Market Watch

EA's Digital Growth Story Marches On


Display Driver IC Forecast

EA revealed sales performance details for key digital titles and reaffirmed its' strategy for digital gaming at investor events hosted by Credit Suisse and UBS in the last month.

FIFA expansion, FIFA Ultimate Team, generated $15m for FIFA 09 which doubled to $30m for FIFA 10. While EA did not release a figure for FIFA 11 it did confirm that it was expecting strong year-on-year revenue growth. Ultimate Team requires players to purchase packs of player cards in order to play and purchasing additional packs increases a player's prospects in the game. EA claimed that, at the top end, customers were spending upwards of $500 on player cards.

EA's Battlefield shooter games have also diversified to download versions and paid DLC alongside disc-based releases. Battlefield Bad Company generated $2m (PC only) while the download only Battlefield 1943, released in 2009 for HD consoles, generated $16m. Battlefield Bad Company 2, released in C1Q 2010, has thus far generated $30m in digital revenue.

Analysis
EA has taken an aggressive approach to increasing the proportion of revenue it earns from digital and online gaming, setting itself the target of $750m (up from $570m) in fiscal 2011. With $350m generated in H1 and an encouraging digital story for the rest of the fiscal year, Screen Digest believes the company is on course to meet its' revenue objective.

  • Strong console DLC slate including major Battlefield BC2 expansion, Sims 3 DLC
  • Seasonally driven purchasing at Christmas, less pronounced than for packaged goods however EA peg console downloads (driven by new console purchasers) and smartphone games sales (iOS devices received as gifts being loaded up) as two digital streams which benefit from seasonality
  • Strong sales for existing Kindle games
  • Playfish growth on social

EA's digital revenues offer healthier margins relative to packaged goods but across numerous, smaller scale segments compared with physical retail. EA stated in its last conference call that margins on console DLC once costs have been recouped is "90 per cent plus" net of platform owner fees and that it had doubled revenues on console DLC year on year.

The key consideration for EA's digital growth prospects is the number of these sectors it can scale up into many hundreds of millions or even billion dollar revenue lines. While the casual and mobile segments aren't likely to generate significant growth, social, console and PC DLC and full game downloads have grown quickly in the last two years. EA's challenge is to further refine its games development bets to drive growth going forward.

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