often-linked superdataresearch.com piece claiming that SWTOR is one of the top-grossing MMOs, which make such claims without providing any data or evidence whatsoever, I find them both very interesting and very implausible. If I had to speculate I would say that SDR is writing those pieces based solely on marketing material they are being given by EA (if, in fact, they aren’t on the take, which for a variety of reasons I will not rule out).
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