Electronic Arts Inc (NASDAQ:EA) has it almost too good.
Through its decades-long partnerships with sports franchises NFL, John Madden, FIFA and Formula 1, the video games giant has managed to squeeze gamers out of their hard-earned cash year after year by releasing a very similar product, albeit with a fresh coat of paint and updated player rosters.
Outside of sport, premier gaming titles such as Battlefield, The Sims, Need For Speed and others have crafted a multibillion-dollar gaming empire of little comparison.
However, as the California-based group approaches its full-year earnings call on Tuesday, May 9, investors will be keen to hear how chairman and chief executive Andrew Wilson intends to navigate EA through a high-profile divorce from a lifelong partner.
After 30 years of seemingly blissful marriage, FIFA ‘23, released in September 2022, marked EA’s final entry into the legendary sporting series in what appears to be an acrimonious split.
FIFA, it seemed, wanted to double its US$150-per-year licence fee.
There’s no doubt that EA could afford it; 2022 was the strongest of record for the FIFA gaming franchise, with EA calling it the primary driver for the group’s US$7.5bn net bookings (alongside Apex Legends, Madden and The Sims).
But instead of forking over the cash, EA has decided to ditch brand FIFA in place of the less-catchy ‘EA Sports FC’.
Well at least EA has retained the rights to “19,000 fully licensed players, 700 teams and 30 leagues” including the Premier League.
The question on investors’ lips is, will EA’s gamble pay off?
Naming power can make or break sports gaming franchises.
Japanese developer Konami’s Pro Evolution Soccer regularly trumped EA’s FIFA in terms of critical acclaim, but by 2015, the latter was outselling the former 10 times over.
Then again, EA has 30 years of development expertise behind it, and little in the way of competition in the football scene.
EA also has a huge roster of AAA gaming titles to fall back on, but its football strategy will undoubtedly be something to keep an eye on next Tuesday.
The Street appears bullish- consensus opinion has underlying earnings increasing 40% and a near doubling of pre-tax profits.
RIP gaming sales
It may come as a surprise that EA only gets a third of its revenues from full-game sales, with two thirds coming from live services.
Live services refer to extra content, subscription offerings and other revenue generated
outside of the physical (or digital) sale of games.
FIFA (or EA Sports FC as it will soon be called)’s Ultimate Team mode is the largest driver of live services revenues.
Can EA hold onto this hugely lucrative cash cow? Game on!