AOL Strikes $81M Gaming Alliance With Electronic Arts

America Online and interactive entertainment software company Electronic Arts announced a five-year strategic alliance today to create and deliver online games and interactive entertainment content for all AOL properties.

Under the terms of the agreement, Electronic Arts will guarantee AOL $81 million (US$) and be exclusively responsible for content on AOL’s Games Channel and all game content on AOL.com, CompuServe, Netscape Netcenter and ICQ.

The new gaming site is expected to launch next summer with a broad offering of products and services for game players of all ages and interests. Electronic Arts will also provide similar proprietary game content with the simultaneous re-launch of its own Web site.

Game players will be able to use either site to download and play games, find online opponents and visit game-related chat rooms.

Right Time To Expand

“We believe the time is right for us to make a bold move into online entertainment,” said John Riccitiello, president and chief operating officer of Electronic Arts. “In addition to our own Web site at EA.com, our strategic relationship with AOL will enable us to reach millions of new consumers.”

Many industry observers contend that the agreement will bolster AOL’s credibility as a contender in the online gaming arena and at the same time give Electronic Arts a platform that it could never develop itself. The alliance also serves as a hedge for Electronic Arts against some of its toughest competitors, such as Activision, Eidos and GT Interactive.

Meanwhile, Electronic Arts also announced the acquisition of Kesmai Corporation, a developer and publisher of multiplayer online entertainment. The Charlottesville, Virginia-based Kesmai, which provides games to the AOL Games Channel, is a unit of News Corporation (NYSE: NWS, NWS/A).

Kesmai Corporation becomes a wholly-owned subsidiary of Electronic Arts. Electronic Arts bought Carlsbad, California-based PlayNation in September and a minority stake in New York-based Bottle Rocket in October.

Exclusive Content For AOL

AOL’s new gaming site will feature current Electronic Arts games, as well as original online products developed exclusively for users of AOL Games. Game content will range from sports games to multiplayer games such as the popular Ultima Online.

Electronic Arts, which develops games for both computers and console players such as the Sony Playstation and Nintendo 64, is perhaps best known for its library of sports games, which include Madden NFL 2000, Tiger Woods PGA Tour and March Madness 2000. It also has popular titles in college football, the NBA, the NHL, baseball, soccer, boxing, automobile racing, rugby and cricket.

Electronic Arts also owns game publishers such as Origin, which develops the Ultima series, and Maxis, which has created the bestselling Sim City series.

Stock Impact

In addition to creating a new business division for its Internet initiatives, Electronic Arts’ board of directors has approved plans to create a new class of common stock that will track the performance of the Electronic Arts Internet business. The new class of stock is subject to shareholder approval.

Meanwhile, Electronic Arts plans to file for an initial public offering of its Internet business in the future.

Investors apparently liked what they heard today. Shares of Electronic Arts soared 7-3/16 to 99-3/16 in early trading. Shares of AOL gained 1 to 159-5/8.

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