Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Electronic Arts Inc. (EA) in Good Shape After Adjusting Its Strategy

Page 1 of 2

Electronic Arts Inc. (NASDAQ:EA) has been favored by the market this year. The stock is up 50% year-to-date. Its peers, Activision Blizzard, Inc. (NASDAQ:ATVI) and Take-Two Interactive Software, Inc. (NASDAQ:TTWO), have enjoyed gains of 39% and 40%, respectively. The industry has gained momentum, but would this momentum continue as we head into the second part of the year?

Electronic Arts Inc. (NASDAQ:EA)


Games are played on three main types of devices – consoles, PCs, and mobile devices. Mobile games are the fastest growing part of the market because of the shift to mobile around the world. In this environment, Electronic Arts Inc. (NASDAQ:EA) states that it is focused on bringing as many titles as possible across all devices so that players can interact with its products from various platforms.

The company recently reiterated its fiscal year 2014 revenue guidance of $4 billion. Electronic Arts Inc. (NASDAQ:EA) is going to narrow its focus and concentrate on the best-performing franchises, while carefully selecting new titles. The company is famous for its sports simulators, including Madden NFL, FIFA, FIFA Manager, NBA Live, and NHL. The jewels in the product crown are Battlefield and the Sims series. What does concentration on franchises mean from the financial point of view? It means that the results would be more predictable. It also means there is less opportunity for explosive growth created by a previously unknown title.

Electronic Arts Inc. (NASDAQ:EA) states that it is moving to games-as-a-service as its business model. It means that every game issued would have a service component in it. It expects this model to defer some revenue at the beginning. However, the company cares more about the game’s lifetime revenue than up-front sales. During the latest analyst call, it hinted that FIFA 14 will be free-to-play on mobile, in line with this strategy.


The competitors also heavily rely on franchises. Activision Blizzard, Inc. (NASDAQ:ATVI) publishes World of Warcraft, the massively multiplayer online game that has conquered the hearts of millions of gamers. Lately, the number of active subscribers for this game has been falling. During the first quarter, subscribers declined by approximately 1.3 million, which accounted for 14% of total subscribers. The company believes that a further declined would occur, and that it will end the year with fewer subscribers than it has today.

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) relies on the success of series like Bordelands, Grand Theft Auto, and BioShock. The strategy of the company is common to the entertainment industry: take everything you can from your franchises while accurately trying something new. The company is projected to overcome recent loses and to finish the year with profit.

Autumn releases

Autumn is always a hot time for the industry, but this year, it would be even more special than ever because new generation consoles would hit the market. At first, the impact would not be seen on the income statements. It takes time for gamers to perform the transition. After initial months, the impact would start to grow, so the success of the newest games would be crucial.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!