Video game developer and publisher, Electronic Arts Inc. (ERTS), popularly known as EA, recently announced that the highly anticipated massively multi-player online (MMO) game Star Wars: The Old Republic will be released worldwide in December 2011.
The MMO game is scheduled to launch in North America on December 20, 2011 and in Europe on December 22, 2011. Bioware also announced that gamers can pre-order the game at retailers and will receive a redemption code, which will allow them to play the game before the scheduled release date. Gamers purchasing Star Wars: The Old Republic will initially get 30 days of free access, after which they will have to pay a subscription fee to play the game.
Developed by Bioware in partnership with Lucasfilm Ltd, Star Wars: The Old Republic dates back thousands of years when the galaxy is amidst a cold war. Gamers will have the choice to join either the Galactic Republic or the Sith Empire and choose one of eight iconic characters: Jedi Knight, Jedi Consular, Smuggler, Trooper, Bounty Hunter, Imperial Agent, Sith Inquisitor and Sith Warrior.
According to EA,Star Wars: The Old Republic has already surpassed the company’s pre-order record. We believe this subscription based model of the MMO will drive top-line growth for EA. Moreover, Star Wars: The Old Republic is expected to provide significant competition to arch rival Activision Blizzard Inc.’s (ATVI) massively popular World of the Warcraft franchisee.
We believe that Star Wars story telling mode, where every character has a story and can make personal choices that will mark his/her own destiny, adds a new dimension to the game. Unlike World of Warcraft, Star Wars also features fully voice-acted dialog, which is an added attraction of the EA game.
EA has earned a name for developing and publishing quality games in the last few years. EA delivered 15 titles that were rated 80 or above by Metacritic in fiscal 2011. Star Wars: The Old Republic is of the same genre and is expected to drive EA’s subscriber base going forward, thereby boosting its market share in the online gaming market over the long term.
Our Take
We believe that high quality titles, impressive product line, increasing exposure to online and social games and diversification of the portfolio guarantees market share gains over the long term.
We believe the digital business will be a key growth driver for EA going forward, as it offsets weak growth from packaged goods. EA has launched Origin, its first online service, through which the company plans to sell its downloadable titles directly to customers.
We believe that EA is better equipped than many new players to gain traction in the digital format with its variety of titles and massive fan following. Additionally, the strategic acquisitions made by the company in the field of social and casual gaming platforms will reap benefits in the long run.
We believe that EA boasts a strong product pipeline for fiscal year 2012, which should allow it to generate strong growth through the current fiscal year and beyond.
However, the gloomy macro environment in North America, increasing competition and weak video game results over the last 12 months compel us to remain on the sidelines.
We therefore have a Neutral recommendation on Electronic Arts over the long term (for the next 3 to 6 months). Electronic Arts has Zacks #3 Rank, which implies a Hold rating in the short term.
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