The layoffs have me confused more then anything else. Help?

[Grevlin]

One would think that if they're shifting focus to their online and digital markets, Star Wars: The Old Republic would be in their top 5 priorities. Unfortunately, they said it wasn't. Therefore, I'm going to take a shot in the dark here and say that this is just smoke and mirrors with a splash of posturing on their part.

 

Please note; I am an investor and yes, I do own EA shares. I'm not happy at all with the direction they're going in ... the market is agreeing with me.

 

Yeah, because a company will put an already-developed game at the top of their list of priorities over developing new titles before the upcoming summer & winter seasons.

 

http://www.ea.com/games#6

 

-Overstrike

-Warhammer Online

-Command & Conquer Tiberium Alliances

-Crysis 3

-New Sim City title

-Command & Conquer Generals 2

-Medal of Honor: Warfighter

-NHL 13

-Madden NFL 13

-The Sims 3 Diesel Stuff Pack

-NCAA Football 13

-EA SPORTS UEFA EURO 2012

-Tiger Woods PGA Tour 13

 

These are all rather large titles in the development pipeline for 2012, and have been since the March interview you're referring to. Considering that SWtOR already has a stable subscriber base and is out of the main development phase, I'm happy to see that they're including it in their "top 10" priorities considering what else they're planning to release. Remember, EA is a large company with multiple properties. You're not talking about SWtOR versus all the other RPGs or just Bioware's other products, but one of the largest publishers in the market. Keep that in mind.

 

Tell me then, as an investor, what does it typically mean when a company engages in a large buyback program of its own stock?

[Kthx]

I don't really get the appeal. I own it. I got it free with my AP. But it's not all that fun to actually play.

 

I have no interest in it and I noticed that it has gotten very tepid reviews on amazon.com. However, this is exactly my point. Even if it is not a good game, it has sold extraordinarily well.

 

http://www.bbc.co.uk/news/technology-18181020

Edited May 23, 2012 by Kthx

[Rouge]

Tell me then, as an investor, what does it typically mean when a company engages in a large buyback program of its own stock?

 

That it tries to drive the share price up.

[Kourage]

Some of, if not all of those people were not doing a good job.

[Kharnis]

You do know that the 1.3 number was inflated, right? While it was reported during the quarter reports it was stated that the number was as of the end of April which means quite a bit of that were customers who received the free monthly period and it also counted the weekend trials. So 1.3 'paying' customers is not correct essentially.

 

I guess they can say it flopping like a fish out of water (interesting metaphor he chose there though, heh) because of the investment into the game. When you compare how much money they rolled into it which if I recall is more than any MMO in history (not sure on that) then look at it's current status then yes, it is flopping a bit. When you lose nearly or more than half a million subscribers this early then there are some issues and red flags. No if's, and's or but's about it.

 

You do know that the people who received the free month could only do so if they had an active subscription paid for as of 22 April, right? Whether or not they included the weekend trials (since they specifically didn't say "1.3 million paying subscriptions," the argument could definitely be made, though I personally doubt that there'd be that many weekend passes to make any significant difference), I really wish people would stop using the "this includes the free month" argument. It's irrelevant. Those with the free month had a paid subscription barely two weeks before the meeting.

[Rouge]

I guess we can have a metaphysical debate as to whether great sales make a great game, but there is no denying D3 has sold well.

 

Diablo 3 was in development from since 2001.

 

Since 2001. Eleven years.

 

It has to sell well for Blizzard to get the development costs back.

Edited May 23, 2012 by Rouge

[Zhauric]

Such a great game that Blizzard felt compelled to give out 1 200 000 copies of the game free...

 

Umm...you do know the 6.3 million that they sold did NOT include the 1.2 million they gave away to those who took the 12 month subscription to WoW. So that 1.2 million means little to nothing. Sorry, but that 6.3 is pretty darn impressive even if I am not one of them.

 

In any case, just think of the layoffs as restructuring. Is it good or bad for the game? Honestly, only time will tell. It's a critical move at a critical juncture so there really is no way of knowing presently. Question becomes does it slow the progress any even just slightly because many folks are on the edge and won't wait any longer for some changes.

[Alkiii]

Yeah, because a company will put an already-developed game at the top of their list of priorities over developing new titles before the upcoming summer & winter seasons.

 

http://www.ea.com/games#6

 

-Overstrike

-Warhammer Online

-Command & Conquer Tiberium Alliances

-Crysis 3

-New Sim City title

-Command & Conquer Generals 2

-Medal of Honor: Warfighter

-NHL 13

-Madden NFL 13

-The Sims 3 Diesel Stuff Pack

-NCAA Football 13

-EA SPORTS UEFA EURO 2012

-Tiger Woods PGA Tour 13

 

These are all rather large titles in the development pipeline for 2012, and have been since the March interview you're referring to. Considering that SWtOR already has a stable subscriber base and is out of the main development phase, I'm happy to see that they're including it in their "top 10" priorities considering what else they're planning to release. Remember, EA is a large company with multiple properties. You're not talking about SWtOR versus all the other RPGs or just Bioware's other products, but one of the largest publishers in the market. Keep that in mind.

 

Tell me then, as an investor, what does it typically mean when a company engages in a large buyback program of its own stock?

 

This game is 6 months old, and with them focusing on the online and digital market (as they claim they're doing) ... one would think SWTOR would have a higher priority. Simple logic really.

 

You do realize that some companies buyback to boost their value (short term), right? We're not seeing that now are we? They are idling at their 52 week low (and have been). With all the negative publicity, it's not going to get any better. On top of that, they're beginning to show a pattern ... something that people like me watch for very carefully when it comes to stocks and the market itself.

 

You see, buybacks are sometimes good for the company. But sometimes, they're used as smoke and mirrors. I'm going with the latter on this one. The market is backing my claim with the average value we're seeing on a consistent basis.

 

SWTOR is in trouble and investors are not happy about the large investment put into the game and seeing so many leave and/or voice negativity over the product ... EA is doing something about it and in my eyes, they're going about it the wrong way.

Edited May 23, 2012 by Alkiii

[Chaconne]

That's his job there. As well as a bunch of QA openings.

 

All those jobs are listed as having been posed in April...

[Grevlin]

You do know that the 1.3 number was inflated, right? While it was reported during the quarter reports it was stated that the number was as of the end of April which means quite a bit of that were customers who received the free monthly period and it also counted the weekend trials. So 1.3 'paying' customers is not correct essentially.

 

I guess they can say it flopping like a fish out of water (interesting metaphor he chose there though, heh) because of the investment into the game. When you compare how much money they rolled into it which if I recall is more than any MMO in history (not sure on that) then look at it's current status then yes, it is flopping a bit. When you lose nearly or more than half a million subscribers this early then there are some issues and red flags. No if's, and's or but's about it.

 

Actually, the original 1.7 million number was the largely inflated one IIRC, as that included people who hadn't yet cycled out of their trial periods. The 1.3 million, as stated in the shareholders report, was composed of a far higher percentage of paying subscribers who had signed up for a regular subscription. And remember, they'd have to lose another 800,000 before they would have to consider downsizing at all (such as downsizing the work force and shutting down servers) , much less shut down. Considering that they're going to continue sinking money into SWtOR and expanding their overall workforce (9,200 to 9,700), they certainly aren't acting like they're having problems with it.

 

It all comes down to perspective, though. WoW lost more than that number after SWtOR came out, and I don't remember too many people claiming doomsday. Could be the 10 million strong subscriber base on their end.

 

Also, from the perspective of the company's management, the development costs stop being relevant once they've been spent. It's a "sunk cost", unrecoverable, and irrelevant to future operation (take a business finance or microeconomics course if you don't believe me). What's relevant to future & current operation is marginal revenue versus marginal cost. If the former is greater than the latter, operations continue. If vice versa, that's when you (net) downsize or reduce production (remember, EA's planning to EXPAND their net head count and shift the ratio of engineers to other employees).

 

Now, that doesn't mean development costs don't matter, but they matter up to the point you pay them. When a company decides what projects to pursue, they do an analysis of how much they'll be paying to develop the project in each year. These values are then calculated with the expected interest rate to determine the present & future value of the money that would be spent. Analysis is done to determine the range of expected profits and the statistical likelihood of different outcomes. This is all put together and then compared against other, similar projects. It's based on this analysis (weighted average cost of capital, or WACC) that a company decides what projects to pursue. That's when the development costs are relevant.

 

Also, Bioware/EA currently haven't released their own numbers for how much SWtOR cost to develop, so those numbers come from various analysts. The lower range of estimates is $80,000,000. The upper range is $200,000,000. A difference of $120,000,000 between estimates doesn't instill a lot of confidence in me as far as their accuracy, so I'd prefer to wait until EA releases their own numbers about it (if they do, though by that point they may be even less relevant to the customers/shareholders.).

[Rouge]

EA did come up with SWTOR's cost late last year: 80 million US dollars spent in development, 20 million US dollars earmarked for marketing. Edited May 23, 2012 by Rouge

[Celebrus]

Way to try and twist what I said. You should really look for a job with Fox News or MSNBC. Such skilled wordsmithing should not be wasted on an MMORPG forum. Go! Go! For the sake of spin doctors everywhere!

 

Like I said, actually READ the shareholders' materials first. This isn't a net reduction in employees, but a net increase in their workforce. Ironically, you did exactly what I described in the second to last paragraph. Frankly, I don't see how maintaining 1.3 million regular paying subscribers (i.e., they're signed up for a recurring subscription plan) making it the second most popular MMO on the market is "flopping around like a fish out of water".

 

That bit where you falsely accuse me of spin after you've made a rather feeble attempt to do so yourself was a nice touch, though.

 

And by the way, assuming you actually read my comment, you'll notice that I was complaining about the ability of legitimate players with legitimate concerns & questions to utilize the forums properly, citing my own experience in trying to get a question answered and being drowned by trolls. That's why I suggested re-organizing so that the forums could function both as a sounding board for disgruntled customers AND serve their purpose for general users. But go ahead and accuse anyone you disagree with of wanting to censor dissenting opinions. It's not like you have any lower to sink.

 

I tend to form my view of what is happening within a game based on what is actually happening within a game.

 

The shareholders could be as happy as a lark and 90% of american servers would still be underpopulated.

 

The shareholders could be throwing a party right now pouring champagne over naked ******s and basic features would still be missing.

 

They could be dancing under a film-set sky that is currently raining 100 dollar bills, and my account would still be lapsing as soon as my free month runs dry.

 

When the impacts of all of these "positive" changes start to show themselves, I may, or may not, come back for a while, but to tell people that everything is looking up and to just hold out hope based on the assumptions you have made while reading the shareholders materials is no more credible than anyone else screaming that the sky is falling.

[AkulaX]

Actually, the original 1.7 million number was the largely inflated one IIRC, as that included people who hadn't yet cycled out of their trial periods. .........................................................

 

That is all real positive and I really hope you are right and they keep a steady dev cycle going to improve and grow the game. However my mind keeps snapping back to WAR. This feels exactly like how they did WAR. Yeah I played it and it got better over time albeit at a slow snails pace. But it was just a slow death and it felt like one.

 

I think the Reid thing makes me the most worried. Yeah his job will be replaced, but that is the scary part. I remember in WAR the went through many downsizes of their community relations manager and team. Towards the end I remember getting an email from the CRM, a housewife from Wisconsin I believe, talking about getting a few interns in and wanted to know what I might like to see in the game.....

 

Anyways I am trying to stay positive, but honestly it is real hard right now.

[Grevlin]

This game is 6 months old, and with them focusing on the online and digital market (as they claim they're doing) ... one would think SWTOR would have a higher priority. Simple logic really.

 

You do realize that some companies buyback to boost their value (short term), right? We're not seeing that now are we? They are idling at their 52 week low (and have been). With all the negative publicity, it's not going to get any better. On top of that, they're beginning to show a pattern ... something that people like me watch for very carefully when it comes to stocks and the market itself.

 

You see, buybacks are sometimes good for the company. But sometimes, they're used as smoke and mirrors. I'm going with the latter on this one. The market is backing my claim with the average value we're seeing on a consistent basis.

 

SWTOR is in trouble and investors are not happy about the large investment put into the game and seeing so many leave and/or voice negativity over the product ... EA is doing something about it and in my eyes, they're going about it the wrong way.

 

Actually, companies tend to do that when the stock itself is undervalued. There are many things you can do to boost the short-term value of stock without engaging in a buyback program, such as paying a dividend. Buyback programs tend to be limited to times when the stock gets undervalued because it's a relative non-starter when it comes to increasing shareholder value (compared to expanding production, acquiring other assets, purchasing stock in another company, paying a stock dividend, paying off current debts to increase shareholders' equity compared to liabilities, etc). It CAN be used as smoke & mirrors, but there are other much easier methods they can use if they wished to do so. They certainly aren't hurting for retained earnings with which to do so.

 

Considering that you seem to think EA's stock price turns on SWtOR's publicity, that SWtOR is itself in trouble regardless of the shareholders materials and other info, and that a company doesn't face any trade-off for repurchasing its own stock, I doubt your status as a serious investor.

[Alkiii]

Also, from the perspective of the company's management, the development costs stop being relevant once they've been spent. It's a "sunk cost", unrecoverable, and irrelevant to future operation (take a business finance or microeconomics course if you don't believe me). What's relevant to future & current operation is marginal revenue versus marginal cost. If the former is greater than the latter, operations continue. If vice versa, that's when you (net) downsize or reduce production (remember, EA's planning to EXPAND their net head count and shift the ratio of engineers to other employees).

 

I guess you missed the discussion in your business finance class that involves investor money changing how company management works. Come on man ... don't bring up microeconomics in business and conveniently leave out what happens when investor money is involved.

 

We're seeing downsize. Yes. We know they're increasing their work force by about 500 people. I get that. I'm just not confident that the increase of Engineers is going to be used on continuing the investment into SWTOR the way that it has been since 2008.

 

When they let Mr. Reid go, I'm going to say that they're pulling some plugs on the SWTOR team and either letting them go, or moving them to other projects. I'm willing to bet that they're not happy with the outcome of SWTOR and feel that they've spent enough resources on it. They're moving on (but going to keep the game going, but with less focus and resources). This is pure speculation on my part, and I understand that, but at the end of the day, EA is showing signs of weakening and their hopes of SWTOR being the revenue juggernaut that WoW currently is, have been squashed.

[Grevlin]

EA did come up with SWTOR's cost late last year: 80 million US dollars spent in development, 20 million US dollars earmarked for marketing.

 

If you could give me a source for that, I would love you forever. :-P

 

Seriously, trying to get info on this stuff has been a PITA.

[Alkiii]

Actually, companies tend to do that when the stock itself is undervalued. There are many things you can do to boost the short-term value of stock without engaging in a buyback program, such as paying a dividend. Buyback programs tend to be limited to times when the stock gets undervalued because it's a relative non-starter when it comes to increasing shareholder value (compared to expanding production, acquiring other assets, purchasing stock in another company, paying a stock dividend, paying off current debts to increase shareholders' equity compared to liabilities, etc). It CAN be used as smoke & mirrors, but there are other much easier methods they can use if they wished to do so. They certainly aren't hurting for retained earnings with which to do so.

 

Considering that you seem to think EA's stock price turns on SWtOR's publicity, that SWtOR is itself in trouble regardless of the shareholders materials and other info, and that a company doesn't face any trade-off for repurchasing its own stock, I doubt your status as a serious investor.

 

Doubt all you would like. But when you're talking about 100's of millions of dollars invested into a product, publicity sometimes can have an effect on share value. Guess you missed that part of class too.

 

It's okay young one, I've been on this earth for 80+ years ... I'm sure that you've got this world figured out 100 times more than I ever will. At the end of the day, it's all speculation until more information is released. I'm no expert, but neither are you. So lets just agree to disagree my friend.

[Grevlin]

I guess you missed the discussion in your business finance class that involves investor money changing how company management works. Come on man ... don't bring up microeconomics in business and conveniently leave out what happens when investor money is involved.

 

That all depends on the circumstances, but primarily has to do with when they're selecting which capital expenditures to engage in or avoid. There's no situation where a sunk cost (which is SPENT, UNRECOVERABLE, AND THUS IRRELEVANT) is considered in the development of a current product. The factory cost $50,000 to build, but that doesn't factor into whether or not you continue to use it. What factors in is how much the product sells for and how much it costs to manufacture each unit with the factory including operating costs. So long as the product is yielding more money than it costs to make, production continues.

 

We're seeing downsize. Yes. We know they're increasing their work force by about 500 people. I get that. I'm just not confident that the increase of Engineers is going to be used on continuing the investment into SWTOR the way that it has been since 2008.

 

Yeah, because a development team is ALWAYS maintained after development is finished, kind of like how NIKE will continue to pay the construction company after a factory has been completed. That's also why Bioware Austin and the SWtOR team aren't hiring any new people AT ALL.

 

When they let Mr. Reid go, I'm going to say that they're pulling some plugs on the SWTOR team and either letting them go, or moving them to other projects. I'm willing to bet that they're not happy with the outcome of SWTOR and feel that they've spent enough resources on it. They're moving on (but going to keep the game going, but with less focus and resources). This is pure speculation on my part, and I understand that, but at the end of the day, EA is showing signs of weakening and their hopes of SWTOR being the revenue juggernaut that WoW currently is, have been squashed.

 

Yeah, that's why they emphasized SWtOR's long-term profitability and their plans to focus on SWtOR development to increase its potential to generate revenue over the long-term in their shareholders' reports.

 

Consider the possibility that your speculation is being blinded by your personal preferences for the game. You've overemphasized SWtOR, overemphasized negative data over positive, and have apparently ignored all other shareholder information. Frankly, you're coming off more as either a clueless investor or a disgruntled unsub posing as an investor.

[Grevlin]

Doubt all you would like. But when you're talking about 100's of millions of dollars invested into a product, publicity sometimes can have an effect on share value. Guess you missed that part of class too.

 

It's okay young one, I've been on this earth for 80+ years ... I'm sure that you've got this world figured out 100 times more than I ever will. At the end of the day, it's all speculation until more information is released. I'm no expert, but neither are you. So lets just agree to disagree my friend.

 

Actually, this is my major.

 

Yes it can, but you're also talking about one among a myriad of products. I highly doubt that EA's currently low stock price is based on less-than-positive (let's face it, SWtOR is still in second place among MMORPGs. At worst, the media indicates it's underperforming compared to its full potential. Really negative publicity would be like if it wiped your hard drive, damaged video cards, lost all but 300k subscribers, or caused your computer to grow arms & strangle you.) publicity about ONE product among dozens. EA's not the only big game publisher to be suffering from lackluster stock growth at this time. IIRC, all but Blizzard are chugging along at the bottom. You may not have heard, but there's something of a slump in the general economy right now. :-P

 

The person making an argument is irrelevant to the argument itself. The statements made stand & fall based on their own merits. It doesn't matter if you're Gandalf & I'm Smeagol or vice versa.

 

I'd say there's plenty of information out there. When taken as a whole, though, it doesn't paint the picture of a failing product. Only when you pick & choose does that picture emerge, and that seems to be the prevailing interpretation on these forums.

[Lurchy]

, I don't see how maintaining 1.3 million regular paying subscribers (i.e., they're signed up for a recurring subscription plan)

 

I guess that I would be included in that 1.3 million subscribers figure however, I am not a 'paying' subscriber I am an 'already paid' subscriber. I am on a 6 month recurring payment plan that has been cancelled as of 2 months or so ago. I do not for one moment think that my situation makes me a unique snowflake, quite the opposite in fact I would estimate that a not inconsiderable amount of that 1.3 million people are like myself, i.e. sub cancelled but still have game time (therefore forum access) until August some time (including the free 30 day thingy) in a game that we do not/can not play to our satisfaction due to its current state.

[Grevlin]

That is all real positive and I really hope you are right and they keep a steady dev cycle going to improve and grow the game. However my mind keeps snapping back to WAR. This feels exactly like how they did WAR. Yeah I played it and it got better over time albeit at a slow snails pace. But it was just a slow death and it felt like one.

 

I think the Reid thing makes me the most worried. Yeah his job will be replaced, but that is the scary part. I remember in WAR the went through many downsizes of their community relations manager and team. Towards the end I remember getting an email from the CRM, a housewife from Wisconsin I believe, talking about getting a few interns in and wanted to know what I might like to see in the game.....

 

Anyways I am trying to stay positive, but honestly it is real hard right now.

 

Well, like I said, we aren't at the point of net downsizing yet. If that were the case, Bioware Austin wouldn't be hiring at the same time it was doing layoffs. Though I think Warhammer Online just ran its course. Compared to SWG (my old stomping ground. I still shudder with dread when I hear "Smedley"), it had a pretty good run.

 

Now, if you want to know what a dying MMORPG looks like, look at SWG. That thing was a nightmare.

[Celebrus]

Well, like I said, we aren't at the point of net downsizing yet. If that were the case, Bioware Austin wouldn't be hiring at the same time it was doing layoffs. Though I think Warhammer Online just ran its course. Compared to SWG (my old stomping ground. I still shudder with dread when I hear "Smedley"), it had a pretty good run.

 

Now, if you want to know what a dying MMORPG looks like, look at SWG. That thing was a nightmare.

 

If you were to pay attention, those job postings have been on the website for a month or more, which means they really aren't reactionary postings unless this is the one and only area of business in which BW has amazing foresight, although I doubt it.

 

It can basically be assumed that those are simply the postings they regularly make to deal with their high turn over rate, but hey, haters gonna hate, right?

[Arkerus]

Actually, I wasn't that surprised. But then again, I read the shareholders' materials for the latest quarter.

 

(http://www.joystiq.com/2012/05/07/ea-planning-upcoming-layoffs-completed-by-september-30-2012/) Found this online, seems like a pretty good summary.

 

EA announced to the shareholders (and others) that it was going to be restructuring its employees so that there were going to be layoffs of up to 500-1,000 employees (puts the 200 from BioWare Austin in perspective, eh?). However, that's because EA is currently trying to refocus onto their online and digital offerings. Before the layoffs, their employees numbered 9,200 with one in eight being engineers. After the layoffs, they're planning to employ 9,700 employees with one in two being engineers.

 

But you know the trolls. They'll ignore the majority of the details to change the story from "EA growing workforce & restructuring to employ more engineers, will layoff some current workers" to "EA (...) will layoff some current workers". Then imply that this means the game is dying, or that there will be no more meaningful content.

 

Honestly, I wish people would actually read the news stories or the shareholders' materials before the fly off the handle predicting doomsday. It'd save us time, keep the forums a bit cleaner, and make it a bit easier for people with real questions and legitimate concerns (such as a time-frame to expect 1.3 on the test server. I've tried twice to ask that question in the topic about the 1.3 preview video, and the only response was someone tying it into their whining about the game.) to actually use the forums. You know, what the forums were designed for. Instead of a place for the community to interact and disseminate information about the game, it's become a sounding board for trolls who seem to need SWtOR to fail in order to justify their unsub to themselves.

 

Bioware at the very least needs to make two General Discussion forums- one for subscribers & one for both subscribers and non-subscribers. Then bar non-subscribers from the rest of the forums. This is getting ridiculous.

 

Haters, trolls, and doom-sayers don't like facts. While TOR has had problems, especially server density (or lack thereof), EA is changing the way they do business. Layoffs here are part of the bigger picture.

 

Thanks for posting this.

Edited May 23, 2012 by Arkerus

[Grevlin]

If you were to pay attention, those job postings have been on the website for a month or more, which means they really aren't reactionary postings unless this is the one and only area of business in which BW has amazing foresight, although I doubt it.

 

It can basically be assumed that those are simply the postings they regularly make to deal with their high turn over rate, but hey, haters gonna hate, right?

 

Got a source for the turnover rate?

 

You mean from mid April, about half a month before the shareholders' reports were released and said "restructuring" was alluded to? Are you trying to say they decided to start restructuring less than two weeks before announcing it in the quarterly reports?

 

Point is, downsizing doesn't usually mix layoffs with "Now Hiring" postings.

[Lurchy]

Actually, I wasn't that surprised. But then again, I read the shareholders' materials for the latest quarter.

 

Snippity snip

 

Bioware at the very least needs to make two General Discussion forums- one for subscribers & one for both subscribers and non-subscribers. Then bar non-subscribers from the rest of the forums. This is getting ridiculous.

 

I hope your financial analytical ability is more reasoned and thought out than your game mechanics ability.

 

Because, to the best of my knowledge, the requirement for posting on these forums is having current paid for gametime on your account. So it would seem that you are suggesting that when somebody cancels their recurring subscription they should no longer be able to post on these forums even though they are still allowed to log in to the game:eek: