After Disney closed LucasArts, the video game arm of LucasFilm, it handed the gaming rights to the Star Wars movies to Electronic Arts Inc. (NASDAQ:EA). In a muli-year licensing deal, Electronic Arts will have the rights to create games for mobile, PC, and console centered around upcoming movies. Disney will still produce online and mobile games in its Disney Interactive studio.
Electronic Arts Inc. (NASDAQ:EA) scored a huge win with this deal from The Walt Disney Company (NYSE:DIS) and will be happy to share in the large media conglomerate’s success. Electronic Arts Inc. (NASDAQ:EA) is the same studio behind the already popular MMO Star Wars: The Old Republic. The game became the fastest growing MMO in the world when it was released. In three days, over 1 million people subscribed to the game. At its peak, over 1.7 million people paid monthly to pay the game. That amount has dropped, but this is a game that can easily win back fans and players with new Star Wars movies in theaters. Star Wars mania will be in full effect with The Walt Disney Company (NYSE:DIS)’s acquisition.
Subscriptions of The Old Republic struggled, but Electronic Arts Inc. (NASDAQ:EA) has re-focused its efforts on a free model. The company has also worked on creating new storylines and downloadable content to obtain additional revenue and keep players engaged. In April, a digital expansion titled Rise of the Hutt was released. This expansion was made available for $9.99 to existing paying subscribers and $19.99 to other players. The expansion brings in new story content and also increases a player’s level cap to 55, from a previous 50. This is a similar move to what Activision has done with its World of Warcraft expansions packs.
As I wrote in January and March, Disney is not just creating movies to capture Star Wars fans and revenue. The company also has a rumored live action television show for ABC planned and a new animated show coming to Disney XD. Both of these platforms can allow Disney to create new storylines that Electronic Arts can follow in games, or vice versa.
In fiscal 2013, Electronic Arts Inc. (NASDAQ:EA) posted revenue of $3.8 billion. This was broken down as $2.1 billion from packaged games and $1.7 billion in digital revenue. For fiscal 2013, Electronic Arts is forecasting earnings per share of $1.20. The company sees 2014 revenue hitting $4.0 billion for fiscal 2014. A strong lineup of games will power sales for the next year, prior to the release of any Star Wars games.
Video game companies live and die by blockbuster games. Electronic Arts has been somewhat of an exception to this rule with its strong sports franchise. The company owns the Madden NFL, NCAA Football, FIFA Soccer, NHL, and NBA Live licenses. Every year, the company puts out games for each sports and sees strong sales as gamers upgrade to the newest game with new rosters.
With an already strong library of brands like SimCity, Command & Conquer, Battlefield, and NeedforSpeed, Electronic Arts will now be able to throw in blockbusters centered around Star Wars. The really good news for Electronic Arts Inc. (NASDAQ:EA) was Disney’s recent announcement that it will release a Star Wars movie every year beginning in 2015. The company will create a new trilogy with Star Wars VII, VIII, and IX. Disney will also be releasing spin-off character origin movies in the off years to create additional revenue from its acquisition. This will allow Electronic Arts to create additional games or add downloadable content to The Old Republic or other games based on character origin movies.
Another company worth following is Hasbro, Inc. (NASDAQ:HAS). The large toy maker has the rights to the Star Wars toys, including the current line of Angry Bird-themed toys. Recently, the company expanded its deal with Star Wars characters through 2018. This means that at a bare minimum, Hasbro, Inc. (NASDAQ:HAS) will be able to release toys for three Star Wars movies. To go along with the Star Wars line, Hasbro also has the rights to Marvel characters and has enjoyed in the success of Disney’s plethora of films since its prior large acquisition of Marvel.
Analysts are predicting that the toy maker will post revenue gains of under 1% in fiscal 2013 and 4% in fiscal 2014. However, in fiscal 2015, with both Star Wars VII and The Avengers 2, Hasbro, Inc. (NASDAQ:HAS) could be in for one of its best years ever. Expect analysts to get behind the toy maker prior to a blockbuster 2015.
With its large acquisition of LucasFilm, Disney will come out a winner. However, with a large market capitalization and several other blockbuster franchises, new Star Wars movies will have less of an impact on the stock. I recommend going long Disney, but also think Electronic Arts Inc. (NASDAQ:EA) is worth a play here too, considering the potential of new blockbuster games centered around the franchise, and an increase in users for TheOldRepublic.
The article Electronic Arts Gives Investors Another Way to Play Star Wars Movies originally appeared on Fool.com and is written by Chris Katje.
Chris Katje has no position in any stocks mentioned. The Motley Fool recommends Hasbro and Walt Disney. The Motley Fool owns shares of Hasbro and Walt Disney. Chris is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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