Video developer and publisher
Electronic Arts
(
EA
) recently announced the upcoming sequel of the
Dragon Age
franchise. Developed by Bioware, the new game called
Dragon Age 3: Inquisition
is expected to release in late 2013.
Dragon Age
is one of the most popular franchises of EA. The company has sold
more than 8 million copies since its release of
Dragon Age: Origins
in 2009. EA released the second part of the game
Dragon Age II
in 2011. Both the titles were followed by numerous downloadable
contents ("DLCs") and expansion packs that kept the gamers
captivated.
We believe that the much needed sequel will boost the game's
popularity going forward. The new storyline of the upcoming
Role-Playing Game ("RPG") will be powered by DICE's (another EA
studio) Frostbite 2 technology, which supported games such as
Battlefield 3
and
Medal of Honor: Warfighter.
This is expected to be the additional attraction of the game in our
view.
The video game industry is going through a lean phase for some
time. U.S. retail sales declined for the ninth consecutive month in
August 2012, primarily due to the ongoing transition towards mobile
and free-to-play gaming coupled with lack of new physical game
releases.
We believe that new games such as the upcoming
Dragon Age
sequel are needed to boost U.S. retail sales going forward.
Superior graphical quality due to technological advancement,
intriguing storytelling, new plots and effective packaging are
essential to drive a recovery in the retail market, in our
view.
We believe that EA is well positioned to benefit from this pent
up demand for new packaged games going forward. The company's
strong product pipeline along with regular digital updates will
boost top-line growth over the long term.
However, EA will face significant competition from its close
competitor
Activision Blizzard
(
ATVI
). Moreover, an aging console platform and improving monetization
of mobile games remain concerns. We believe that EA'sgrowing
Play4Free game portfolio will cannibalize packaged goods sales
going forward.
This compels us to remain Neutral on the stock over the long
term. Currently, EA has a Zacks #3 Rank, which implies a Hold
rating in the near term.
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