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With New "Star Wars" Game, EA Wields the Force Against "World of Warcraft"


"Star Wars: The Old Republic" launched today, and it's a worthy foe to "World of Warcraft."

"Don't Underestimate the Force."
--Darth Vader

Electronic Arts (EA) couldn't quite topple Activision Blizzard's (ATVI) dominant Call of Duty: Modern Warfare 3 in this year's battle for first-person shooter supremacy.

However, in its effort to take on World of Warcraft, EA turned to something even more significant than the ability to destroy a planet -- the power of the Force.

And that's looking like a pretty smart move right about now.

Today, EA fully rolled out Star Wars: The Old Republic, a massively-multiplayer online (MMO) game set in the Star Wars universe that is aimed at taking down Activision's mighty-but-bleeding World of Warcraft.

World of Warcraft, which once had over 12 million subscribers, has seen a reversal of fortunes as its player count has fallen to 10.3 million. (See: Activision: World of Warcraft Drives a Growing Bear Case.)

And remember -- this happened before the new kid came on the block.

My contention all along has been that the decline in World of Warcraft subs is not fully appreciated by the extremely bullish Wall Street analyst community, and that decline is destined to create a significant sentiment drag, especially now that EA appears to have created a very strong competitor in SWTOR. (See: "Modern Warfare 3" Hits the $1 Billion Mark: Why It Doesn't Matter)

There aren't many, if any, scored reviews out as of the time I'm writing this, mostly because of the scope of the game. However, initial takes from the press have been fairly positive.

Here's a sampling: "Assuming the bugs don't deter you, it's apparent from playing Knights of the Old Republic that a remarkable amount of effort, work, and talent went into this game. It's one of the only Star Wars games that truly makes you feel, at times, as though you're a key player in and a part of this unique and beloved sci-fi setting. You'll get to do all the sorts of stuff that you've seen and enjoyed in the Star Wars movies, and you'll get to emulate any of your favorite characters' personalities and actions over the course of the game. You'll also experience a much more morally complex version of Star Wars than what you get from the movies. Along the way, you'll find a few aspects of the game that you'll wish were better, but that's mostly because the vast majority of Knights of the Old Republic is so exceptionally good."

CNET: "In the end (not that a game such as this even has an end, at least as long as it generates enough revenue to continue), the game's characters in particular look great, and the inclusion of so much recorded dialogue instead of text-only conversations adds a level of polish most MMO games, including the all-powerful World of Warcraft, lack. The inclusion of NPC sidekicks and plenty of (at least so far) solo-playable content make the game a lot easier to get into than many MMO games, which can only be good for SW:TOR's chances as the great WoW-killer."

Kotaku: "In practical terms, buying this game is a pretty simple 'no' for me right now-I'm a Mac user. I'd be lying, however, if I not only thought about buying a copy of Windows 7 for use in Boot Camp, but also moved up my purchase of a new computer to yesterday in the vague hope I could find a way to play The Old Republic on it. That would make this game effectively cost some $1,500, and though that's prohibitively expensive, there's still a powerful gut feeling in me that The Old Republic is something worth joining. I do not have the budget for it now, but it's a lead-pipe cinch I'll be playing the game, somehow, in the next three or four months."

ShackNews: "All in all, I'm fairly shocked at how much I'm enjoying my time with Star Wars: The Old Republic, especially because I'm not typically much of a MMO player. I'm still early enough in the game where I haven't been able to dabble in major things like space combat or PvP, but based on my early experience, I'm very much looking forward to doing so."

There's no denying -- EA has sicced a pretty vicious beast on the wounded World of Warcraft franchise, and that beast is sitting at the top of the sales charts at key retailers (AMZN) and GameStop (GME).

Activision hit a multi-year closing high of $13.93 on November 8 on the back of Call of Duty euphoria, but since then, it's declined 14% versus a 5% fall for the Nasdaq (^IXIC). And that's despite delivering a very strong earnings report on November 9, and consistently good numbers regarding Modern Warfare 3 sales.

That tells me that investors are pretty much over the Call of Duty hooplah, and are now starting to focus on the fate of World of Warcraft in a tougher competitive environment.

Now the Activision bulls will woo you with tales of low P/Es (the more daring ones will back out the cash) and the 2012 game lineup, but I'm smelling value trap as folks are finally starting to freak over those World of Warcraft sub numbers, which are now under heavy fire from SWTOR.

Activision's taken a big hit over the years after the death of Guitar Hero. I just don't see folks responding well to what looks like the inevitable decline of the massively profitable World of Warcraft franchise.

Remember what happened back in October -- Activision announced that subscribers who bought an annual pass for World of Warcraft would receive a free copy of next year's Diablo III on release, along with other incentives. That sounds like a franchise on the defensive to me.

And finally, some housekeeping notes...

Zynga (ZNGA) was initiated at an outperform rating with a $12.50 price target by Wedbush. I'm sticking on the sidelines with this one until it reports its first quarter of earnings. This stock is very much controversial on account of its slowing growth and reliance upon Facebook, so that makes it a coiled spring. Volatility is a given, but direction is awfully tough to guess.

I don't see Apple's (AAPL) courtroom victory over HTC as having any earnings/revenue/market share impact given the latter's market-share losses. HTC just doesn't have the juice it once had in the marketplace.

Now if Apple won similar battles with Samsung -- that would be something.

Twitter: @MichaelComeau

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