3DO Auction Yields Disappointing Financials

Thanks to Yahoo!/Daily Deal for revealing the final bidding prices for 3DO's assets, totalling a mere $4.6 million, following the company's bankruptcy auction last week. The article indicates the main winning bidders were "...UbiSoft Holdings Inc. for the fantasy games 'Might and Magic' and 'Heroes of Might and Magic,' for $1.3 million; Namco Hometek Inc. for 'Street Racing Syndicate' at $1.515 million; JoWooD Productions Software AG for the 'Jacked' motorcycle game for $90,000; Crave Entertainment Inc. for 'Army Men' for $750,000; and Microsoft Corp. which paid $450,000 for the intellectual property for 'High Heat Baseball'." 3DO founder Trip Hawkins also bought an Internet patent and much of 3DO's back-catalog for $400,000. 3DO's lawyers claimed that the SEC investigation of games companies launched last month made possible suitors back off, saying: "It probably cost us $10 million easily."

Comments

Crunching the numbers

[NetDanzr]

The average game by 3DO sold 40,000 units worldwide (source: an investment report by Wedbush Morgan Securities). Let's be generous and say that the Heroes of Might and Magic game sold 50,000 units. Let's be generous again and say that 3DO got $20 per game in revenues. As a consequence, the Heroes game brought revenue of $1 million.

According to the report I mentioned and a couple of other reports, the break-even point (a point where 3DO would not show any losses) is $85 million. As a consequence, they'd either have to sell 85 such games or jack up the sales of their exising titles. At $50 million in 2002, however, their costs were almost twice as high. So we can safely assume that developing an average game costs 3DO around $2 million.

UBI Soft paid $1.3 million for something that generates $1 million in sales and $1 million in net losses per game (not counting expansions). Considering UBI's public relations department, they probably expect to loose most of their fan base, which was the driving force behind the sales. As a result, them buying the Might and Magic franchise actually sounds like a really bad deal. I'm not surprised 3DO has gotten so little for its assets; in fact, I expected less.

Re:Crunching the numbers

[simoniker]

Very interesting analysis indeed - but I believe that UbiSoft bought the rights to all the old Might and Magic games, even those that have already been developed, and which they can essentially now sell without sinking much/any new money into them. That's good for starters. And the Might and Magic name still has some prestige value, and if you figure that you can pay up to $5 million just for the right license, then paying $1 million to get your own intellectual property/license forever seems half-decent.

I think everyone got very good deals out of this, actually, considering the average game costs $3-5 million dollars, especially Microsoft, who got a respected and fully-developed baseball franchise for under $500,000 - crazy.