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Plugged In

After Six Years, EA Steps Up to the Plate with New MLB Game

Plugged In

When it comes to sports video games, Electronic Arts is largely viewed as the industry's king. But for the past six years, the company has had a hole in its lineup: Major League Baseball.

With its hands tied due to an exclusivity agreement between MLB and Take-Two Interactive Software, EA has had to ride the bench. Today, though, it's stepping back into the batter's circle.

The company has launched "World Series Superstars," a Facebook game that carries the MLB license. Players are tasked to build and manage teams, then compete in games with their friends on the social media site.

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It's not quite the major leagues in gaming terms (to push the metaphor to its limits), but as
Facebook games continue to grow, it's certainly AAA. EA has invested heavily in its social gaming arm in recent years, particularly with its 2009 purchase of PlayFish for $300 million.

The agreement between Take-Two and MLB does not expire until the end of the 2012 season. Unlike EA's agreement with the NFL, though, it has loopholes. First-party publishers (such as Sony and Microsoft) are still free to make their own MLB
console games.

And when Take-Two signed the deal, Facebook was just getting started. Even if anyone had known about it, they would never have imagined it would be a significant player in
the video game industry.

Today, Facebook games are a $500 million to $1 billion market, insiders estimate. Privately-held Zynga, the largest maker of social games, has an estimate market share of $5.5 billion - higher than EA's.

Meanwhile, the MLB license has been more of an albatross than a windfall for Take-Two. The company's games have never had the fan support or high Metacritic ratings of
EA's "MVP Baseball" lineup and the company's previous management
vastly overpaid for the limited exclusivity.

A Facebook game, meanwhile, costs millions less to make than a console title - and EA almost certainly struck a much better licensing deal with MLB. But even with those
concessions, "World Series Superstars"won't make much of a dent on the company's bottom line.

"It doesn't mean anything as far as moving the needle for EA," says Michael Pachter of
Wedbush Securiries. "It might be a good signal that EA is in MLB's good
graces and they might be about to take the license away from Take-Two - and to
that I say, who cares? ... You have to wonder if baseball can ever be lucrative
[to game publishers]. The only way it can be is it has to be very cheap."

Take-Two is reportedly saddled with annual payments to MLB of $30 million to $40 million. That's less than EA pays the NFL for its exclusive deal, but not by much - and
the football market is four times the size of baseball.

Pachter estimates the license is worth no more than $12 million-$14 million today, but questions
whether the league and the player's association will be willing to accept such
a drastic cut.

"World Series Superstars" isn't the first branded sports Facebook game from EA. The company has already seen success with FIFA, NFL and PGA games. It's part of a larger
restructuring plan at EA, which has been looking to expand into gaming areas
other than consoles to cover its bases as the industry expands into new fields.

"There's a lot of transition going on in this industry and we're really well positioned for
that," says Frank Gibeau, president of the EA Games label. "We feel
like we're on the offensive. We're moving from a fire-and-forget packaged goods
model to an online services model."

© 2011 CNBC.com

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