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Friday, January 20, 2012

Star Wars Most Expensive Game of All Time. American Idol on the decline. Happy Birthday COMCAST/NBCUniversal (official name, no kidding). Pirates Win the Series (at least until next week).

Star Wars The Old Republic
 Photo: Jeff Hollis, left, his wife Deirdre, and David Moore are co-founders of TORWars, a fan site devoted to Star Wars: The Old Republic. Credit: Anne Cusack / Los Angeles Times

From the LA Times Company Town Blog. Click here for the lastest industry news.
An very very record setting expensive galaxy far far away. It cost $200 million and took six years to make. No, we're not talking about James Cameron's next movie. We're talking about Star Wars: The Old Republic, the costliest and riskiest video game ever made. The Los Angeles Times looks behind the scenes at the making of the game and what it will have to do to be a hit.

With a price tag approaching $200 million, Star Wars: The Old Republic is likely to be the most expensive game of all time to produce -- and a colossal gamble for the game's publisher, Electronic Arts Inc.

BioWare, the EA studio responsible for the online game, had spent close to six years on the title, hiring hundreds of programmers, writers and artists, as well as a legion of contract workers. The hope is that The Old Republic will attract millions of players, each willing to spend $60 to buy the game and $15 or so a month to play out their fantasies of being Jedi knights or Sith warriors.

But creating an online universe that can satisfy the demands of both hard-core "Star Wars" fans and players of multiplayer online role-playing games is an epic undertaking, as our story in the Times describes. 

"It's the single largest bet of J.R.'s career," said P.J. McNealy, a game analyst with Digital World Research in Boston,  referring to EA's chief executive, John Riccitiello, who plunked down $860 million in 2007 to buy BioWare and Pandemic, a Los Angeles game studio that EA shut down in 2009.
EA declined to comment on the amount it spent to create The Old Republic. That hasn't stopped Wall Street analysts from pegging the game's production costs at $150 million to $200 million or more, a figure that people knowledgeable with the game's budget don't dispute.

Unlike films, whose budgets are routinely reported, game development expenses are closely guarded secrets. As a result, cost comparisons are difficult to come by.

"You hear about RockStar Games as having the richest budgets in the business and spending over $100 million on a Grand Theft Auto game," said John Taylor, managing partner with Arcadia Investment Corp. in Portland, Ore. "Star Wars seems to have gone way above that."

The good news for EA is that the Redwood City, Calif., company has already absorbed those costs into its finances, expensing them as they were incurred.

"It's all sunk costs," said Atul Bagga, an analyst with Lazard Capital Markets.

Not quite all. EA must continue to devote significant amounts of resources to keeping the game running. That means maintaining a vast network of computers, a dedicated staff to deal with customers who have technical or billing issues, as well as a core team of developers constantly adding new content to the game to keep players interested.

EA has said that covering the game's operating costs will require 500,000 paying subscribers. At $15 a month, the figure implies that the game costs at least $7.5 million a month to maintain, including an undisclosed royalty fee to Lucasfilm, which owns the "Star Wars" license.

"Very few companies can afford to make this sort of bet," Taylor said, "And EA is one of them."
EA executives insist the company, with about $3.6 billion in annual revenue last year and about $1.5 billion in cash and short term investments, will not collapse should Star Wars fail to hit its marks.
"We're not betting the company on Star Wars," said Frank Gibeau, president of EA Labels, which oversees the Star Wars game. "While it's a major undertaking, it's one aspect of a larger strategy to transform EA from a company that sells discs to one that derives the bulk of its revenue from digital games and services."

The upside, however, is undeniably lucrative. Should the game win 4 million subscribers -- compared with over 10 million for World of Warcraft, the big Kahuna of the genre -- EA's operating profit rises to $395 million a year, representing a 50% margin, according to Doug Creutz, an analyst for Cowen & Co.

Endemol makes AMC's Hell on Wheels
Photo: Endemol's "Hell on Wheels," which airs on AMC. Credit: Chris Large / AMC

AMC producer to financially restructure. Television production giant Endemol, whose future has been the subject of speculation, said Thursday it has made a "significant step" toward restructuring its balance sheet. Dutch-based Endemol, which primarily makes game shows and reality programs like NBC's "Fear Factor" and ABC's "Wipe Out," and the AMC drama "Hell on Wheels" (pictured above), said more than two-thirds of its creditors have struck an agreement in principle regarding the company's capital structure. The company has been struggling under a debt load of $2.75 billion.

“We are delighted that the majority of our lenders have in principle agreed to the proposed commercial restructuring terms and we can now enter into the final part of the process. A solution that puts Endemol on a strong financial footing for the future is now imminent," Endemol Global President Marco Bassetti and Chief Financial Officer Just Spee said in a statement.

The news that the creditors are on the same page may put a damper on Time Warner Inc.'s hopes of acquiring Endemol. Last November, Time Warner made an unsolicited bid of about $1.4 billion for the company. Endemol has said all along that it is more interested in fixing its books than in selling the company.

Don't let pirates sink our entertainment industry.   
Photo: Motion Picture Assn. of America Chief Executive Chris Dodd.

Can't we all get along? The battle over proposed bills to fight piracy continues to rage on. Hollywood is furious that its efforts to curb theft and piracy have been overshadowed by Silicon Valley's claims that the laws will hurt innovation and free speech. In the meantime, an activist group has been hacking into websites to protest the bills and some sites went dark for a day as a form of protest. Of course, if Hollywood and the TV networks shut down for a day for political purposes, they'd hear about it from regulators and consumers. On Friday, Senate Majority Leader Harry Reid cancelled the vote on one of the bills. Meanwhile, on Thursday the feds shut down the site Megaupload for violating piracy laws. The latest coverage from the Los Angeles Times, New York Times and Variety.

Senate Majority Leader Harry Reid's decision on Friday to put off a vote on the controversial Protect Intellectual Property Act in the Senate next week was hailed by Silicon Valley but brought a stern warning from Hollywood's chief lobbyist.

"As a consequence of failing to act, there will continue to be a safe haven for foreign thieves; American jobs will continue to be lost; and consumers will continue to be exposed to fraudulent and dangerous products peddled by foreign criminals,'' Chris Dodd, chairman of the Motion Picture Assn. of America, said in a statement.

The MPAA strongly backed the the bill intended to crack down on foreign websites engaged in piracy.  But the legislation, along with a similar measure in the House, has encountered enormous opposition from Google, Wikipedia and other tech companies that led an unprecedented Internet strike on Wednesday to protest the bills which they view as misguided and damaging to the Internet economy. The protest prompted several senators to back off their support for the bills.

"With today’s announcement, we hope the dynamics of the conversation can change and become a sincere discussion about how best to protect the millions of American jobs affected by the theft of American intellectual property,'' Dodd added. "The threat posed by these criminal operations has been widely acknowledged by even the most ardent critics.  It is incumbent that they now sincerely work with all of us to achieve a meaningful solution to this critically important goal.”

Bloomberg Remembers Anniversary of COMCAST NBC/Universal Take Over. 
Business media giant Bloomberg LP is marking the upcoming one-year anniversary of the government's approval of Comcast Corp.'s acquisition of NBCUniversal to remind regulators that it thinks the cable giant is disrespecting the feds.

Bloomberg, parent of business news channel Bloomberg Television, thinks that Comcast should be required to put the Bloomberg channel near its main competitor CNBC on its cable systems. Bloomberg has argued practically since the day Comcast announced its deal with NBCUniversal that it feared the cable giant would favor NBC's CNBC financial channel over Bloomberg on its systems, which reach more than 20 million consumers.

Last June, Bloomberg filed a complaint against Comcast at the Federal Communications Commission arguing that the conditions of the government's approval of the Comcast-NBCUniversal deal require Bloomberg to be moved closer so it can be in the same "neighborhood" as CNBC. The FCC is still reviewing the matter and no timetable is set for a ruling.

"Marking yesterday's one-year anniversary of the FCC's Order approving Comcast's blockbuster acquisition of NBC Universal, it's time for Comcast to live up to the bargain it accepted to secure its merger," said Greg Babyak, head of government affairs for Bloomberg LP. "Rather than continue to watch Comcast thumb its nose at the FCC and the American viewing public, the FCC should immediately require Comcast to stick to commitments, and implement the plain language of the order, including the news neighborhooding condition."

Comcast has countered that the FCC's conditions do not require it to move Bloomberg closer to CNBC.

"If Comcast were forced to do what Bloomberg is asking the government to mandate, millions of customers would be subject to disruption and confusion required by massive channel realignments to benefit a thriving $30 billion media company," a Comcast spokeswoman said. "The FCC carefully crafted its moderate, forward looking condition precisely to avoid this type of upheaval.”
And no, Comcast didn't thank Bloomberg for remembering the anniversary.

American Idol ratings fell in its season premiere

 Photo: "American Idol." Credit: Michael Becker / Associated Press.

Out of tune? Fox's "American Idol" returned Wednesday night and only 21.9 million tuned in to watch the season debut of the show's 11th season. Yes, the number is the lowest for the show since Season 1. But it is also an amazing number for a show that old. In my opinion, it is a little too early to start playing Taps for "American Idol." More on the numbers from the Wall Street Journal.

Jump ball. Reading the stories about the box office this weekend and it seems to me that there is not going to be any dominating by any movie. "Underworld: Awakening," Sony's latest chapter in its vampire series (is it sign of how out of it I am that I have never heard of this franchise?) is expected to end up on top. I am no expert but I predict "Haywire," the action movie starring Gina Carano, is going to do better than people think. Projections from the Los Angeles Times and Hollywood Reporter.

Secrets of phone hacking. Earlier this week, News Corp. settled a bunch of claims having to do with phone hacking at the company's now-closed tabloid News of the World and its still up-and-running paper the Sun. While the company has tried to say that settling is not an admission of guilt, that's a hard sell. In the meantime, the Guardian, the biggest thorn in News Corp.'s side, offers up its story on how the media giant hid and misled authorities about the scope of the scandal.

Inside the Los Angeles Times: Betsy Sharkey went crazy for "Haywire."

-- Joe Flint and others

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From the LA Times Company Town Blog. Click here for the lastest industry news.

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