Hardcore gaming is here to stay
Unlike Zynga Inc (NASDAQ:ZNGA), EA primarily produces games for the “hardcore” gaming market segment. Not too long ago, analysts everywhere were calling the “end” of hardcore games and the age of “casual” gaming. (They also talked about the “end” of PC gaming in favor of mobile games.) So far, we haven’t seen it.
“Hardcore” games such as Battlefield continue to set blockbuster release records that rival that of major summer movies. PC gaming, for the same reasons, won’t disappear anytime soon either. Hardcore games need high-end (or at least decent) computer performance. That’s not coming from today’s tablets or cell phones.
Activision Blizzard, Inc. (NASDAQ:ATVI), another game maker playing primarily to the hardcore gaming segment, is enjoying a nice profitable year. It is on track to do $4.3 billion in net revenue this year, and has $4.5 billion in cash. It has its own rival franchise to EA’s Battlefield series called Call of Duty and just released its Black Ops 2 installment in late 2012 doing $1 billion in sales in 15 days . It is also the company behind World of Warcraft, a popular multiplayer online game with 7.7 million subscribers at last count. At a $15 a month subscription, that is $115.5 million in revenue monthly.
Because of its cash cushion and great game lineup, Activision Blizzard, Inc. (NASDAQ:ATVI) will probably be doing well over the next coming years; however, its flagship World of Warcraft revenue stream has been taking a great loss in subscribers to the tune of almost 2 million people since December of last year. This is probably due to player fatigue. (You can release only so many expansion packs and special quests!) Eventually people will want something entirely new and fresh and Activision Blizzard, Inc. (NASDAQ:ATVI) will need to either come up with a way to stem its player loss on their current franchise, or come up with and entirely new one to bring its subscription revenues back up.
I believe Electronic Arts Inc. (NASDAQ:EA) stock is undervalued and that it will eventually grow to reflect its real value. Not sure where Zynga is headed, but it’s not looking good for the company. It needs a hit (or two), and it needs one fast. It needs to reevaluate its core value offering, find a way to reconnect with users, and stop hemorrhaging talent.
The article Electronic Arts: Get in the Game originally appeared on Fool.com and is written by Marcus Tisdale.
Marcus Tisdale has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard (NASDAQ:ATVI). The Motley Fool owns shares of Activision Blizzard.
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