EA Sports

Blizzard On Steam / CD Projekt Cuts / EA Post-FIFA / Earnings Reports

The global gaming industry is currently undergoing a significant structural transition, moving away from the aggressive, growth-at-all-costs expansion that defined the 2021 market.

• The gaming industry is shifting from 2021's growth-at-all-costs model to a focus on operational efficiency, free cash flow, and the prioritization of core intellectual properties.
• Major firms are implementing workforce reductions and portfolio optimization, exemplified by CD Projekt's layoffs and the sunsetting of underperforming titles to maximize margins.
• Electronic Arts is actively reducing overhead by transitioning from the FIFA brand to EA Sports FC, effectively eliminating burdensome licensing costs while maintaining audience engagement.

Our Industry News (10/07/23 - 16/07/23)

The publication serves as a weekly roundup of notable developments within the gaming and entertainment sectors, covering the period from 10 to 16 July 2023.

• A federal judge cleared Microsoft’s acquisition of Activision Blizzard to proceed before the July 18 deadline, despite an ongoing appeal by the FTC.
• Microsoft considered extreme regulatory workarounds, including the potential withdrawal of Blizzard from the UK market, to secure the acquisition.
• Antstream expanded to Xbox Series X/S and Xbox One with a library of over 1,300 titles, highlighting a broader industry concern that 87% of classic games in the U.S. are currently out of print.

FTC Halts Microsoft’s Acquisition / AI Narrative Gaming / EA Restructuring

The gaming industry is currently navigating a period of significant structural and regulatory transformation, characterized by aggressive corporate consolidation and the integration of emerging technologies.

• The FTC is actively challenging Microsoft’s acquisition of Activision Blizzard, creating significant operational uncertainty despite the deal securing approval in other global jurisdictions.
• Electronic Arts has restructured into two distinct divisions, EA Sports and EA Entertainment, to separate stable annual sports revenue from volatile creative projects and improve M&A readiness.
• Roblox is expanding its demographic reach by implementing 17+ age verification systems, aiming to host more mature content while managing the associated risks of user safety and moderation.

Electronic Arts Fiscal Year 2023 Financial Results

Electronic Arts’ financial results for the fiscal year ending March 31, 2023, reveal a company increasingly reliant on live services, which reached record-breaking net bookings during the period.

• Live services now account for 74% of Electronic Arts' total revenue, underscoring a heavy reliance on recurring digital engagement.
• Total net revenue grew 6% year-over-year to $7.42 billion, while net income rose to $802 million for the fiscal year ending March 31, 2023.
• Full game net bookings declined by 16% to $1.8 billion, contributing to an overall 2.3% decrease in total net bookings to $7.3 billion.

Final Score

The dissolution of the thirty-year licensing partnership between Electronic Arts and FIFA marks a significant transition in the sports simulation genre.

• Electronic Arts and FIFA have officially ended their 30-year licensing partnership, with EA transitioning its football series to the new brand name 'EA Sports FC'.
• EA is moving away from the FIFA license because it has secured independent rights with individual clubs, leagues, and players, and believes its 'Ultimate Team' brand is strong enough to stand alone.
• Elden Ring has reached 13.4 million units shipped, contributing to a 50% profit increase for Bandai Namco in the 2022 fiscal year.

2022 Predictions: Sports Games Get Beaten from a Pillar to a Post

The mobile sports and racing gaming sector faced significant stagnation in 2021, failing to keep pace with the broader mobile gaming market.

• The mobile sports and racing sector stagnated in 2021, with revenues remaining flat at $1.3 billion and total downloads declining by 9%, underperforming against the 14% growth of the broader mobile gaming market.
• Sports management games emerged as a growth leader with a 35% year-over-year revenue increase, driven by titles like Top Eleven and F1 Clash that utilize the 'clash' meta for long-term engagement.
• Traditional franchise-based sports titles, including major releases from EA Sports for the NBA, MLB, and Madden, experienced notable declines in both revenue and download metrics.

Electronic Arts Q1 FY 2022 Results

Electronic Arts’ first-quarter fiscal year 2022 results demonstrate strong financial performance, characterized by the company exceeding expectations for net revenue, net bookings, and earnings per share.

Electronic Arts Q1 FY22 Financial Results

Electronic Arts reported strong financial results for the first fiscal quarter of 2022, ending June 30, 2021, characterized by revenue growth and an optimistic outlook for the remainder of the fiscal year.

• Electronic Arts reported Q1 FY22 net revenue of $1.551 billion, representing a 6% year-over-year increase.
• Live services remain the primary revenue driver, contributing $1.229 billion to the total quarterly revenue.
• Management raised its full-year outlook for FY22, projecting $6.850 billion in net revenue and $7.400 billion in net bookings.

FIFA Earns Almost $160 Million From Video Game Licensing

The International Federation of Association Football (FIFA) has increasingly relied on video game licensing as a critical revenue stream, particularly during periods of global disruption.

• In 2020, FIFA generated $158.9 million from video game licensing, accounting for 60% of its total annual revenue of $266.5 million.
• The 2020 licensing revenue exceeded initial projections by 24%, driven by increased gaming activity during the COVID-19 pandemic.
• Electronic Arts and FIFA ended their 30-year partnership in May 2022, leading EA to rebrand its football franchise to EA Sports FC.

In FIFA v EA, Fans Lose

The termination of the thirty-year partnership between Electronic Arts (EA) and the football governing body FIFA marks a significant shift in the sports gaming landscape.

• EA’s Ultimate Team mode, a critical revenue driver, grew from $587 million in 2015 to $1.6 billion in 2021, underscoring the high financial stakes of the brand transition to EA Sports FC.
• Live services now account for 85% of EA’s $1.75 billion in quarterly bookings, providing a stable financial foundation as the company navigates the loss of the FIFA brand.
• FIFA faces significant financial risk from the split, as EA’s $150 million annual licensing fee represented the governing body's largest single income category.

Electronic Arts Q3 FY21 Financial Results

Electronic Arts reported strong financial performance for the third fiscal quarter ending December 31, 2020, characterized by growth in net bookings and robust engagement across its live service portfolio.

• Electronic Arts reported $1.673 billion in Q3 FY21 revenue, a 5% increase year-over-year, with trailing twelve-month net bookings reaching $5.956 billion.
• Growth was primarily driven by live services, specifically strong performance in the FIFA Ultimate Team and Apex Legends franchises.
• FIFA Ultimate Team reached nearly 6 million daily active players in December, while Apex Legends saw a 30% year-over-year increase in new players.

Plus: How Did Those Big Steam Debuts Do?

This analysis examines the performance of major PC and console game launches during a high-traffic period in September 2023.

• Technical stability is the primary driver of player sentiment, as evidenced by Payday 3's 'Mostly Negative' reviews due to server failures despite 78,000 peak CCU, compared to Lies of P's 'Very Positive' reception with a stable launch.
• Party Animals recorded the highest Steam debut among the analyzed titles with over 104,000 peak CCU, though it faced criticism for its lack of an offline mode.
• Mortal Kombat 1 demonstrated strong multi-platform performance, maintaining high CCU on PC while securing a top-three position on U.S. PlayStation digital sales charts.