ELECTRONIC ARTS TO PRODUCE ALTERNATE LOTR GAME? [Author: Arcadian Del Sol]

Electronic Arts wins Tolkien movie rights

By Dean Takahashi

Red Herring

July 25, 2001

Gearing up for competition over one of the most valuable entertainment licenses available today, Electronic Arts (Nasdaq: ERTS) (EA) is expected to announce Wednesday that it has acquired the rights to make games based on New Line Cinema’s upcoming Lord of the Rings trilogy of films.

New Line Cinema reignited the craze for the works of novelist J.R.R. Tolkien with its highly anticipated Lord of the Rings: The Fellowship of the Ring, set for December release. The film is the first of three that will be released each year through 2003, with a cumulative budget of $270 million. Sources close to the matter say that EA will announce only that it has secured rights, but will say later what kind of game it will make and when it will release it.

The deal is a coup for Redwood City, California-based EA because it’s a backdoor way for the game publisher to tap into one of the most valuable game properties of all time. More than 100 million fans have read Tolkien’s novels since they were published in the 1930s. The novels inspired the Dungeons & Dragons style of role-playing games that today account for 20 percent of all game sales. The movies have been hyped for months, thanks to New Line’s strategy of marketing the film on fan Web sites. Millions of people have downloaded trailers for the first movie even though it’s months away from release.

TO BATTLE!

Previously, the Tolkien estate (also known as the Saul Zaentz Company, based in Berkeley, California) had licensed Vivendi Universal’s (NYSE: V) Sierra Studios unit to make Tolkien-related computer games. But when Sierra’s prior owners canceled one game and delayed another, the parties became locked in a lawsuit. They settled the suit earlier this year, but the delays cost them dearly in game production time. As a result, Sierra won’t have a game ready until January 2002 at the earliest.

Under copyright law, New Line created a new work of art with the Lord of the Rings films because it modified the story in its scripts and created new artistic assets for the movie. Hence, New Line has the right, separate from the book rights held by the Saul Zaentz Company, to license the stories it created for the movies to EA.

As a result, EA and Sierra will produce rival games under the Lord of the Rings name, much as publishers like Activision (Nasdaq: ATVI) and Interplay (Nasdaq: IPLY) dueled with opposing Star Trek games.

GAMES, MY PRECIOUS

Sierra officials showed off the first game, being developed by Seattle-based developer The Whole Experience, at the recent E3 trade show in Los Angeles. It will be a role-playing game in which players act as Frodo, the main character in the Tolkien novels. Those who viewed it noted the challenges of making games based on the Tolkien novels, since fans are sure to quibble with the style of art and how closely the game follows the plot of the novels without becoming too boring.

Sierra officials say the game, being developed for Microsoft’s (Nasdaq: MSFT) upcoming Xbox console, is only the first and that Sierra has the rights to make games based on the novels for eight years.

Besides EA, New Line has also licensed Finland-based Riot Entertainment to make Lord of the Rings games for cellular phones. Riot expects to launch its games in September. The startup maker of portable device games will also create a wireless “Middle Earth” community.