DFC Intelligence's David Cole weighs in on the strong performance of EA's live service and sports games.
EA has released its financial report for Q4 and full year 2020, and the numbers show a strong increase in revenue driven largely by live service games and digital distribution. Net revenue for the three months ended March 31 hit $1.4 billion. In all, net revenue for the previous 12 months totaled $5.5 billion, an increase over the $4.9 billion from the previous year. In an earnings call with investors, EA’s CEO Andrew Wilson said that revenue surpassed the company’s projections by a good margin.
“We finished a strong year for Electronic Arts with fourth quarter and full-year revenue and earnings above our previously-raised guidance,” Wilson said. “The innovation that we are delivering to players across the breadth of our games and live services continues to drive strength in our business.”
On the software side, FIFA continues to be one of the strongest performers in EA’s portfolio, boasting more than 25 million unique players. As usual, Madden NFL 20 also figured heavily into the year, and EA said that franchise engagement has never been higher.
“EA Sports is a pillar of our portfolio and continues to bring more players together,” Wilson explained. “FIFA is one of the biggest and most engaging entertainment franchises in the world. Madden NFL is a cultural icon in football, gaming and entertainment, and it just had its biggest year ever. We took a new approach to launching and rolling out new modes of play in Madden NFL 20, and the result was the highest engagement levels in franchise history.”
Of course, the ongoing coronavirus pandemic is calling the sustainability of these sports franchises into question like never before. However, EA is confident in its portfolio’s ability to fill the void left by the cancelation of real-world sports leagues.
“We have a long history of creating spectacular sports content,” Wilson said. “It’s not actually directly dependent or reliant on the real world of sports. I actually believe that there is an opportunity for us to continue to do that for players, even if sports are delayed or don’t make it back this year.”
David Cole, analyst at DFC Intelligence, notes potential growth in EA’s sports portfolio in the face of global quarantine orders.
“Sports games could be interesting,” Cole told GameDaily. “The lack of real-world sports could actually increase sales. Already we are seeing real-world players getting together in sports simulations to interact with fans and other players. This could be a really interesting area. It is one of EA's biggest opportunities.”
Outside the sports arena, EA noted strong contributions from a pair of its evergreen live service titles. Both Apex Legends and The Sims 4 have performed very well in recent months, according to the report, with the former being the most-downloaded free-to-play game of 2019.
“The Sims 4 inspires an entirely different gaming audience, and one that continues to grow,” Wilson told investors. “It provides a completely unique experience from anything else on the market, and FY20 was its biggest year since launch. In every quarter this year, monthly average players in The Sims 4 were higher than the previous year. Our Sims community is diverse and highly creative, and our success continues to be built on delivering a wide variety of content and ways to engage for players with very different interests.”
“The Sims 4 is one of those evergreen titles where consumer engagement remains high for a long period of time,” he explained. “It fits into those world building and user-generated content models where consumers are constantly making new creations. EA also continues to add content to keep the game fresh. These types of games are becoming increasingly important for companies like EA to have a consistent audience and revenue base. The monetization is ongoing, and only increases during a time like this.”
Between The Sims 4, Apex Legends, and the suite of ever-popular sports titles, it’s live service games that have cemented EA’s position as a market leader. Of the $5.2 billion in net bookings the company saw over the last 12 months, $3.6 billion came from live services.This is a 17% year-over-year increase, according to the financial report.
“With our teams’ expertise in live services, we’re also building some of the biggest ongoing experiences in the industry,” Wilson explained. “We have a lot more for the growing Apex Legends community this year, starting next week with Season 5. Maxis will continue delivering Sims 4 content that empowers self-expression and fuels the creativity of our diverse player audience. In addition to our new EA Sports games, we’ll continue delivering fans’ daily connection to sports through our live services, even if the real-world leagues and teams aren’t back in action yet.”
Elsewhere, Star Wars Jedi: Fallen Order also made a strong impact on EA’s financials in 2019.
“Star Wars Jedi: Fallen Order is one of the breakout titles of the last several years,” Wilson said. “More than 10 million unique players have joined the game since launch, a rare achievement for the first title in an entirely new franchise. It’s a meticulously well-crafted game, and it continues to give fans a deeply-engaging and original Star Wars experience.”
Of the quarter’s $1.4 billion in net revenue, digital spending accounted for $1.2 billion. This is in line with the industry’s larger shift toward digital distribution; in December, digital spending hit almost $10 billion, according to analyst group SuperData. Cole said that he’s not surprised at the role digital played in EA’s report, and expects this trend to continue even after stay-at-home orders are lifted.
“Overall, EA is in great shape,” Cole said. “Like with all companies, the big challenge is continued product development and operations given the work conditions. They have a diverse lineup of games for a wide range of demographics. Their various sports games appeal to a different audience than the Sims or Star Wars. During stay-at-home orders, more people engage with those products, and that should have a long-term positive impact.”
Looking forward, it should be interesting to see if EA can carry this impressive momentum into the next generation of consoles. As one of the preeminent publishers in the games industry, EA has the clout to help set the tone for a new console cycle. Expect the company to lean further into its live services as we head toward the imminent launch of the Xbox Series X and PlayStation 5.
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