With Star Wars, Time for Electronic Arts to Prove Its Worth

Despite all the excitement surrounding new Star Wars movies stemming from Disney's (NYSE: DIS  )  $4 billion acquisition of Lucasfilm last November, question marks have loomed over what the House of Mouse had planned for its newly purchased video game rights.

After all, just last month Disney cleaned house by dropping the guillotine on George Lucas' game division, LucasArts, laying off most of its staff while at the same time indicating that the business model going forward would rely on licensing content to third-party developers to minimize Disney's risk.

So who gets the honor of bringing Star Wars to life on the small screen?

The lucky winner ...

Electronic Arts stock

Image source: Electronic Arts.

While its a safe bet the competition was fierce, yesterday Electronic Arts (NASDAQ: EA  ) announced a multi-year licensing agreement to "develop and publish globally new games based on Star Wars characters and storylines." More specifically, Electronic Arts' future Star Wars games will be made "for a core gaming audience, spanning all interactive platforms and the most popular game genres." In all, three of EA's gaming studios including DICE, Visceral, and Star Wars gaming vet BioWare will be tasked with working on the new games.

Disney, for its part, will retain the rights to develop new titles within the mobile, social, tablet, and online game categories.

Much to prove
Remember, this is the same Electronic Arts that took home the unwanted honor of being Consumerist.com's "Worst Company in America" for the past two consecutive years. This is also the same Electronic Arts whose stock price has fallen by nearly 70% over the past five years, and whose CEO of six years recently resigned as a direct consequence.

Of course, EA's underperformance wasn't without reason; consumers have long complained of its subpar product support, seemingly rushed storylines, and the company's general lack of vision in creating new titles.

Even so, EA shouldn't have any problem coming up with decent material to appease hardcore fans, given the 17,000 characters in the Star Wars universe. Heck, the company could even win big points with disappointed gamers by finding a way to resume development of LucasArts' much-anticipated Star Wars 1313 title using its new licensing rights.

Star Wars 1313 screenshot. Source: LucasArts.com.

Foolish final thoughts
In any case, EA shareholders should keep a close eye on whether their company seizes this opportunity. In the end, this deal could very well serve as a way for Electronic Arts to effectively either secure or destroy its own future.

More expert advice from The Motley Fool
While Activision Blizzard and Microsoft have been taking the headlines when it comes to console gaming, investors following the gaming sector would do well to also keep tabs on Electronic Arts. We can help. The Motley Fool's special report breaks down the risks and opportunities facing the company to help you decide if EA is right for your portfolio. Click here to get your copy now.


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