Introduction

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.

Conclusions

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