Microsoft wants to buy.....EA?

[alanschu]

I'm stating my opinion based on precedent. BioWare alone had two significant buyouts in recent years for large amounts of cash. Writing it off as being "oh, well that's overpriced" is a bit convenient.

Both those buyouts were by the same person though- John Riccitiello- just wearing different hats. He's hardly going to sell (himself, effectively) Bioware for less than he paid for it originally, if for no other reason than he'd get sued by Elevation Partners if he did so.

 

Why would Elevation Partners sue him for selling it to himself for less than he paid originally, while Electronic Arts happily lets him sell it to himself for more than it's worth? For a company that's very much chastised for so diligently caring about only the bottom line, the rest of the boardroom seems pretty stupid.

 

 

Bioware is overvalued as it stands- you can, after all, work out their income streams roughly from their sales and compare that to other companies'. The big question being how SWTOR performs, if it's a genuine WoW killer then 750mUSD for Bioware alone would be a steal.

 

How much is BioWare valued at, at the moment? Or even at the time of sale?

 

 

SWTOR is being published by LucasArts and using their IP so I'm not sure how much EA will get out of it.

 

As far as I know, EA is still involved with the process, given that BioWare is in fact making the game. And BioWare is a division of Electronic Arts. BioWare wouldn't work on the game if they didn't get any revenue out of it.

 

 

No doubt that this is what EA is betting on but we have to remember that Lucas takes big cut from overall profits so theoritically KotOR online need to be REALLY popular in order to reach WoW like profits for EA.

 

Even if SWTOR is precisely as popular as WOW is, even with Lucasarts' cut, EA will still be rolling in a ****load of money. I have no doubts that EA (and BioWare and Lucasarts) would be very happy with those numbers.

[Masterfade]

As far as I know, EA is still involved with the process, given that BioWare is in fact making the game. And BioWare is a division of Electronic Arts. BioWare wouldn't work on the game if they didn't get any revenue out of it.

 

EA will get the developer's cut, but the share will probably be lower than what EA is used to. Also EA is building LucasArts' IP instead of their own, they can't license a SWTOR movie, etc. I won't be surpised if some of the EA people wish it's Mass Effect Online instead of Star Wars.

[Volourn]

"Bioware is overvalued as it stands-"

 

Nah. Value is detemrine the price people are willing to buy something for. If someone is willing to buy BIO for $750mil then that is the value it is worth. That's the way real economics work not one's personal opinion - unless youa re making the purchase perosnally. If you value BIO at $1 than that it is its value. *shrug*

 

As for the topic, MS is awesome. So is EA. Though wh EA would consider being bought out since they make money each year solely based Madden, they're fine as is. This would be a good purchase for MS, though.

 

 

"I won't be surpised if some of the EA people wish it's Mass Effect Online instead of Star Wars."

 

Then they'd be stupid. MEOL would not have the same built in audience that SW has therefore it would have to be developed cheaper therefore likely making it 'not as good'.

Edited September 25, 2009 by Volourn

[Slowtrain]

MS is awesome.

 

Why do you say that?

[Masterfade]

"I won't be surpised if some of the EA people wish it's Mass Effect Online instead of Star Wars."

Then they'd be stupid. MEOL would not have the same built in audience that SW has therefore it would have to be developed cheaper therefore likely making it 'not as good'.

 

 

I'm not sure about that. The buzz around SWTOR seems to be more "ZOMG it's a Bioware MMO" than "ZOMG it's a Star Wars MMO". WoW became this behemoth without a mainstream recognizable brand-name (I dare say a lot of WoW players have never played any of the Warcraft RTS games), while Matrix Online is laying dead, Star Wars Galaxy on its death bed and LOTRO's trying its best just to survive.

[Calax]

"I won't be surpised if some of the EA people wish it's Mass Effect Online instead of Star Wars."

Then they'd be stupid. MEOL would not have the same built in audience that SW has therefore it would have to be developed cheaper therefore likely making it 'not as good'.

 

 

I'm not sure about that. The buzz around SWTOR seems to be more "ZOMG it's a Bioware MMO" than "ZOMG it's a Star Wars MMO". WoW became this behemoth without a mainstream recognizable brand-name (I dare say a lot of WoW players have never played any of the Warcraft RTS games), while Matrix Online is laying dead, Star Wars Galaxy on its death bed and LOTRO's trying its best just to survive.

I think the way that WoW had it's success was that Warcraft had a fairly large following before WoW appeared. then when WoW appeared it had really good mechanics so friends networked it out and soon had everyone playing it. The hardest thing for a new MMO to do is attract customers away from WoW because they don't want to leave their friends.

[Nepenthe]

Bioware is overvalued as it stands- you can, after all, work out their income streams roughly from their sales and compare that to other companies'. The big question being how SWTOR performs, if it's a genuine WoW killer then 750mUSD for Bioware alone would be a steal.

 

Considering the recent creation of the "RPG branch" at EA and how it was executed, I think it's conceivable that EA viewed some key staff in Bioware as being worth quite a bit just by themselves.

Edited September 25, 2009 by Nepenthe

[entrerix]

"Bioware is overvalued as it stands-"

 

Nah. Value is detemrine the price people are willing to buy something for. If someone is willing to buy BIO for $750mil then that is the value it is worth. That's the way real economics work not one's personal opinion - unless youa re making the purchase perosnally. If you value BIO at $1 than that it is its value. *shrug*

 

hi, welcome to earth. If things cannot be overvalued, why do values inflate, bubble, then burst? like the housing market. WITHOUT the thing having been overvalued?

 

oh wait. things CAN be overvalued.

 

i get what you were trying to say, but you forgot about some things. like valuation, and how it can be done poorly by people and markets.

[Mamoulian War]

...Microsoft ...

They would probably shot down EA within the year to save money!

 

 

And the i would go out get drunk as a Dane and celebrate

Edited September 25, 2009 by Mamoulian War

[steelfiredragon]

I can't stand the current crop of PC vs MAC ads from either side.

 

I'm a pc!

 

I'm a Mac!

 

Burn in hell both of you.

 

 

Cant stand them either ,want to sue Apple just to get rid of these good for nothing comercials

[Nepenthe]

Cant stand them either ,want to sue Apple just to get rid of these good for nothing comercials

 

It's true, the major advantage of monopolies is that they don't need to advertise.

[Wrath of Dagon]

"Bioware is overvalued as it stands-"

 

Nah. Value is detemrine the price people are willing to buy something for. If someone is willing to buy BIO for $750mil then that is the value it is worth. That's the way real economics work not one's personal opinion - unless youa re making the purchase perosnally. If you value BIO at $1 than that it is its value. *shrug*

No, a business is valued according to its potential returns. Just because some idiot is willing to pay way too much for it doesn't change its value.

[Nepenthe]

"Bioware is overvalued as it stands-"

 

Nah. Value is detemrine the price people are willing to buy something for. If someone is willing to buy BIO for $750mil then that is the value it is worth. That's the way real economics work not one's personal opinion - unless youa re making the purchase perosnally. If you value BIO at $1 than that it is its value. *shrug*

No, a business is valued according to its potential returns. Just because some idiot is willing to pay way too much for it doesn't change its value.

 

Not really, another possible factor is denying those returns to a competitor - the reason why most company executives are paid such obscene salaries: otherwise some competitor could massively sabotage your operation by jacking your key personnel.

[alanschu]

As far as I know, EA is still involved with the process, given that BioWare is in fact making the game. And BioWare is a division of Electronic Arts. BioWare wouldn't work on the game if they didn't get any revenue out of it.

 

EA will get the developer's cut, but the share will probably be lower than what EA is used to. Also EA is building LucasArts' IP instead of their own, they can't license a SWTOR movie, etc. I won't be surpised if some of the EA people wish it's Mass Effect Online instead of Star Wars.

 

 

What type of cut is EA used to from MMO games? No kidding the cut won't be the same as if it was their own IP, but that hardly means that EA is not hoping for big things from the game.

 

 

I guarantee that EA is very excited about SWTOR.

[alanschu]

"Bioware is overvalued as it stands-"

 

Nah. Value is detemrine the price people are willing to buy something for. If someone is willing to buy BIO for $750mil then that is the value it is worth. That's the way real economics work not one's personal opinion - unless youa re making the purchase perosnally. If you value BIO at $1 than that it is its value. *shrug*

 

hi, welcome to earth. If things cannot be overvalued, why do values inflate, bubble, then burst? like the housing market. WITHOUT the thing having been overvalued?

 

oh wait. things CAN be overvalued.

 

i get what you were trying to say, but you forgot about some things. like valuation, and how it can be done poorly by people and markets.

 

 

Does that mean that things can be overvalued, or that valuation is not static?

 

 

I'm inclined to agree with Volourn's assessment, because he basically just summed up supply and demand.

[Volourn]

"The buzz around SWTOR seems to be more "ZOMG it's a Bioware MMO" than "ZOMG it's a Star Wars MMO"."

 

let me guess. This buzz you get are from BIO fans, or people posting around BIO/Obsidian, and other similar sites? Not exactly a fair check. I wouldn't be surprised if at leats half the people who buy KOTOR OL would know who BIO is.

 

 

"WoW became this behemoth without a mainstream recognizable brand-name (I dare say a lot of WoW players have never played any of the Warcraft RTS games),"

 

But, they know Blizzard. I may be a fan of BIO, but they are no Blizzard. Sorry.

 

 

"Hi, welcome to earth. If things cannot be overvalued, why do values inflate, bubble, then burst? like the housing market. WITHOUT the thing having been overvalued?

 

oh wait. things CAN be overvalued.

 

i get what you were trying to say, but you forgot about some things. like valuation, and how it can be done poorly by people and markets"

 

Hi, welcome to Earth. Things are valued by what people are willing to buy them for. Period. Anything else ala gov't interverence, is simply artificial.

[entrerix]

"Bioware is overvalued as it stands-"

 

Nah. Value is detemrine the price people are willing to buy something for. If someone is willing to buy BIO for $750mil then that is the value it is worth. That's the way real economics work not one's personal opinion - unless youa re making the purchase perosnally. If you value BIO at $1 than that it is its value. *shrug*

 

hi, welcome to earth. If things cannot be overvalued, why do values inflate, bubble, then burst? like the housing market. WITHOUT the thing having been overvalued?

 

oh wait. things CAN be overvalued.

 

i get what you were trying to say, but you forgot about some things. like valuation, and how it can be done poorly by people and markets.

 

 

Does that mean that things can be overvalued, or that valuation is not static?

 

 

I'm inclined to agree with Volourn's assessment, because he basically just summed up supply and demand.

 

 

when preparing to buy a company lots of things happen. and many many people examine the worth of the company in different ways. some of these are estimates based on the impact the purchase is presumed (or hoped) to have on competitors or the market etc. if people do a crap job in making these valuations they may think that a company is worth more than it actually will earn them. (in not just $ either, you could be buying goodwill or customer relations, or key personnel who could quit any day of the week etc too)

 

all this means that the "valuation" done by the people involved in the deal could be flat out WRONG. thus over or undervalueing a company. so yes. a company can be overvalued.

 

if youre just talking supply and demand you're about 5 steps behind where this conversation is happening.

[Masterfade]

let me guess. This buzz you get are from BIO fans, or people posting around BIO/Obsidian, and other similar sites? Not exactly a fair check. I wouldn't be surprised if at leats half the people who buy KOTOR OL would know who BIO is.

 

Nope. I got that from people I play WoW with, hardcore raiders who have EJ forum as their browser homepage. Guaranteed my guild is hardly a representive sample of potential SWTOR buyers, but those among us who do care about the game care because it's a game being made by a MMO outsider with established reputation. They're hoping an outsider may breath some fresh air into the genre.

 

MMO players are used to iconic IPs, Star Wars, Matrix, LoTR, Conan, etc. We'll get Star Trek and DC Universe soon enough and the rumor is Sony is working with LucasArts on a new free-to-play Star Wars MMO. Now just name me one established developer beside Bioware who ventured into the MMO market in the last, say, five years?

 

Anyway, this discussion is getting pretty meaningless, we're talking without statistics about something people will pay thousands of dollars to a market research company for. Let's go back to EA and MS. Personally I love EA, taking money from the benighted Madden/Sims masses to make Mirror's Edge and Dead Space for us hardcores? Hell yes.

Edited September 25, 2009 by Masterfade

[entrerix]

I'm of the opinion that EA is just too big to love or hate. they have so many developers under their "roof" that lots of different projects are being done, some awesome and some lame. I care nothing for publishers unless they start really messing with their developers, then i get annoyed. i dont know enough about EA's protocols for those situations though.

 

i guess if a publisher were to really encourage their developers to always pursue quality and provide them with all the time and money needed to get it, then i'd like said publisher because they have a good mentality (ie no shovelware, just quality products)

 

EA isnt like that though, either that or lots of their developers need to get fired. too many games with an EA logo on them are crap.

 

just my opinion though, and I'm far far far from an expert on EA or their methods and products.

[Syraxis]

just my opinion though, and I'm far far far from an expert on EA or their methods and products.

 

I hated EA to the point of zealotry during the late 90s early 00s. They have definitely turned to the right direction of cleaning their image/reputation ever since Ricitello took over.

[alanschu]

"Bioware is overvalued as it stands-"

 

Nah. Value is detemrine the price people are willing to buy something for. If someone is willing to buy BIO for $750mil then that is the value it is worth. That's the way real economics work not one's personal opinion - unless youa re making the purchase perosnally. If you value BIO at $1 than that it is its value. *shrug*

 

hi, welcome to earth. If things cannot be overvalued, why do values inflate, bubble, then burst? like the housing market. WITHOUT the thing having been overvalued?

 

oh wait. things CAN be overvalued.

 

i get what you were trying to say, but you forgot about some things. like valuation, and how it can be done poorly by people and markets.

 

 

Does that mean that things can be overvalued, or that valuation is not static?

 

 

I'm inclined to agree with Volourn's assessment, because he basically just summed up supply and demand.

 

 

when preparing to buy a company lots of things happen. and many many people examine the worth of the company in different ways. some of these are estimates based on the impact the purchase is presumed (or hoped) to have on competitors or the market etc. if people do a crap job in making these valuations they may think that a company is worth more than it actually will earn them. (in not just $ either, you could be buying goodwill or customer relations, or key personnel who could quit any day of the week etc too)

 

But it's all still just estimates. You're making predictions, and valuing the company based on that.

 

 

all this means that the "valuation" done by the people involved in the deal could be flat out WRONG. thus over or undervalueing a company. so yes. a company can be overvalued.

 

All this means is that the valuation of a company is different, since it is impossible to know whether the valuation is correct until after the fact.

 

 

 

if youre just talking supply and demand you're about 5 steps behind where this conversation is happening.

 

Spell it out for me then. Preferably each of the 5 steps.

 

If 3 independent firms evaluated BioWare at the same cost as Electronic Arts, would all of them be wrong? It's easy to look back in the future and go "hey you were wrong."

Edited September 26, 2009 by alanschu

[entrerix]

different = wrong when youre talking about money.

 

its either more money. or less money. if, as a buyer, you overvalue a company then you will find that you're making less money/reaping less reward than projected. if you undervalued the company then you are making more than predicted.

 

so in my opinion, i would call that wrong. not different. but thats just a semantics argument so no harm no foul.

 

also consider though, becuase things change. rapidly, like changing employees and shifting markets, what could have been a spot on analysis and valuation in january, by february is WAY off. so keep that in mind too.

[alanschu]

different = wrong when youre talking about money

 

Sure, but you can't know until later, which involves predicting the future. It doesn't change the fact that it's current value is what people are willing to pay for it.

 

The only way that someone, at this point, could say that BioWare was overvalued by Electronic Arts, is because they (for whatever reason) value BioWare at less. But it's still an estimate at this juncture.

 

 

also consider though, becuase things change. rapidly, like changing employees and shifting markets, what could have been a spot on analysis and valuation in january, by february is WAY off. so keep that in mind too.

 

All this means is that valuation changes. It doesn't mean that something is "over" or "under" valued.

 

I'd certainly wager that no one on this board is qualified to say that Electronic Arts overvalued BioWare. Even if they had the business acumen to make the assessment, doesn't mean they put in any of the time properly evaluating the value of a company like BioWare. You can make your assumption (i.e. guess) based on whatever reason (like supporting an argument), but the fact remains that something is valued at precisely what people are willing to pay. Unless people are insinuating the evil, money grubbing, Electronic Arts has suddenly become altruistic and decided to pay more than they felt BioWare was actually worth.

[Masterfade]

Unless people are insinuating the evil, money grubbing, Electronic Arts has suddenly become altruistic and decided to pay more than they felt BioWare was actually worth.

 

I'm not going to argue either way if EA had overvalued Bioware. But I think it's worth pointing out the interest of the shareholders and the interest of the management may not be exactly aligned, and a company may indeed pay more than it should without being 'altruistic'.

 

In case of EA's VG Holdings buyout (VG Holdings was the parent company of Bioware and Pandemic, just like ZeniMax is the parent company of Bethesda and id), Riccitiello was a senior manager at Elevation Partners and masterminded Elevation's 300 million acquisition of Bioware and Pandemic in 2005. He was the Chief Executive of the merged company before returning to EA as CEO. After Riccitiello's return, EA paid Elevation 600+ millions for VG Holdings in 2007. Riccitiello received nearly 5 million dollars from Elevation after the buyout. I'm not accusing Riccitiello of doing anything improper, but that was certainly one of the more questionable deals in video games history.

Edited September 26, 2009 by Masterfade

[alanschu]

See, that's what I don't get.

 

It's been stated in this thread that if EA had bought the package for less, Elevation/VG Holdings/whatever would have sued Riccietello. Yet, Electronic Arts shareholders and board of directors have no issues with "Yup, pay more than the company is worth so that you can make several million dollars, while the company we represent takes on additional risk AND has our own personal investment squandered."

 

As you say, it's "one of the more questionable deals in video games history" yet no one in Electronic Arts (the money grubbing company, remember?) bothers to ensure that Riccietello is upholding his fiduciary duty as CEO of a billion dollar, public corporation?

 

 

Does Riccietello have full autonomy for who he buys out and how much he buys them out for?