Consistent with its strategy of expanding into the social
gaming market,leading video game developer and publisher
Electronic Arts Inc.
(
EA
) recently launched a new social game called
Word Derby
. The multiplayer turn-based game is currently available at
Apple's
(
AAPL
) App stores and can be played on iPhone and iPad.
Developed by social gaming apps developer Mention Mobile and
published by EA's Chillingo division,
Word Derby
can be played by a maximum of four players. They are allowed to
choose any of the four horses namely "traditional derby horse,"
"flashy unicorn," "candy cane piñata" and "fire breathing dragon"
to join the derby race.
Players need to create words in order to win power-ups and
bonuses that will help their horses to win points. A player
reaching the 200 mark first wins the derby trophy and his/her
achievement will be displayed on
Facebook
(
FB
).
Word Derby
allows virtual gambling, which is the game's additional
attraction. Players are allowed to place wagers on their horses
by using the
Word Derby's
in-app currency, which is its primary revenue earning source.
Word Derby
adds to EA's expanding word-based gaming portfolio that includes
popular games such as
Word Smack
. We believe that the popularity of the EA brand, coupled with
its availability on Apple devices such as the iPhone 5, will
benefit the new game going forward.
We believe that EA will continue to develop and publish social
games particularly due to the staggering growth expectation of
the sector. According to research firm IBISWorld, social gaming
is one of the fastest growing industries in the United States.
The sector is expected to earn $4.5 billion in revenue for 2012.
Revenue is forecasted to reach $12.3 billion by 2017.
Although the market is getting overcrowded with the entry of
new developers thereby increasing competition for established
players such as EA,
Zynga Inc.
(
ZNGA
) and
The Walt Disney Company
(
DIS
), we believe that EA's innovative product pipeline (that
involves social & mobile versions of popular franchises) will
provide it a significant competitive advantage going forward.
Notably, EA is set to release 31 new games for the social, mobile
and free-to-play platform in fiscal 2013.
However, the highly fragmented video game market continues to
witness increased competitive pressures, which are hurting its
overall profitability. 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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