EA Buy Hits Right Note - TheStreet

American Idol

wannabes don't always have to face Simon Cowell's acerbic comments in their journey to stardom.

They can reach out to America directly -- at least to whomever's logged on to

SingShot Media

, a karaoke Web site that lets users record songs, share them with friends, rate and comment on other members' tracks, and customize recordings with photos and videos.

SingShot is

American Idol

meets MySpace,

News Corp.'s

(NWS) - Get Report

online networking site that has also become a sensation.

Not surprisingly,

Electronic Arts

( ERTS) wants a piece of this action.

The video-game publisher picked up San Francisco-based SingShot in an acquisition announced Monday. Financial terms of the deal were not disclosed.

On the surface, online karaoke may seem an unlikely bet for the largest publisher of video games. But SingShot is a shrewd buy.

The EA-SingShot deal unites two of the biggest trends in gaming: casual games that draw in users who might not otherwise be interested in video games, and rhythm games that cater to those with an inner desire to be a music sensation.

The year-old SingShot licenses music for its members to sing along to. The service is free for two weeks, after which it charges $9.95 for a monthly plan, $7.95 a month for a quarterly plan, and $4.95 a month for an annual subscription.

According to comScore Media Metrix, the start-up logged 173,000 unique visitors to its site in January.

The major Internet players are already hip to the potential of online karaoke. News Corp's Fox Interactive Media bought karaoke site kSolo.com in May, and

Yahoo!

(YHOO)

bought Bix, a music contest Web site, in November.

With SingShot, EA can not only ride the online karaoke trend but also be part of the social networking buzz that has made stars out of sites such as MySpace and

Google's

(GOOG) - Get Report

YouTube.

Community Sing

Redwood City, Calif.-based EA has said the SingShot acquisition will help accelerate its efforts in "community-building and promoting user-generated content." SingShot's CEO Ranah Edelin and CTO Niranjan Nagar, who created Rhapsody Digital Music before it was acquired by

RealNetworks

(RNWK) - Get Report

, will now join EA as vice presidents.

Shares of EA closed Wednesday's regular session up 56 cents, or 1.1%, to $50.48. The stock has moved sideways since the

company's third-quarter earnings Feb. 1.

The SingShot acquisition extends EA's reach to a wider audience, says IDC games analyst Billy Pidgeon.

"EA is trying to expand the base away from typical, enthusiast hard-core gamers, because the big-volume deals are with casual players," says Pidgeon.

SingShot, which works both on PCs and

Apple

Macs, requires a broadband connection and a microphone.

Gamers who play through their PC -- a subset of whom are casual gamers -- have already helped turn EA's PC-based game

The Sims

into one of the best-selling PC games of all time.

Second Acts

The five-person SingShot team will join the EA Sims division, the company said, adding that the technology itself can be applied to "several different community projects." SingShot could help boost that franchise.

"EA is looking for some community-building with

Sims

," says Michael Pachter, an analyst with Wedbush Morgan, which makes a market in EA shares. "They have tried to do that earlier with

Sims Online

to get multiplayer games, but they haven't really been successful in it."

Sims Online

, shipped in 2002, allowed users to play one another through the Internet, but reviews for it have been dreary.

SingShot could give EA a second chance there, says Pachter. "I think EA is looking at ways to make

Sims

even more successful with greater staying power," he says.

The genre of rhythm and karaoke games could help EA entrench itself in the casual-gaming market, which researcher IDC forecasts will grow into a $2 billion market in the U.S. by 2010, up from $420 million in 2006.

Also with SingShot, EA could be trying to reach for the kind of success other gamemakers such as

Activision

(ATVI) - Get Report

have seen for their music-based games.

Activision's

Guitar Hero

series, where users simulate playing the guitar through a guitar-shaped game controller, ranked in the top five bestselling video games.

Sony

(SNE) - Get Report

has its own music-based game, the

SingStar

series of karaoke games, the first of which it released in 2004 for the PlayStation 2.

Sony plans to bring

SingStar Pop

, the latest game in that franchise, to the PS2 in North America sometime in April. Additionally, Japanese publisher

Konami

offers

The Karaoke Revolution

, a music-based series for different consoles.

When it comes to the product potential of SingShot for EA, think

Guitar Hero

marries

World of Warcraft

, suggests Pachter.

World of Warcraft

is an online game developed by Blizzard Entertainment and published by

Vivendi Universal

that has more than 8 million players worldwide.