Video-games publisher Electronic Arts ( ERTS) has lofty expectations for Spore when the long-awaited game is released on Sept. 7. The Redwood City, Calif. company hopes Spore will become the next Sims, the franchise that has sold more than 98 million copies worldwide since its launch in 2000 and has become so successful that it's one of the company's four business units. Designed by Sims creator Will Wright, Spore has been in the works for nearly three years. Last May, EA decided to delay its release during the holiday season last year by nearly 12 months to allow more time for development. Spore is an epic game that entices players to create a universe and navigate their way through it. Through different levels of play, they will get the chance to create single-cell organisms, see them turn into tribes and civilizations and then launch them into space to explore the universe.
With such high expectations, the question now is just how big a hit will Spore be and what impact will the release have on EA's stock this year? EA showed off the game briefly at its recent
analysts meeting but hasn't offered any outlook for the game. Four analysts polled by TheStreet.com predict sales of Spore will range from 3 million to 5 million units this year. "I think Spore will do at least 3 million units as a packaged product, and if it's as good as it looks, it has the potential to do twice that," said Michael Pachter, an analyst with Wedbush Morgan, which does not own shares or have an investment banking relationship with EA. At the least it could translate into $250 million annually from all sources of revenue from the game during the first four months after its September debut, said Pachter. That's a fraction of the $4.6 billion in overall revenue that analysts expect from during EA's next fiscal year, which ends in March 2009. A better gauge would be to look at the financial impact of EA's Sims division. In fiscal 2007, that division accounted for about $400 million of the company's $3.09 billion revenue. Over its life time, the PC and Nintendo DS versions of Spore could sell about 7.5 million copies, predicts the simExchange, an online virtual stock market where users trade stock to forecast how games will sell. That forecast, however, does not include sales of versions of the game for Sony's ( SNE) PlayStation, Microsoft's ( MSFT) Xbox 360 or Nintendo' Wii -- that EA is likely to develop. Still, Spore is not a slam-dunk for EA investors. Some industry watchers are doubtful that the game will catch on the way Sims has. "The avatars in the Sims games are human while with Spore you are creating these very alien-looking creatures," said Charles Onyett, editor at IGN PC, an online video-games news and reviews site. That could hinder Spore's appeal among more casual gamers and offer a lesser degree of emotional attachment to the game. Spore is also a very complex game, warns Onyett. "There are a lot of different styles of game play in there," he said, "and at different levels of the game it changes from an action game to real-time strategy to an online game." Spore could also fall a victim to the expectations that EA has set up for the title, said Jesse Divnich, an analyst with The simExchange.
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In other words, Spore could meet estimates but that may not be enough to please investors who are looking for more in a market where even the slightest disappointment could have a big negative impact on the stock. EA also needs to reassure investors who have been holding on to the stock. Over the last two years, EA shares have declined 3.2% while rival Activision's ( ATVI) stock soared 55%. Shares of EA closed up 29 cents, or 0.6%, to $48.72 Friday. The Spore game has been designed for five playable levels -- cell, creature, tribe, civilization and space. In the first level users create microorganisms and try to nourish them and keep them alive. From there they move to the next phase where the microorganisms can evolve into creatures and be organized into tribes. Next comes the civilization phase where gamers can create cities and when they earn enough points players can launch their civilizations into the space to search for new planets.
A EA spokesperson said the company has designed Spore "to be highly creative, very personal, easy-to-use and easy-to-share." "If you want to jump into the game, well, there are hours upon hours of fun to be had there. But if you want to just mess around with the editors, create things and show them off to the world, you can do that too," an EA spokesperson said. EA hopes to more than just sell millions of copies of Spore. The user-generated content that defines the game could help Spore become the cornerstone of EA's ambitious plans to generate more digital revenue. At its annual analysts meeting this year, EA promised to take digital revenue from $325 million in 2007 to $900 million, or 15% of its total revenue, by fiscal 2011. Spore, if successful, could help the company get there as EA develops a marketplace to charge users for new premade creatures or other in-game accessories. "We may see Spore define the micro-transaction model," said Pachter. EA also hopes to release expansion packs, or add-ons to the existing game that could extend the story line, and spin off versions of Spore for mobile and casual games to attract more users and sustain the franchise. EA's biggest challenge in the next months will be to manage expectations, some analysts say. "When The Sims was first introduced it was new and revolutionary," said Divnich. "It also changed the profile of the gamer from the typical 18- to 25-year-old male to a more female demographic, which worked in the favor of the game." By contrast, Spore has legions of hardcore gamers waiting for the title and disappointing them could be costly for the company. Still, it will take more than a few missteps to stop the juggernaut that Spore has become, says Arvind Bhatia, an analyst with Sterne, Agee & Leach. " Sims is a billion-dollar plus franchise," he said. "If Spore does half of what Sims does, it will be a great success."
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