UPDATE 1-EA plans to offer part of "Star Wars" game for free

Mon Jun 4, 2012 10:00pm EDT

By Liana B. Baker and Malathi Nayak

LOS ANGELES, June 4 (Reuters) - Electronic Arts Inc plans to offer a big part of its "Star Wars: The Old Republic" online game for free and licensed the rights to produce videogames with the "Ultimate Fighting Championship" brand, hoping to breathe life into efforts to secure steady long-term revenue.

EA announced the licensing agreement with Zuffa LLC on Monday. The licensing rights were previously held by THQ Inc , which received an undisclosed cash payment, Zuffa and THQ said.

EA has struggled to get "Star Wars: The Old Republic", the massively multiplayer role-playing game based on George Lucas' science-fiction movie, off the ground since its December launch.

The company announced last month it had lost 400,000 subscribers in its fiscal fourth quarter.

Video game companies have been trying to turn gamers from one-time purchasers into subscribers who generate a steady and predictable revenue stream.

From July, EA will offer 15 "levels" for free, meaning gamers will be able to join and play the beginning phases of the game without paying. That might be the jumpstart the game needs, analysts say.

"Part of it is just trying to be promotional, trying to keep the game alive," said Sterne Agee analyst Arvind Bhatia. "We've got a little bit north of a million subscribers on average for the year, and if it goes down too much it increases the risk of the game going away.

"It's a little bit desperate but it's showing us where the industry is going: people are not ready to pay."

"Battlefield 3"

On Monday, EA also announced a $50-a-year premium service for "Battlefield 3", the first-person shooter game that competes with Activision Blizzard Inc's popular "Call of Duty" game.

More than 15 million copies of "Battlefield 3" have been sold. Bhatia said EA might be hoping a portion of those players sign up for the premium service, which offers five new expansion packs or additional content.

THE STAKES WITH STAR WARS

EA shed 36 percent of its value in 2012, hurt by worries about its ability to deliver growth and compete with Activision.

The acquisition of the "Ultimate Fighting Championship" license will also bring on board a signigicant slice of annual revenue. Analysts estimate the UFC games generated about $100 million in revenue for THQ.

EA has spent more money on "Star Wars" -- some analysts estimate $100 million to $300 million -- than any other game in its history.

Wall Street is watching to see if the game can succeed and bring EA steady subscription-based revenues for years to come.

EA had been hoping to take on its biggest rival, Activision, which had more than 10 million subscribers to "World of Warcraft" last quarter.

"Warcraft" is the 7-year-old Internet game that re-energized the market and is Activision's most profitable franchise. It only recently opened up its starting levels to gamers for free.