Blockbuster video game publisher Electronic Arts didn’t have much happening in its fourth fiscal quarter, other than the launch of the relatively small independent co-op title A Way Out. But EA had a relatively strong earnings result, thanks to the strength of ongoing live services for games such as…
Blockbuster video game publisher Electronic Arts didn’t have much happening in its fourth fiscal quarter, other than the launch of the relatively small independent co-op title A Way Out. But EA had a relatively strong earnings result, thanks to the strength of ongoing live services for games such as FIFA 18 (and its Ultimate Team game) and Madden NFL 18.
Some worried that games such as Fortnite, which has become the world’s most popular game in the battle royale genre, could threaten EA’s revenues. But analyst Colin Sebastian of Baird Equity Research said that such fears were “likely overblown,” and EA sees Epic’s barnburner bringing in more players to Battlefield.
EA Sports topped 90 million players and helped drive revenues through live services. FIFA and Madden’s competitive players — the esports pro and amateur crowd — were up 75 percent from a year ago to 18 million.
EA’s non-GAAP revenue was $1.25 billion, above expectations of $1.23 billion. About 68 percent of the net bookings came from digital. Non-GAAP earnings per share of $1.28 was above analyst consensus of $1.16.
EA forecast a relatively modest result in the first fiscal quarter ending June 30, with revenue at $720 million and breakeven earnings per share. EA’s big titles of the year included new FIFA, Madden, and Battlefield titles, as well as the original sci-fi title Anthem coming in early 2019. EA will describe more about those titles at the upcoming Electronic Entertainment Expo (E3) in June.
“We look forward to innovation in this industry,” said Blake Jorgensen, chief financial officer at EA, in a conference call with analysts. “We welcome games like Fortnite and PUBG. We don’t think one game will capture 100 percent of the market. It just doesn’t happen that way. We think in the case of Fortnite it has grown the whole marketplace.”
CEO Andrew Wilson said in the call that the company will continue to double-down on esports and competitive gaming, and it was excited at the opportunity to grow the category further.
Meanwhile, EA doubled its stock buyback effort, authorizing $2.4 billion in share repurchases over the next two years. Such efforts help build investor confidence in the stock price.
While EA is confident about Battlefield and Anthem, it noted that the end of the year will have big competition (notably, Rockstar’s Red Dead Redemption 2), and it was being cautious about guidance. The new Battlefield will have both single player and multiplayer modes, Wilson confirmed, and it will have both live services and community engagement right from the start.
“We are excited to make Anthem a game that our players can’t wait to play and share with their friends for years to come,” Wilson said.
Mobile games are roughly half of the $138 billion worldwide games business, according to market researcher Newzoo. And EA is investing heavily there. It has begun alpha testing on Star Wars: Rise to Power, a new multiplayer strategy game that will be different from the ongoing hit Star Wars: Galaxy of Heroes. Jorgensen said he does not believe the games will cannibalize each other, just as having two mobile games based on The Sims has not hurt either title.
EA is repatriating some of its cash from overseas to take advantage of new tax laws, but Jorgensen didn’t say whether EA would use some of that for acquisitions.
Wilson said that the future will involve a lot of investment in platforms — such as game streaming — where people can play wherever they want. And EA is investing in subscription business models, networked games, and cloud gaming, Wilson said.
Loot crates got EA into trouble for charges of overly aggressive monetization with Star Wars: Battlefront II. But Wilson said that he was confident that regulators would understand globally that loot crates are not gambling, particularly since you cannot legally cash out winnings of virtual currency or loot from the games. He said EA would continue to think about loot boxes in a “transparent, fun, fair, and balanced way.”
Jorgensen said that EA’s emphasis on numbers of monthly players or total players was a better representation of results than unit sales metrics.
“We are trying to move away from that and the business model has changed,” he said. “Unit sales are less significant due to the power of event-driven live services. Live services is the bedrock of our business. Unit sales have become misleading to the street, and we will stay away from that.”
