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When Electronic Arts (NASDAQ:EA) announced their earnings after the close of the market on February 1st, they beat 3Q street expectations thanks to strong digital sales of Battlefield 3 and their new Massively Multi-player Online Role-Playing Game ((MMORPG)), Star Wars: The Old Republic (SWTOR). But disappointing news for Electronic Arts' investors came in the form of the 4Q earnings projections. EA predicted 10-20 cents less than the consensus estimate of 29 cents for 4Q 2012.

It might make sense to take a closer look at the 2012 product line to see if this is warranted. Their success or failure depends on SWTOR subscriptions, PopCap, and their conventional product lineup.

The Present (and Future) of SWTOR's Subscription Gaming

Initial digital sales of SWTOR were fairly excellent. Now EA investors have to think about SWTOR subscriptions.

While I've yet to see a confirmed budget from EA, it seems to generally have been pegged at around 200 million by several news sources and gaming industry insiders. That may seem like a lot - it is, in fact. However, it's fairly certain based on strong sales they already recouped 100-150 million at outset. Consumers who purchase the $59.99 game receive the first month of play for free, and after that it costs $15/month.

I don't need to provide very many figures to show that a moderately successful game that keeps 25% of its 2 million launch subscriber base for the year will be in the black. Activision's (NASDAQ:ATVI) tremendously popular World of Warcraft game operates on this model.

If SWTOR lasts more than 2 years, it will be outrageously profitable. This was a gamble, and it looks like EA is quite likely to at least hit the break-even point. But will it be profitable like Activision's World of Warcraft?

It certainly has the potential to be, but there are several obstacles standing in the way of EA's SWTOR product in the present. One of them is the fact that there are other high profile releases coming out in 2012 that are direct competition. The most notable of these is NCSoft's Guild Wars 2.

The Guild Wars brand is already an established IP in the Massively Multi-playing Online videogame genre. The first Guild Wars game sold 6 million copies (sales comparable to EA's flagship Battlefield series) and NCSoft is has produced other MMORPG hits such as Aion, City of Heroes and Lineage II. Guild Wars 2 will be completely free to play. That last bit is the thing that should worry EA.

There will be a subscriber loss if EA does not incentivize subscription in the face of high-quality free competition. So far, EA's already offered a "Founder's Medal" to persons who subscribed for the first month of the game, and they have introduced additional content to their product, so it seems they understand paying subscribers expect more in today's marketplace.

Social Gaming

The PopCap acquisition plays very well into EA's long term strategic plans, which takes into account its market predictions, where casual games as well as MMOs make up a larger portion of digital revenue. It's a noticeable slight to Social Network up and comers like Zynga (NASDAQ:ZNGA), Gree , and DeNA that had sought it out. PopCap produces many of the most popular "casual" video games such as "Plants Vs Zombies", "Peggle", and many more. Beyond that, PopCap is also estimated to have revenues in the $100-$150 million range. It will provide EA with solid revenue and access to the mobile devices and casual market. However, their future success depends on leveraging PopCap on social networks and portable devices.

The Rest of The Product Line

Then there are of course, the other games in the EA product line. The most notable game coming out is Mass Effect 3. This will be EA's 2nd sequel to its blockbuster Mass Effect IP. The previous game in the series, Mass Effect 2, sold 2 million copies in its first week. It was highly esteemed by critics and consumers. Mass Effect 3 is on track to have even more pre-orders than Mass Effect 2. It will be released on March 6th, 2012.

Another product, Kingdoms of Amalur, to be released February 7th, has gotten good buzz from several notable videogame outlets and is #17 on the top 100 videogames on Amazon.com, but has yet to break into the Gamefaqs.com top 10. It has respectable pre-order numbers and has received favorable comparisons to Skyrim and other popular recent games in the role-playing genre.

The MMORPG The Secret World (due out in April) has gotten positive buzz over its unique horror setting, but given developer FunCom's previous experiences with Age of Conan, and a lack of publicity, it is unlikely to be a blockbuster. Additionally, it faces competition from games in the MMORPG genre like EA's own SWTOR, Activision's World of Warcraft, and NCSoft's forthcoming Guild Wars 2. However, it may develop a strong niche following. If the budget is not too high, that could be profitable.

The Sims 3: Showtime will sell decently. A partnership with Katy Perry will likely enhance the aging franchise's visibility and its dependable sales figures. The budget is minimal, so virtually any sales at this point are profit.

Tiger Woods PGA Tour 13 will likely be a solid seller for EA, though Tiger Woods decreased viability as a brand may weigh it down. Tiger Woods PGA Tour 12 was a record seller for the franchise.

Like Kingdoms of Amalur, Syndicate (to be released later this month) is another wild card. It's a new franchise (based on an old IP) with promise. It's a cyberpunk shooter with role-playing aspects. But will it be too soon and too similar to the recent cyberpunk shooter Deus Ex: Human Revolutions for consumers?

Conclusion

When we look at EA's product line, there is a great deal of promise that hinges on three things -success in converting SWTOR subscribers to paid subscribers, PopCap and social games, and the success of EA's other major titles. There are also some areas of concern as well.

Source: After The Earnings Call: Taking A Closer Look At The Electronic Arts 2012 Product Line