Electronic Arts Inc.
's (
EA
) bid to go digital is being well-complemented by its online game
download platform, Origin. Recently, seven other game publishers
have chosen Origin for download and purchase of titles published by
the company. With the addition of these publishers, Origin now has
21 publishers on board, whose games are being made available
through its online platform.
Apart from Warner Bros., Interactive Entertainment,
THQ Inc.
(
THQI
), Capcom, Trion Worlds and Robot Entertainment that were already
present, Origin's newest additions include Focus Home Interactive,
Iceberg Interactive, Strategy First, Macro Games, Selectsoft and
Legendo Entertainment.
Origin was launched in June 2011 and since then it has roped in
9.3 million users. The top selling games that are available through
Origin include the recently launched MMO
Star Wars: The Old Republic
,
Battlefield 3
,
Need for Speed
The Run
and the ever-popular
FIFA 12
among other renowned games from EA's stable. Additionally, popular
games from other publishers include Warner Bros.'s
Batman: Arkham City
,
Saints Row: The Third
from THQ and
Rift
from Trion Worlds.
Incidentally, approximately 40% of sales of
Star Wars: The Old Republic
was through Origin. Moreover, in the recently concluded quarter,
EA's full game downloads reported a staggering 442.0% yearly
growth, which was primarily driven by downloadable content from
Origin.
Additionally, EA's digital revenue surged 79.0% year over year
to $377.0 million in the third quarter and contributed 23.0% of
total revenue, increasing significantly from 15.0% reported in the
year-ago quarter. Strong growth from mobile and other handheld
revenues and downloadable content (DLC) drove digital revenue
growth in the reported quarter.
Gamers' preferences have been changing to the digitized format
and playing games through smartphones and tablets continues to gain
popularity. Moreover, online social games have been changing the
gaming industry rapidly.
Although consumers continue to buy games that can be downloaded
to consoles or computers, digital downloads, used game sales and
game rentals are gaining popularity. We believe that given EA's
variety of titles and massive fan following, it is better equipped
to gain traction in the digital format than most of the other new
players.
EA has been shifting its focus to the digital format and
combined with its diversified portfolio and strong product
pipeline, it is expected to drive top-line growth going forward. We
believe that its high-quality titles, increasing online exposure
and social games guarantee market share gains over the long
term.
However, the gloomy macro-economic environment, increasing
competition and weak video game sales results over the last 12
months compel us to remain cautious in the near term. Competition
from
Activision Blizzard Inc.
(
ATVI
),
Zynga Inc.
(
ZNGA
) and new entrant
International Game Technology
(
IGT
) may act as the other headwinds going forward.
We have a Neutral recommendation on Electronic Arts over the
long term (for the next 6 to 12 months). Currently, Electronic Arts
has a Zacks #3 Rank, which implies a Hold rating in the short
term.
ACTIVISION BLZD (
ATVI
): Free Stock Analysis Report
ELECTR ARTS INC (
EA
): Free Stock Analysis Report
INTL GAME TECH (
IGT
): Free Stock Analysis Report
THQ INC (
THQI
): Free Stock Analysis Report
ZYNGA INC (
ZNGA
): Free Stock Analysis Report
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