Electronic Arts Inc.(ERTS) recently signed a deal with animation company FUNimation Entertainment, to create an animation feature film based on Mass Effect, an immensely popular video game franchise.
BioWare, a division of EA, is spearheading the project, where T.O Entertainment Inc. is the co-producer. Production of the movie has already begun and is scheduled to release in the summer of 2012.
Mass Effect is a science-fiction action and adventure game set in the year 2183 when humans have ventured out into the galaxy, encountering various alien races in unknown planets. The movie is based on the same storyline with minor changes to make it suitable for the theatrical release.
The original Mass Effect game and its sequel Mass Effect 2 has been a very popular series and Electronics Arts expects the same patronage from its fans when the animation movie releases.
FUNimation is currently in collaboration with BioWare for the production of an animation movie based on the Electronic Arts’ Dragon Age franchise. Production of the movie has already started, and the digital and video formats are expected to be released later this year.
Electronic Arts is diversifying its portfolio by leveraging its most popular gaming franchises to production houses for turning them into theatrical wonders. This suggests that Electronic Arts will not only generate revenue from the sale of video games but will also benefit from movie releases.
This is possible for Electronic Arts as it has a broad portfolio of popular video games and an unprecedented fan base.
However, weak consumer spending, intense pricing pressure and postponement of game releases such as NBA ELITE 11 and Crysis 2 can hurt profitability going forward.
Moreover, weakness in the overall packaged-goods sector, compounded by intense competition from Activision Blizzard Inc. (ATVI)and Take-Two Interactive (TTWO), will hurt profitability in the long term. Thus, we remain Neutral on Electronic Arts on a long-term basis (6-12 months).
Currently, Electronic Arts has a Zacks #3 Rank, implying a short-term Hold rating.
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