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EA Pays $860M for Hardcore Gamer Studio — But Why?

masseffect.jpg“We’re boring people to death and making games that are harder and harder to play,” John Riccitiello, then-newly appointed CEO of Electronics Arts (ERTS), told the Wall Street Journal last July, summarizing the main challenge of the company he had just taken over.

And so what did he do? He spent nearly a billion dollars on a development studio renowned for making games that are hard to play.

At least the $860 million acquisition of Pandemic/BioWare isn’t boring, because it pretty much guarantees tech industry cocktail chatter for weeks. Unfortunately for EA, much of it will revolve around the question: “What the hell were they thinking?”

Why? BioWare is famed for role-playing games like Neverwinter Nights and Star Wars: Knights of the Old Republic, while its partner Pandemic Studios has a library of action titles like Full Spectrum Warrior and Star Wars: Battlefront — all of them primarily designed for a niche hardcore gamer audience who enjoy spending dozens of hours on a single, highly complex, difficult-to-master title. And while many of these were hits, none have reached the truly stratospheric success of, say, Will Wright’s Sims franchise from Maxis Studios, which EA bought in 1997 (according to Next Generation, for example, PC sales for the D&D spinoff Neverwinter were $23 million, while the Sims games, which appeal to a far larger crossover audience, have cleared $129 milllion in PC sales alone and surely much more for the many console spinoffs). Judging by Pandemic/BioWare’s solid but unspectacular track record, EA’s purchase price seems way steep.

So why did they spend so much? The acquisition includes several titles for the Wii and DS already in development, and those may have breakout potential. There’s tremendous gamer buzz around BioWare’s upcoming RPG Mass Effect, but in all likelihood, it’ll do similar numbers to the studio’s million-plus-selling Knights of the Old Republic — a hit, but not a huge one. There are rumors that BioWare is developing a “Star Wars”-themed MMO, but if that’s what inspired the purchase, the mystery only deepens: Sony Online’s (SNE) MMO Star Wars Galaxies was a disappointment in relation to cost and anticipation, and that was released at the height of the buzz over a movie franchise that’s since become old news.

Maybe there are several stealth blockbusters that will eventually justify EA’s purchase. But at the moment, it just appears to be the costliest example of the industry’s self-destructive fixation on being Hollywood for Lost Boys.

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22 Responses to “EA Pays $860M for Hardcore Gamer Studio — But Why?”

  1. Two things:

    • The Sims is a freak hit. It’s not close to any other game in the industry. It’s to single player games what World of Warcraft is for MMOs.

    • RPG and Action Games make up ~35% of the american software market and EA has nothing in these areas. This means that the money is going to the competition.

    Case to the point, EA recently announced that the revenue from the sports division that rebrands the same titles every year (Madden, NHL, …) is down roughly 30%.
    The company has come to rely too much on sequels and sports remakes and that makes them vulnerable. Thus they are diverifying their portfolio, and, on the way, prevent someone else from snapping up BioWare / Pandemic.

  2. — This truly was one of the worst post titles on this site.

    — You belittle BioWare’s accomplishment of selling over a million titles for a single-platform game, which KotOR was initially. Actually, you belittle the accomplishment of selling a million units entirely.

    — The acquisition fills some holes in EA’s portfolio.

  3. “Of course they made money, but like I said, not that much money in relation to revenue Maxis has earned for EA.”

    That might be relevant if Maxis’s products were competing for the same part of the market.

    Perhaps Hollywood should axe all development of non-iceberg-and-Celine-Dion-based movies too.

    I’ve not seen the part of EA’s mission statement that says they should strive to leave areas of the market for Take Two, Microsoft, Blizzard, etc. to earn $100m’s from uncontested.

  4. There is a SW television program in development (or so it is rumored). The SW MMO may be set in the same time period, or simply be launching near the date of the show.

    Rumor + rumor + speculation = ?

  5. “Which of the supposedly ‘niche’ games you list didn’t make money?”

    Of course they made money, but like I said, not that much money in relation to revenue Maxis has earned for EA. Which makes EA’s high purchase price strange; and still stranger when Pandemic/Bioware’s product is totally at odds with the CEO’s own stated corporate mission.

  6. Which of the supposedly “niche” games you list didn’t make money? KOTOR did over a million units.

    Did you stop to think that there might be (millions) of gamers who want to buy more involving games, irrespective of how fervently you try to wish them away as irrelevant to your preposterous Second Life new world order?

    Your Coen Brothers analogy is equally specious. If the Coen Brothers had the capacity to consistently churn out five or ten of their offbeat modest successes every year it would be approaching accuracy.

    You really can be very silly James.

  7. I think its an outrage that EA are monopolising the games industry just to start and being allowed to get away with it. Microsoft recent made a fair play by spliting with Bungie, so why haven’t Maxis split with EA after the huge success with “The Sims” series?

    Mercenaries, Star Wars Battlefront and Star Wars: KOTOR are some of my personal favorites. With Mercs 2 on the way I believed Pandemic especially would avoid take-over bids, perticularly now.

    As for some of the articles comments I must disagree with most of them. KOTOR was a hit in its own right and justifying what a “big” hit is out of the question. For a game to be voted “Game of the Year” is a big title, no matter what the sales of the game are, and to sell over a million copies of the game does say something.

    Finally I have to agree with everything “OTL” said in their comment. My sister plays Star Wars: Battlefront with us regularly and she’s more into games like “The Sims” and the Harry Potter games.

  8. I’m not disputing the quality, if you read closely, BioWare/Pandemic make excellent hardcore games; but as I said, the reality is they don’t have a track record to justify that purchase price. If you want to go the Hollywood analogy, BioWare are a bit like the Coen Brothers, who’ve made a bunch of great films, but whose biggest success, O Brother Where Art Thou, made something like $50 million domestic, a modest hit at best. EA’s purchase is like a studio signing the Coen brothers to an exclusive development deal… for a billion dollars.

  9. I have to agree a bit with the others. While I won’t try and justify the purchase or the price, in terms of producing quality games these studios are at the top of their game.

    With the world of film as an analog, studios like Bioware create Academy Award winners, while huge mainstream successes like ‘The Sims’ are more along the lines of American Idol. Measuring only in dollars and cents can skew your perception of what a ‘quality’ title is, even if it might be a little too difficult for 45 year old non-gamers to pick up.

  10. Jeez, yet again a short-sighted piece of opinion-led non-journalism. I’ve asked before, and I’ll ask once more: fire up gigagamez again so I can bypass this kind of stuff. The author’s “Mainstream Success is All” refrain is becoming increasingly tiresome.

  11. why, why, why sell two of the best company’s out there that are making somem of the most different games at the moment, to the most over hyped company in history.
    next up we have mass effect then mass efffect 2008 followed by mass effect 2009.
    there will be spin off after over used ea spin off using the same graphics engine, only with a twist.
    i suppose from a game company point of view i can seee why they sold them selfs to ea, one of the biggest publishers out there make you an offer you cant refuse, i just feel that the work will suffer when the dead lines cant be meet for release dates and they rush out half arsed games because they want the money.
    anyone remember the big microsoft buy out of rare,im still waiting for a decent game from them for the 360 lets just hope bioware does’nt go the same way

  12. darrenstuart

    As the above poster said half the games here are not hard.

    I think you missed the point, these 2 studios make quality games and this something some EA games are lacking. Have a look at Bioware’s history and then rethink your comments. EA don’t have an RPG developer of this quality and as the genre is getting more popular it makes sense to have them.

    I think they had to go in at that price because if it was any lower then there would have been some rivals for them.

  13. Kevin Edwards

    This deal has nothing to do with gaming…. Elevation Partners bought BioWare/Pandemic awhile ago and Riccitiello is a founding partner of Elevation who later left to run EA.

    Great payday for John and Bono as he does himself a favor and gets paid on the deal. Another nice job for the titans that run the Valley.

  14. The reason is that good development studios are becoming a premium.
    1. Consider that each title can require up to four different studios to make the game (one who will specialize in Xbox360/PS3, one for Wii, another for NintendoDS, and another for PSP).
    2. Now consider that many publishers are public companies and are always looking at new titles to drive their growth (as opposed to expanding current market for their current titles).
    This means that the growth in demand for quality studios is exceeding the growth in supply (it is easy to see that even right now there are many sub-standard studios doing work because there are no other alternatives!).
    The video game industry will not have problems growing to lack of growth on the consumer side. It is completely the supply of quality developers of games. The price is only going to get higher for the great studios. The major publishers who control the roster of the best studios will be able to grow. The others will level out.

  15. Dude, Battlefront was NOT hard to play. It was the simplest game ever created. It takes only 15 minutes to figure out how to play. How about Mercenaries by pandemic studios? That was easy “Pick up and Play game” as well. Oh, Maybe Destroy all human was hard core game? DO you even own game consoles?
    Are you pretending to be a gamer or something?
    Do you know even what OTL means? Cauz,this article is SO~ OTL.
    THINK before write something or bore someone else with your article.