On Tuesday, both Hasbro, Inc. (NASDAQ:HAS) and Electronic Arts Inc. (NASDAQ:EA) stock rose slightly after the companies announced a new four-year agreement, under which Electronic Arts Inc. (NASDAQ:EA) will develop mobile games based on several of Hasbro, Inc. (NASDAQ:HAS)’s most popular gaming brands.
The deal, which extends the scope and length of an existing six-year agreement, will include new mobile versions of Hasbro, Inc. (NASDAQ:HAS)‘s Monopoly, Scrabble, The Game of Life, Battleship, Boggle, Clue, Risk, and Yahtzee.
For those of you keeping track, this is the second third-party content licensing agreement announced by Electronic Arts Inc. (NASDAQ:EA) in as many months. If you recall, the last was unveiled in early May detailing a multiyear partnership with The Walt Disney Company (NYSE:DIS), through which the House of Mouse granted Electronic Arts Inc. (NASDAQ:EA) exclusive rights to develop and publish new games based on Star Wars characters and storylines “for a core gaming audience.”
In contrast to this week’s Hasbro, Inc. (NASDAQ:HAS) deal, however, The Walt Disney Company (NYSE:DIS) opted to retain the rights to develop new titles within the mobile, social, tablet, and online game categories.
Is this a bad thing?
But while our initial inclination might be to applaud Electronic Arts Inc. (NASDAQ:EA)’ efforts in grabbing this low-hanging fruit, I can’t help but doubt whether this will actually be good for Electronic Arts Inc. (NASDAQ:EA) stock.
On one hand, these deals are great for companies like The Walt Disney Company (NYSE:DIS) and Hasbro, Inc. (NASDAQ:HAS) because it gives them a low-overhead way of leveraging wildly popular brands they already own. At the same time, it also negates the risk of spending big bucks to develop and publish big-name games that may or may not turn out to be a flop with consumers.
On the other hand, considering Electronic Arts stock has fallen more than 45% over the past six years since the initial Hasbro, Inc. (NASDAQ:HAS) deal was put in place, it’s fairly obvious that licensing third-party content hasn’t exactly helped the company’s own brand prowess.
Then again, that doesn’t mean these deals were directly responsible for Electronic Arts’ fall from grace.
After all, as I wrote in April, voters at Consumerist.com have named Electronic Arts the “Worst Company in America” for each of the past two years (at least among consumer-facing businesses), largely thanks to stale storylines, halfhearted sequels, subpar product support, and games that seemed to be rushed to production.
Foolish takeaway
With that in mind, it’s safe to say that Electronic Arts’ problems go much deeper than a simple reliance on third-party content. Then again, if EA could actually manage to harness the power of that content while also consistently creating awe-inspiring, high-quality, wholly original games, you can bet Electronic Arts stock would follow suit by rewarding patient long-term investors.
For now, though, despite the Hasbro and Disney deals, I’m still convinced EA has much to prove before I’ll be willing to deem its stock worthy of my investing dollars.
The article Will Electronic Arts Stock Benefit From Hasbro Deal? originally appeared on Fool.com is written by Steve Symington.
Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Hasbro and Walt Disney (NYSE:DIS). The Motley Fool owns shares of Hasbro and Walt Disney.
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