The launch of a range of new products could stimulate Electronic Arts' (EA, Financial) stock price. The company has a number of new title releases ahead, while its expanding presence in esports and its first foray into esports mobile gaming may lead to a wider range of revenue streams.
New technology could provide the company with a competitive advantage versus peers, while also increasing its total addressable market. While competing subscription platforms are set to be launched, the company is due to offer multiple price points for its own service, which could help it to grow market share.
Although the Electronic Arts stock price has fallen 17% in the last year versus a rise of 6% for the S&P 500, it appears to have investment potential.
Product potential
New products could catalyze Electronic Arts’ financial performance. The company is due to release first-person shooter video game Battlefield V on Nov. 20, with it being the broadest offering yet in what has been a highly successful franchise. The launch is set to be followed two weeks later by a live service called Tides of War, which will commence regular content updates aimed at further monetizing the franchise.
The business also anticipates that demand for its Ultimate Team offering will increase. Engagement has been strong since its launch, with the average number of games played per player increasing year-over-year. The company is ramping up its live events within the service, with participation set to grow.
Electronic Arts is also set to benefit from the increasing popularity of esports. Over 20 million players participated in its FIFA esports league, while viewership of the FIFA eWorld Cup Final increased 400% versus the previous year. The company is seeking to generate additional revenue streams through sponsorships, broadcast agreements including the current deal with ESPN, and licensing deals.
Alongside this, it is expanding the ecosystems of its esports products, while also releasing its first entry into mobile esports. Command & Conquer: Rivals is set to increase its global audience of players, with it seeking to connect more players. The company has found that players who watch esports often spend more and return to the product with greater frequency.
Technology
Technological change could present a growth opportunity for the business, with it seeking to bring next-generation experiences to its customers. It is expanding the capabilities of its Frostbite game engine through advances in ray tracing, artificial intelligence and scalable world editing. Alongside improvements in game engine technology, Electronic Arts is also investing in social layers and services as well as the cloud, which could provide it with a competitive advantage versus industry peers.
It is merging Frostbite with an expanding suite of digital services in order to create a fully integrated platform. This could provide increasingly interactive services for players, while cloud gaming could allow games to reach new audiences and geographies. The company’s growing Player Network could provide it with an increasing total addressable market through which to deliver enhancements in technology.
Competition
Microsoft (MSFT, Financial)'s plan to launch the Xbox Game Pass on Windows PCs could present a competitive threat to Electronic Arts. It is a subscription-based gaming platform for the Xbox One which allows players unlimited access to a variety of games. This follows its decision to launch Xbox Game Pass last year, which provides gamers with unlimited access to a library of over 100 games. The offering on both console and Windows PCs is comparable to Electronic Arts’ Origin Access service for PC Gamers and the EA Access for Xbox One gamers.
Although competition in the subscription service area may increase, Electronic Arts is currently focused on a lower price point than Microsoft. Both of its services cost $4.99 per month, while Microsoft’s offering is $9.99 per month. Electronic Arts also intends to launch a premium version of Origin Access that will provide access to newer games than the existing service. Offering multiple price points could increase its total addressable market and help to maintain its relatively high market share.
Outlook
New product releases could catalyze Electronic Arts’ financial performance. Its expansion within esports and in esports mobile could allow it to capitalize on changing consumer trends. New technology may provide it with a competitive advantage versus sector peers, while also increasing its addressable market through the development of cloud-based offerings.
Although competitive pressure may increase in the subscription marketplace, the company’s plans to have multiple price points could increase its market share. Having underperformed the S&P 500 in the last year, the stock could offer investment appeal.
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Electronic Arts Still Has Legs to Run
