EA's Investment in Star Wars: The Old Republic Approaching Half a Billion Dollars

MarketWatch's Dan Gallagher has penned an interesting two-page piece on the past and present successes of Electronic Arts and its CEO John Riccitiello, with plenty of added commentary from a handful of industry figures and analysts. Of particular interest are the article's last several paragraphs, which are devoted to EA's acquisition of BioWare and the major gamble they've taken with Star Wars: The Old Republic. In fact, analyst Doug Creutz puts the company's investment into the game at a staggering $500 million to date:
While at Elevation, Riccitiello oversaw a large investment in a pair of game studios named BioWare and Pandemic that merged them into a single entity. BioWare specialized in the role-playing-game, or RPG, genre that was growing more popular especially as growth in broadband Internet connections enabled gamers to play in virtual worlds with hundreds or even thousands of other players at the same time.

Among BioWare's past titles was a PC game based on the popular (Star Wars) franchise called (Knights of the Old Republic.) Following the investment by Elevation, Riccitiello led negotiations with (Star Wars) creator George Lucas to create an ambitious new game that could rival (World of Warcraft) in scope and game play.

Upon his return to EA, Riccitiello was approached by Frank Gibeau, who ran the company's games-label business, with a suggestion that EA acquire BioWare/Pandemic. Riccitiello retained an ownership stake in Elevation and thus in the studio so a special committee led by Gibeau was set up to evaluate the deal and make a recommendation to the board. The deal got done in October 2007 for about $775 million, making it EA's largest acquisition ever at the time.

(Knowing we would work with John again was a tremendous plus to make us want to join the company,) says BioWare co-founder Ray Muzyka. (At every step along the way, they worked with us to focus on our core values.)

That deal brought aboard what many expect to become EA's next major growth property. The company launched (Star Wars: The Old Republic) on Dec. 20. As a PC-based multiplayer game, (The Old Republic) will sell an initial retail pack plus monthly subscriptions allowing users to continue playing.


(I think it's safe to say that the total all-in investment in '˜Star Wars' is probably approaching half a billion dollars,) Creutz says. (EA has minimized its risks as much as it can on this bet, but it's still a risky bet. To the extent that any one game defines his tenure, it's going to be how '˜Star Wars' performs.)
If accurate, that would likely mean that the game needs an awful lot of subscribers for many years to come before it will start turning a profit. And sorry Dan, but Pandemic and BioWare were not entirely "merged into a single entity." Studios were closed and a lot of Pandemic employees lost their jobs.