The Next-Gen Reboot That Could Carry Electronic Arts Inc. (EA) Stock

Electronic Arts Inc. (NASDAQ:EA) was in a sharing mood this week. The company unveiled its entire next-generation game lineup at the E3 industry expo, giving gamers and investors a detailed look at its new slate of titles.

We learned that EA has a few big games in the works, including:

  • From EA Sports: UFC, FIFA 14, Madden NFL 25, and NBA Live.
  • From EA Games: Battlefield 4, Deadspace 3, and Need for Speed Rivals.
  • On Mobile: Plants vs. Zombies 2, Ultima Forever, and Fightback.

Fishing for a hit
While the E3 previews showed off some polished game development, this list is notable for how short it is. That’s deliberate; Electronic Arts Inc. (NASDAQ:EA) has decided to focus efforts on a small crop of games this year. It plans to release just 11 major titles in 2013, as compared with the 36 it put out in 2011.

Electronic Arts Inc. (NASDAQ:EA)

That will allow EA to focus its development and marketing resources, but it also raises the stakes for each of these games, since a flop in any one could swamp the company’s results. FIFA 13, for example, was responsible for a whopping 17% of the company’s revenue last year.

The video game business has gotten more “hit” driven as sales have shrunk. Activision Blizzard, Inc. (NASDAQ:ATVI)‘s top four games, for example, accounted for 83% of its revenue last year — and almost every penny of its operating income. Activision says that despite the 21% decline in sales for the industry as a whole in 2012, the top five titles actually eked out a 1% gain.

Time for battle
Electronic Arts Inc. (NASDAQ:EA)’s challenge this year will be to break into that top tier. Its best chance there is probably Battlefield 4, which is set to challenge Activision’s Call of Duty franchise in a head-to-head matchup this fall. Activision is taking that franchise in an entirely new direction with Ghosts, so the door might be open for Electronic Arts Inc. (NASDAQ:EA) to win over gamers. And that might finally help the company turn the sales tide that it’s been losing badly to Activision lately.

ATVI Revenue TTM data by YCharts.

Regardless of which company wins this round, though, both will have to ramp up marketing spending in support of their relatively few launches. They don’t have a choice, even If it means lower profits this year. No game publisher can afford to be left behind as the industry moves to the next-generation consoles.

The article The Next-Gen Reboot That Could Carry Electronic Arts Stock originally appeared on Fool.com.

Fool contributor Demitrios Kalogeropoulos owns shares of Activision Blizzard, Inc. (NASDAQ:ATVI). The Motley Fool recommends and owns shares of Activision Blizzard.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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