Declining Demand Of FIFA 16 On Older Platforms Hurting Electronic Arts

Although FIFA 16's spectacular start has brought some relief to Electronic Arts ( EA ), the numbers indicate that it still has to catch up to last year's performance. However, the story does not end there.

Released during the last week of September 2015, FIFA 16 is EA's wildcard release for this year's holiday season. It is one of the money-minting franchises for the company, and one of the most successful sports title brands throughout the world, as its mass appeal and realistic game-play attract millions of gamers every year. Six weeks after the release of the game, the unit sales numbers indicate that FIFA 16 is finding it tough to outperform last year's release. However, the performance is more than the expectations. Let's discuss it in detail:

Our $76 price estimate for Electronic Arts' stock is slightly above the current market price.

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FIFA 16 Vs FIFA 15: No Major Event This Year

In our prior article, we discussed the probable reasons for slowing FIFA sales this year. (See: Electronic Arts: Why FIFA sales growth will probably slow down this year ) According to Trefis estimates, FIFA unit sales have almost tripled from 6.4 million units sold in 2010 to roughly 18.7 million units sold in 2014. Interestingly, sales of FIFA titles are cyclical, as the sales increase in those years coinciding with the Soccer World Cup (FIFA World Cup), or UEFA EURO Cup. One of these two events happens every alternate year, for example, in 2014, Brazil hosted the World Cup and France will be hosting the Euro Cup in 2016. Between these two events, FIFA sales have been seen to increase during those years when there is a World Cup event.

In 2014, FIFA sales rose approximately 27% year-over-year (y-o-y) driven by the FIFA soccer World Cup held in Brazil. In fact, the company released a special mid-year edition of the franchise just before the event: 2014 FIFA World Cup Brazil, which further boosted the franchise's sales. On the other hand, there is no major soccer tournament in 2015, and that will be a major factor in the slower volume growth of the franchise.

According to sales data by VGChartz, FIFA 16 volume sales in the first week of the release reached 4.944 million units comparable to that of FIFA 15 , which sold 4.947 million units in its first week. The noteworthy fact is that FIFA 16 sales growth declined y-o-y in the next 4 weeks. Nonetheless, the growth still beats that of FIFA 14 in 2013, as most of the gamers have transitioned to new generation platforms over these two years.

FIFA 16 Still Outperforming Expectations

Despite the absence of any major soccer event this year, the newer edition of the franchise, FIFA 16, is performing better than the expectations. According to experts, FIFA 16 was expected to be at least 6-7% below last year's performance. Surprisingly, FIFA 16 sales in the first 5 weeks is just 2% down y-o-y, with a total of 7.67 million unit sales as of October 24, 2015. This is a noteworthy performance, considering the fact that core gamers gave an average review to the new edition.

According to NPD game sales report, software sales for the 10 month period of 2015 are in-line with the last year's similar period.

Note that, till October 2015, Activision's Call of Duty: Black Ops III , did not come out in the market. Analysts believe that since most of the gamers have transitioned to new generation platforms, their interest in buying new games, despite the popularity of those games, have increased. As a result, the unit sales per title for games this year has increased and will continue, or may even increase, in the coming few months. This might give FIFA 16 a further advantage to shrink the gap between its unit sales volume and that of FIFA 15 .

Console Generation Shift Is Clearly Visible

Another significant take-away from the sales numbers was the fact that weekly sales of the FIFA 16 on new console systems (PS4 & Xbox One) exceeded that of FIFA 15 and FIFA 14 on these systems, indicating the gamers shift to next generation platforms.

On the other hand, weekly sales of FIFA 16 on older platforms (PS3 and Xbox 360) was significantly down compared to sales of FIFA 15 on these platforms. Due to this decline, the FIFA 16 sales collectively grew slower than that of FIFA 15, and are also just slightly above that of FIFA 14 , whose sales on older consoles were much greater.

It will be interesting to note what FIFA 16 can do in this year's holiday season. It is highly probable that the title will sell less than what it did last year. However, the question arises whether the title's sales number will stay above that of FIFA 14, or will the declining sales of the title on older generation platforms hamper the overall growth?

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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