Analysis: EA bets big on Jedis and Wookies

Tue Dec 20, 2011 12:56pm EST
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By Liana B. Baker

(Reuters) - Electronic Arts invested more money and firepower into "Star Wars: The Old Republic" than it has on any game in its 30-year history. Starting today, the company will find out if the bet pays off.

If it succeeds, the game, which features the Star Wars movies' familiar Jedis, Wookies, and Siths, could bring EA riches for years to come. If it fails, EA's earnings will be hurt in future quarters.

"A lot is at stake for EA," said Robert W. Baird & Co analyst Colin Sebastian, who estimates the company spent more than $300 million to make "the Old Republic."

Other analysts think between $100 million and $300 million was spent on the game. EA has not divulged the cost.

"This caps years of development and hundreds of millions of dollars. It's a very important part of their pipeline for the next several years. If it's a failure, it's a huge loss for EA," Sebastian said.

"Star Wars: The Old Republic" is different from other recent high-profile releases by EA such as "Battlefield 3" in that it is a massive multiplayer player online game, or MMO, that allows thousands of people to play simultaneously for a monthly subscription fee as opposed to a one-time purchase.

Gamers will pay $60 up front and then about $15 a month for "Star Wars: The Old Republic," reflecting a move by the video game industry to evolve into a cable television business model. Companies like EA are trying to create a steady and predictable revenue stream from subscribers as opposed to a current Hollywood-like business model where games can be one-time blockbuster events.

Despite the film franchise's commercial pedigree, however, the game is no slam dunk. The success of MMO games is hard to predict and early reviews by critics may not gauge its success since it can take months to test the hundreds of hours of playing time.   Continued...