Electronic Arts Inc. (EA), Zynga Inc (ZNGA): Mobile Gaming Takes Off

It’s harder to quantify the value of merchandise sales and successful intellectual property, but both these factors offer potential for upside. Consider that, last quarter, Disney made more money from merchandise than movies. At the same time, Electronic Arts Inc. (NASDAQ:EA)’s rival Activision-Blizzard relies heavily on its Call of Duty franchise — in the fourth quarter of last year, a single Call of Duty title brought in 40% of Activision’s revenue.

Zynga is in the midst of a transformation
And unlike Zynga Inc (NASDAQ:ZNGA)’s titles, Plants vs. Zombies 2 will have staying power — people will still be playing it years from now.

Although Zynga is commonly viewed as a mobile game developer, it is more accurately identified as strictly a social game developer — while its games appear on mobile devices, the key element is their social aspect.

Because of their social nature, Zynga’s games can — like a virus — explode in popularity. It’s no fun to play Words With Friends alone — you need other people. So you’ll encourage your friends to download and play it with you. But the opposite is also true. Once enough people get tired of a given Zynga game, the popularity of the title drops drastically. If your friends quit playing, you will quit as well.

This is why, just months after Zynga Inc (NASDAQ:ZNGA) spent $200 million on OMGPOP, the popularity of its hit title, Draw Something, plummeted. Last fall, Zynga wrote off nearly half the purchase price, and then, earlier this summer, moved to close the studio down.

In contrast, Plants vs. Zombies 2 (and Candy Crush, and other successful mobile games) is single player. Even if your friends stop playing it, you can still have fun with the game.

Zynga’s new CEO, Don Mattrick, has begun to reshape Zynga, shuffling around its top executive team. Yet, he has not detailed his strategic plans for Zynga. Until he does, Zynga remains a speculative investment.

Investing in mobile gaming
Mobile gaming is a growing industry. As consumers continue to adopt tablets and smartphones, demand for mobile games increases.

When it comes to gaming stocks, EA might be the best positioned. Investors commonly think of Zynga Inc (NASDAQ:ZNGA) as a mobile game developer, but the studio’s reliance on social gaming and the ongoing management turmoil make it a difficult investment.

Soon, Plants vs. Zombies 2 is going to be recognized as the next great mobile game. And when that happens, EA will benefit.

The article Electronic Arts Is Better Off Than Zynga When It Comes to Mobile Gaming originally appeared on Fool.com and is written by Sam Mattera.

Sam Mattera has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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