Market Overview

Will Disney and 'Star Wars' Save Electronic Arts?

Will Disney and 'Star Wars' Save Electronic Arts?

Electronic Arts (NASDAQ: EA) has become one of the most troubled companies within the game industry.

From the always-on debacle that followed SimCity to the closure of two studios and hundreds of layoffs, EA is slowly losing its position as a game publishing stalwart.

In fact, EA won The Consumerist's Worst Company in America award two years in a row.

Despite these and other issues, investors have given EA their full support, raising the company's value by more than 25 percent this year alone. Over the last six months, EA's stock has increased by roughly 36 percent.

Why are investors so impressed while consumers and bloggers are typically disappointed?

Consumers care about their own individual experiences with a company, but investors look at the bottom line. For all its flaws, SimCity still managed to sell more than one million units during its first two weeks of availability. It is not yet known how the game performed after the relentless complaints hit the Web, but even a sales decline may not be able to change EA's strategy.

After receiving an endless stream of bad press, Disney (NYSE: DIS) has announced that it has signed a multi-year agreement with EA to produce a series of new Star Wars games.

This announcement comes roughly one month after Disney dropped a Death Star-sized bomb on LucasArts, the game development studio that George Lucas founded. Disney closed LucasArts and terminated all unannounced game projects, leaving many to wonder what would become of Star Wars' future. At the time, Disney indicated that it wanted to find a development partner to produce new Star Wars games.

EA is a logical choice for a Jedi Knights and evil Sith Lords. As the owner of BioWare (which is famous for producing the Star Wars: Knights of the Old Republic franchise, among other popular role-playing games), EA will bring a new level of prestige to Star Wars game development. By enlisting in EA's help, Disney could avoid producing low-rated games that are destined for the GameStop (NYSE: GME) bargain bin.

That's not to say that EA's games are flawless. Medal of Honor, for example, has taken a backseat (a very crowded, painful and almost invisible backseat) to Activision's (NASDAQ: ATVI) Call of Duty franchise. If it weren't for the Battlefield franchise, EA would not even be able to compete in the action/war genre anymore.

Even so, EA is still a very strong company. The firm owns a number of key franchises, including Madden NFL, FIFA and The Sims, which will receive a brand-new sequel in 2014. With Star Wars at its side (and likely a new Star Wars game every year once the movies begin to arrive in theaters), EA might finally be able to turn things around -- in the eyes of consumers, at least.

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ

Posted-In: Bioware disney EA Star WarsM&A News Success Stories Tech Best of Benzinga


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