Confirming earlier rumors, video game developer and publisher
Electronic Arts (
EA
)
recently announced the availability of
Real Racing 3
for
Apple's (
AAPL
)
iPhone, iPad and iPod touch.
Real Racing 3
will also be available on
Google's (
GOOG
)
Play and
Amazon's (
AMZN
)
application store.
Developed by EA's Firemonkeys studio,
Real Racing 3
comprises 900 different events and 600 hours of total gaming. But
the game's major attraction is its free availability. Unlike its
predecessor
Real Racing 2
, the game can be downloaded for free and EA expects to earn
revenues by selling in-game virtual goods.
Another important feature of
Real Racing 3
is the use of time shifted multiplayer ("TSM") technology. TSM
allows players to compete against each other anywhere and anytime
and on any device, even if they are offline. We believe that
these new features will help the game to earn significant
revenues going forward.
Real Racing 3
is the first freemium game of the
Real Racing
franchise. Free-to-play games, popularly known as freemium games,
enable gamers to access the game for free. Developers and
publishers earn revenues through the sales of in-game items (also
known as micro-transactions) and advertisement. The freemium
model has gained further momentum with the increasing popularity
of social games, co-operative games and mobile games.
EA has been focusing on building its social free-to-play
portfolio to counter strong competition and also to offset
declining sales of its core packaging division. The company
continues to bring its well known franchises such as
Star Wars
,
FIFA
,
The Sims
,
Warhammer
,
Command & Conquer
,
Battlefield
and
Need for Speed
in the freemium mode in order to gain significant customer base
going forward.
In the recently concluded third quarter, revenues from mobile
and other handheld devices increased 18.0% year over year to
$99.0 million. Smartphones and tablets revenues were up 36% year
over year to $79.0 million. Moreover, extra content and free-
to-play revenues jumped 50.0% year over year to $185.0
million.
EA expects contribution from free-to-play, casual and social
games to increase to approximately 35.0% of worldwide digital
revenues by calendar year 2013. We believe that EA's strong
digital portfolio and continuing growth in the free-to-play and
online segment will drive top-line growth in the near term.
Moreover, EA recently announced its intention to introduce
micro-transactions in all games including packaged goods.
However, packaged games cost much more than mobile and
free-to-play, and the added cost will aggravate customer dissent
toward packaged titles. We believe that this will hurt EA's
customer base going forward.
Additionally, we believe that soft video game industry
performance, particularly due to weakness in retail sales amid an
aging console system lifecycle, remains a concern in the near
term.
Currently, EA has a Zacks Rank #4 (Sell).
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