Electronic Arts (NASDAQ:ERTS) scored the coup of a lifetime last week. Can you believe they secured the services of the most famous director in the world?
Of course you can, because you've probably heard the news by now. None other than Steven Spielberg is getting into the video game design business. By locking him up to a deal, EA has effectively taken a potential weapon away from stiff competitors Activision (NASDAQ:ATVI), THQ (NASDAQ:THQI), and Take-Two Interactive (NASDAQ:TTWO). This would have been a dream come true for any one of these companies. Too bad -- EA's in the game now.
Spielberg will aid in the development of three titles. He will interact with EA's development studio in Los Angeles to come up with what will hopefully be seminal games that will lead to all sorts of ancillary opportunities -- movies, TV shows, merchandising, etc. According to Reuters, EA will own the games, while the director will have the opportunity to develop said movies or TV properties from them.
Spielberg is, without a doubt, one of the two hottest filmmakers in Hollywood, the other being George Lucas. There's no question that an association with the man who directed such classics as Raiders of the Lost Ark, Close Encounters of the Third Kind, and Jurassic Park holds a ton of promise. Not only might Spielberg come up with an absolutely brilliant game like Resident Evil or Destroy All Humans!, but his name alone might sell a few million copies itself.
I said might. That's important. Because although I have always admired Spielberg and have grown up with his films, I am also intensely aware of the debacle involving the Atari 2600 game based on one of the most successful cinematic reels of all time -- E.T. the Extraterrestrial. That game bombed worse than the concept of sobriety at a Grateful Dead concert, and millions of unsold copies were buried in a landfill in New Mexico.
Also, for those who might remember, Spielberg actually hooked up with buddy Lucas and his video game division on a PC project called The Dig back in 1995. Although that title was a long way off from the E.T. disaster, it still didn't shatter any records, as far as I can tell.
Before you say it, I'll say it for you: That's an apples-to-oranges comparison. After all, not only do the Atari 2600's technological capabilities pale in comparison to the specs sported by the next-generation consoles from Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT), but Spielberg's more direct involvement in the finished product should theoretically yield impressive results. Yet it does illustrate an important issue of consideration for investors; there's no guarantee that the moviemaker's gift of cinematic genius will fuel future earnings for EA.
The stock was up 3.5% at one point on the news last week and, to tell the truth, I just don't see the bid. On a creative level, this is an exciting and smart development for EA. We don't even know the full financial scope of the deal structure in place, though, and one would assume that Spielberg is commanding a lofty premium for his services. I just want to point out that you don't buy EA simply because of the savant who represents the 'S' in DreamWorks SKG. Instead, you buy and hold those shares because the company is a leader in a sector ready to boom with the new PlayStation/Xbox/Nintendo systems.
More Takes on video games:
- MTV Rushes to Market
- When Halo Met Hobbits
- Take-Two Sits This One Out
- Play around at the Electronic Arts discussion board.
Activision and Electronic Arts are past selections of the Motley Fool Stock Advisor. Check out the scorecard with a free trial subscription.
Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.
