"We couldn’t be more pleased with how the diversity of our business allows us to make up for a miss on one franchise with a big hit on another."Electronic Arts held its earnings call for the first quarter of FY 2013 yesterday. The call explains why Star Wars: The Old Republic is going free-to-play. The news was not all bad, as EA announced that SW:TOR drove subscriptions, advertising, and other digital revenue up by 69% compared to Q1 2012. Just about everything else concerning SW:TOR was bad, though.
- Frank Gibeau, President - EA Labels, Q1 2013 Earnings Conference Call
Of course, everything is not rosy for Electronic Arts as a whole. Here is how EA's CEO John Riccitiello started off his portion of the presentation to investors:
"EA delivered a solid performance in our first FY13 period, hitting EPS guidance for the quarter. The EPS loss of $0.41 cents was at the high-end of our guidance and a penny ahead of the Street consensus. The quarter was marked by a series of puts and takes that reflected the strength and diversity of our business across multiple brands, channels, business models and geographies.Losing 41 cents a share is good? EA really needed SW:TOR to come through for them. The results instead were "disappointing". If I read the numbers right, Ken Barker, EA's Chief Accounting Officer, indicated that SW:TOR is expected to bring into EA's coffers about $55 million less in FY 2013 than originally expected (p. 5).
"The disappointing results of Star Wars: The Old Republic were largely offset by a powerful performance from Battlefield 3 Premium service – although revenue-recognition rules will push this very significant EPS driver into our fourth quarter." (p. 2)
Frank Gibeau, quoted at the beginning of the post, spelled out the future of SW:TOR to the investors on the call:
"Although it launched well, subscriptions have been on a declining trajectory and have now slipped below one million. Last year we announced that the breakeven point was roughly 500,000 subscribers. And while we are well above that today, that’s not good enough. The message from players exiting the game is clear – 40 percent say they were turned off by the monthly subscription. And many indicated they would come back if we offered a free-to-play model.Outside of the call we discovered the name of SW:TOR's new executive producer. The original executive producer, Rich Vogel, left the company on 17 July. In the Executive Producer's letter to the players on the official forums, we learned his replacement is Jeff Hickman, the original producer for Warhammer Online.
"Our plan now is to pivot and provide a two-tiered pricing plan which will make the game more accessible and grow the audience. The new pricing will go into effect in November.
"The first tier is a Premium Players membership for Star Wars fans who want everything the game has to offer. For $15 a month, Premium Players will receive comprehensive access to the game plus monthly infusions of in-game currency which can be used for boosts, customization and for moving more quickly through each level.
"The second tier is a free-to-play option which allows consumers to experience the first 50 levels at no charge, but with some restrictions on content and advanced player features. Upgrades to the experience can be purchased with in-game currency. Players will move at their own speed and comfort level. If and when they’re ready, they can easily switch to the Premium tier.
"Additionally, we are introducing new pricing next week in North America and Europe. Beginning August 6, Star Wars: The Old Republic will retail for $14.99 – essentially offering the first month free." (p. 7)
I looked at the options chart between subscribers and free-to-play and I wasn't that impressed. The first person who responded to the Executive Producer's letter may have said it best:
"F2P till level 50?. Congrats you've just killed swtor."SW:TOR is a game that was designed for a player to solo to 50 and enjoy the leveling experience. Unless EA does something odious like only allow speeders to those who subscribe, I don't really see anyone needing to pay. Of course, I did subscribe to the game so I'll be getting some of the new cash coins if I ever go back. Going F2P is an enticement and I did like the stories. But I just get the feeling that EA will be one of the few companies to screw up the transition to F2P.