BioWare, a division of video game developer and publisher
Electronic Arts Inc.
(
EA
), recently announced a new free-to-play game from its well known
Ultima
franchise. The new game called
Ultima Forever: Quest for the Avatar
is expected to release later this year on personal computers as
well as on
Apple's
(
AAPL
) iPad tablet.
Launched way back in 1981 by Origin Systems,
Ultima
was a series of role playing games ("RPG") set in the fantasy world
of Britannia. The last title from the franchise was a browser based
online strategy game known as
Lord of Ultima
in 2010, which failed to create much fanfare.
The new game is a true copy of the 1985 release
Ultima IV
, one of the most successful games of the franchise to date.
Typical of the BioWare developed games, the latest from the
Ultima
franchise follows a story line, based on which gamers are required
to collect the eight virtues in order to end their quest in
Britannia. Based on the cross-platform feature of the game, it
offers both single-player and multi-player options from anywhere at
any time.
Ultima Forever: Quest for the Avatar
is the latest addition to EA's strong portfolio of free-to-play
games segment, which includes popular franchisees such as
Warhammer, Command & Conquer, The Sim
s,
Battlefield
and
Need for Speed
. Last month, EA announced a free trial version of
Star Wars: The Old Republic
, which will allow gamers to play the game up to the 15th
level.
Although most of these games can be played for free, EA earns
revenues through the sales of in-game items and advertisement. EA's
digital gaming segment Play4Free boasts more than 25 million active
players worldwide, primarily driven by the popular titles from
these franchises.
EA expects the digital segment to generate revenues of $1.15
billion to $1.2 billion in fiscal 2012. EA expects contribution
from free-to-play, casual and social games to increase to
approximately 35.0% of worldwide digital revenue by calendar year
2013.
We believe that EA's innovative product pipeline will boost its
market share in the online gaming market. Moreover, EA's strong
focus on the digital segment will help it stand out even amid the
sluggish market conditions going forward.
With consumer spending on free-to-play games, mobile games and
social games on the rise, we believe that EA's significant exposure
to these segments provides it a competitive edge over traditional
peers such as
Activision Blizzard Inc.
(
ATVI
).
Further, EA's accretive acquisitions of Klick, PopCap games and
Playfish over the last couple of years have bolstered its social
free-to-play portfolio to counter strong competition from the likes
of
Zynga Inc.
(
ZNGA
) and also to offset declining sales of its core packaging
division.
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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