Disney's different take on EA's lack of Star Wars games

After days of sustained criticism from numerous quarters over EA's handling of the Star Wars license, IP owner Disney has finally weighed in... and their take on the situation was surprising, to say the least. As reported by WIRED:

One of the most uneasy partnerships in games is the one between publisher EA and Disney. For several years now, since the shuttering of LucasArts games, EA has had an exclusive deal with Disney to make Star Wars console titles. That's all well and good—except for the fact that none of those games have been unmitigated successes and there haven't exactly been a lot of them, either. As a result, many have speculated that Disney's deal with EA might not be long for this world—but apparently the Mouse House is fine with things as they are.

In a recent earnings call, Disney CEO Bob Iger replied to questions about the company's relationship with EA by saying that the deal works well for both parties. "We've had good relationships with some of those we're licensing to, notably EA and the relationship on the Star Wars properties, and we're probably going to stay on that side of the business and put our capital elsewhere," Iger said. "We're good at making movies and television shows and theme parks and cruise ships and the like, we've just never managed to demonstrate much skill on the publishing side of games." Welp, at least Disney is happy. Because, uh, no one else is.

Now, I'll admit that I was as surprised as anybody, at first. Even if Disney didn't have a great video game track record, LucasArts did, at least up to the point when Disney acquired and then gutted their operation. Surely, given how aggressively Disney planned to push the boundaries of the Star Wars franchise, it would have made more sense to keep that team in place, along with their solid track record of doing exactly what Disney needed, rather than reducing them to a skeleton crew that would struggle to oversee anything much... and then outsourcing all responsibility for this huge part of the Star Wars portfolio.

After taking a few days to think about it, though, I've come around to Iger's way of thinking, and not only because Disney doesn't have a great track record when it comes to video games. EA's problems putting out decent Star Wars games are only one symptom of Disney's larger problem: that their entire strategy for Star Wars has been wrong-headed, basically from the very start.

First, the planned pace of Disney's Star Wars releases appears to have been simply too aggressive. True, the flopping of Solo: A Star Wars Story could easily be partly attributed to the boycott espoused by the Star Wars fandom's most toxic and misogynistic elements, but I don't believe that Star Wars fandom as a whole is that virulently toxic or blindly bigoted. After three lacklustre prequels, two more main story films (both of which received decidedly mixed responses from fans), and Rogue One: A Star Wars Story, a lot of Star Wars fans were simply suffering from Star Wars fatigue.

EA: The fun is about to end

It the process of writing my post about the Epic Games/Metro:Exodus mess, I came across this SeekingAlpha article on what the future holds for EA Games, and OMG is it ever a must-read.

EA needs to change its business model fundamentally. Its current model alienates players and makes EA more susceptible to competition. A significant source of profits, lootboxes, are being regulated away. Players are moving to mobile and free to play, where EA is weaker than its competitor Activision Blizzard. We believe that EA is currently heading towards another inflection point where players will start leaving en masse. EA could've already crossed the inflection point. Either way, things aren't looking good.

EA has a very tiny pipeline ahead, with Anthem and Respawn Entertainment's Titanfall 3 and Star Wars: Jedi Fallen Order being the only major non sports games EA is planning to launch. This is after releasing a bunch of old games that are not selling well. This is the perfect recipe for a massive revenue shortfall in 2019. This situation isn't helped by EA's terrible reputation, the upcoming lootbox bans, or increasing competition from developers around the world.

Although downside is reduced by the low valuation, we believe this valuation will look high when considering the secular decline in EA's revenues and profits. We believe EA will make a good short candidate if the market continues running up and brings EA up with it.

"Good short candidate" refers to the investment strategy of short-selling, essentially selling stock that you've only borrowed for just that purpose. It's basically a bet that the stock's value is about to drop; if it does, they you pocket the difference between what the stock was worth when you sold it, and what it was worth when you had to buy it back to "return" the shares that you'd "borrowed."

The quoted passage, BTW, is the conclusion from fifteen pages of analysis, all of which are worth reading if you're at all interested in the video game business. Seriously, go read the whole thing, because it's fascinating in a way that stock analysis normally isn't.

The various section titles in the article should give you some idea what to expect, though:

• Lootboxes: Regulation is coming
• Destroying franchises
• FIFA - How long can it last?
• Star Wars: An unmitigated disaster
• Battlefield V: Soldier up, EA!
• Competition: A quickly narrowing moat
• Dubious tactics: Denying valid refunds
• Significant insider selling
• Anthem: Not looking good

The "Star Wars" section features one of the most glorious EA Star Wars memes I've ever seen, too:

EA's Star Wars games in a nutshell.

Did I mention that this article was a great read? Seriously, go read the whole thing right now.