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Electronic Arts' (EA) Hold Over Star Wars Games to End in 2023

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Zacks Equity Research
·4 min read
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Electronic Arts' EA exclusive agreement with Disney’s DIS Lucasfilm Games to produce Star Wars video games is likely to end abruptly. Per a Bloomberg report, UbiSoft Entertainment UBSFY will be publishing an open-world Star Wars game developed by The Division maker Massive Entertainment studio.

Reportedly, Julian Gerighty, director of The Division 2 and The Crew, will serve as the game’s creative director, and the title will use Massive’s Snowdrop engine, which enables relatively small teams to create ambitious AAA games. Popular games using the Snowdrop engine include South Park: The Fractured But Whole, The Avatar Project and Mario + Rabbids: Kingdom Battle among others.

Just like other Star Wars games published by EA, the new ones will also follow content continuity shared across all the movies and TV shows produced since the Disney acquisition.

Electronic Arts Inc. Price and Consensus

Electronic Arts Inc. Price and Consensus
Electronic Arts Inc. Price and Consensus

Electronic Arts Inc. price-consensus-chart | Electronic Arts Inc. Quote

Lack of Gaming Franchise Expansion: A Major Concern

EA has long been dependent on a few well-known franchises like FIFA, Battlefield and Star Wars for revenue generation. This doesn’t bode well for the company. EA's failure to expand its game franchise is a major concern for the long haul especially after the loss of the exclusivity deal for Star Wars franchise.

Back in 2013, EA had suggested that the company would have exclusivity on Star Wars games for 10 years. While EA will keep making games in the future, Lucasfilm Games is free to seek other partners.

Markedly, EA has created some of the most successful games in the history of the Star Wars franchise, including Star Wars Jedi: Fallen Order, Star Wars: Battlefront and Battlefront II, Star Wars: Galaxy of Heroes and Star Wars: Squadrons.

However, EA is now expected to release the next installment of Battlefield in fiscal 2022, which is disappointing for players. The company is expected to release 14 games in fiscal 2021, including FIFA 21 and Madden NFL 21. Lack of a new Battlefield game is also expected to hurt EA’s competitive position against Activision Blizzard’s ATVI Call of Duty franchise.

Notably, Activision’s Call of Duty: Mobile generated more than $14 million in player spending in the first week of its release, per a report by Sensor Tower.

Additionally, in December 2020, Activision revealed that the Call of Duty franchise’s net bookings surpassed $3 billion over the past year. Additionally, Call of Duty: Modern Warfare sold more units than Call of Duty: Black Ops 4. Activision stated that it will make frequent content updates to Call of Duty and expand the franchise’s presence across platforms and geographies.

Gaming Lineup for 2021 to Aid Growth

EA is also set to launch It Takes Two, a co-op gender-bending gameplay, in collaboration with Hazelight Studios. The game will be available on consoles and PC from Mar 26, 2021.

Additionally, the availability of new Madden NFL 21 and FIFA 21 on next-generation Xbox Series X|S and PlayStation 5 consoles worldwide is likely to boost user base and top-line growth.

Notably, for fiscal 2021, EA expects revenues of $5.625 billion and net bookings of $5.95 billion. The Zacks Consensus Estimate for fiscal 2021 revenues is pegged at $6 billion, indicating 15.1% growth from the figure reported in fiscal 2020.

Moreover, this Zacks Rank #3 (Hold) company has agreed to acquire U.K.-based racing game developer Codemasters for an enterprise value of roughly $1.2 billion, outbidding rival Take Two Interactive’s offer of about $994 million.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Codemasters is popular for the DiRT and Formula 1 racing games. The combination of Codemasters racing franchises and EA’s Need For Speed as well as Real Racing mobile game is expected to boost user growth and expand EA’s portfolio offerings. The transaction is anticipated to be completed in the first quarter of calendar 2021.

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Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
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