The release of a new LEGO video game has put two firms on high alert. LEGO Worlds may mirror Minecraft, but it’s also a direct attack on Walt Disney Co (NYSE:DIS) and part of a massive assault on Electronic Arts Inc. (NASDAQ:EA). The game is not finished yet, but it is already part of a revolution.
Those in charge of key IP are starting to see the power it has in the games market. This happened before, and caused the license fees for IP to creep up until the bankruptcy of THQ caused an end to mass licensing. Walt Disney Co and Electronic Arts are proof that licensing is back, though in a new form.
Walt Disney heads Into EA Territory
Walt Disney Co has long been a game-maker, but the firm’s stumbling in the business, down to poor management, caused it to sell the rights to Star Wars game to Electronic Arts Inc for a decade.
The firm’s Disney Infinity, a game that LEGO Worlds is aiming right at the heart of, shows that it can make a good game and make a profit at the same time. That will give Disney renewed confidence to make games for itself, or use low-priced third party publishers.
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Electronic Arts is the last major publisher that relies on major IP deals to sell its games. Much of its sales come from sports licenses like Fifa and Madden. If the IP owners get confident in their ability to make and sell a game by themselves, a large part of EA business will be taken away.
Right now the firm seems to be making money by being ahead of the curve. It’s not clear what the firm’s deals on those licenses are, but the high margin on digital extras suggests that EA is paying less to the IP owners on those goods than on the base game.
That will likely have to be changed the next time a deal comes up, and Electronic Arts may get slowly crushed by the longer reach of license payments.
LEGO shows the power of IP
Minecraft, which was bought by Microsoft Corporation (NASDAQ:MSFT) for more than $2 billion, is the most powerful piece of IP in video games, but LEGO with its huge following may have the power to take some of its audience. It may also grab some of the audience that Walt Disney Co blockbuster Disney Infinity has built up over the years.
The performance of LEGO Worlds will show the vast power that cultural IP has on video games. If the firm turns it into a hit, the future of Electronic Arts will hang in the balance.
EA has its hands on Star Wars, one of the world’s most valuable brands, until around 2023, but Disney may want it back when that period ends.
If Electronic Arts is successful with its Walt Disney Star Wars game, the firm will either want to take the IP for itself or jack up the fees EA has to pay. Either way, LEGO is showing that content is power, and Electronic Arts doesn’t own too much of it for itself.