Consistent with its strategy of expanding its social gaming
portfolio,leading video game developer and publisher
Electronic Arts Inc.
) recently announced that its simulation game
is now available on
Developed by Maxis and Playfish (both EA studios), the
app provides players with easy-to-use tools that allows them to
create and build their own cities. Being a social game, players are
allowed to visit their friends' cities, can use their resources to
complete tasks and can also choose to build friendly relationships
Over the last couple of years, EA has taken several initiatives
to gain traction in the popular segment of social gaming through
various games such as
The Sims Social
is the latest offering from EA in this space.
According to market research firm eMarketer, there will be
approximately 76.5 million social gamers in the US by the end of
2012, of which 48.0% will be social network user. Social networks
such as Facebook have become the major destination for social
gamers as well as game developers.
Social game makers such as
), Rovio and Mensing have successfully utilized the Facebook
platform to garner significant customer base and revenue over the
last couple of years. However, among all these developers, Zynga
had been the most successful to date.
As of March 31, 2012, Zynga alone had 292 million players
engaged on its various games in Facebook. Zynga had eight of the
top ten games on Facebook, based on daily active users (DAUs).
Currently, Zynga derives 85.0% of its traffic and 92.0% revenue
In order to consolidate its position in the rapidly growing
social gaming sector, EA signed a five year agreement with Facebook
back in 2010. However, EA's success rate on Facebook has been
The Sims Social
garnering significant customer base, its other social games were
unsuccessful. EA believes that the new
will be able to boost its customer base further and provide
significant competition to Zynga's
We believe that EA is diversifying its revenue generating base.
With rising consumer spending on digital gaming (social, mobile,
casual), we remain optimistic on EA's growth trends over the long
term. The company is opening up new fronts in social, mobile and
online gaming based on its well known franchises, which is expected
to boost its customer base going forward.
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
sluggish market conditions going forward.
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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