Game maker is betting on original content

Goodbye James Bond. Take a back seat, Superman. And don’t even mention Catwoman.

Electronic Arts has been a trendsetter in licensing big entertainment properties for video games. But now it is backing off on the strategy that it pioneered: using high-profile movie licenses as the marketing hook for its video games.

The strategy shift, announced earlier this year, will take years to unfold. But it shows that Redwood City, Calif.-based EA doesn’t mind running against the grain as it takes to heart criticism from gamers that they’re tired of playing games with franchise characters that have become too boring.

In fact, other major players are spending a lot of money on licenses and alliances with Hollywood companies, while EA tries to grow its own “original intellectual property,” or games based on characters or stories that its own developers have created.

“We just decided to zig when the rest of the industry is zagging,” said Frank Gibeau, executive vice president of North American publishing at EA. “We are getting radically more selective in choosing licenses for video games. You could argue it’s risky, but you could also say that the time of the licenses has passed.”

The strategy shift follows EA’s mixed results for highly touted licensed games such as “The Godfather,” released last spring, and the James Bond game “From Russia With Love,” released last year. If EA is right, the company could deliver on its plans to grow even bigger as a multibillion-dollar publisher of video games and remain independent in a world of entertainment conglomerates. If it’s wrong, rival game companies and even the Hollywood movie studios themselves could knock EA off its perch at the top of the $25 billion game industry.

Gibeau estimates that EA will shift from 30 percent non-licensed games for its non-sports portfolio of games now to more than 50 percent over time. Economically, going without a big Hollywood license is starting to make sense, he says. And making new games could help employee morale, since workers get excited about creating something new on their own, Gibeau said.

Cost of licensing

Once upon a time, EA could obtain a license from a movie studio or book publisher by paying them a single-digit percentage of the game’s profit. But nowadays, the movie studios themselves have game divisions and bidders have pushed the fees into double-digit percentages. That translates into millions of dollars on a game.

EA has disappointed investors several times in the past couple of years, partly because it has had to spend so much money making games for the next-generation game consoles. Much of that expense goes toward creating new titles. But the company is betting that Wall Street will see the light.

One of EA’s biggest bets is on an original game called “Spore,” developed by star game creator Will Wright, whose “The Sims” titles have sold more than 50 million copies. “Spore” oozes creativity – something that gamers crave – with features such as the ability for players to create their own species in an experiment to see how well they would thrive in a Darwinian universe.

Getting noticed

EA built its business on licenses with figures such as former coach turned broadcaster John Madden, whose pudgy face and witty voice-overs have been used in millions of EA’s games. The strategy worked in the days when it was hard to get noticed on store shelves.

Executives at other companies such as THQ and Activision say that pushing too far toward original games is risky. Robin Kaminsky, executive vice president at Santa Monica, Calif.-based Activision, notes that most original titles fail. Her company can afford to try a couple of new games each year, but it relies on franchises like “Spider-Man” for guaranteed hits.

“If you look at what is succeeding, it is not original intellectual property,” she said. “We develop new IP, but we have to be thoughtful about it.”

But EA’s shift has parallels in the shift from high-paid actors for TV shows to low-wage reality TV stars. Shaving costs is important now that it takes $10 million to $25 million to create a game for the new consoles.

With growing technical complexity, it isn’t easy to finish games on time. EA had to delay the release of “Superman Returns” from the summer to the fall. That meant the game wasn’t finished on the day when Warner Bros. launched the blockbuster film.

Another risk is that EA could move further away from Hollywood at a time when the business demands convergence. Star Wars film creator George Lucas’ game company, LucasArts, is jointly developing technology for animating characters with Lucas’ special effects house, Industrial Light & Magic, to create digital characters for movies and games at the same time.

Where necessary, Gibeau says EA will collaborate. He points to an alliance with Steven Spielberg to develop original story lines for video games. In the end, EA expects it will generate more profits by creating, developing and owning its game characters and stories.

“We’ll take a balanced approach,” Gibeau said.