EA's Star Wars Game Helps Lift Sales, Profit -- Update
January 30 2020 - 6:03PM
Dow Jones News
By Sarah E. Needleman
Electronic Arts Inc.'s latest Star Wars game helped the company
deliver robust holiday-quarter results, though the publisher will
have a thin release slate this year as next-generation gaming
consoles are primed to hit the market.
EA said it earned $1.18 a share in its fiscal third quarter, up
from 86 cents a share a year earlier. Revenue rose 24% to $1.59
billion.
On an adjusted basis EA's profit rose to $2.52 a share while net
bookings climbed 23% to about $2 billion, with both figures coming
in slightly ahead of analysts' expectations.
EA's "Star Wars Jedi: Fallen Order" made its debut in November
and sold around eight million units during the quarter. The company
previously forecast selling between six million and eight million
units of the single-player game by March 31. It now projects sales
of around 10 million units by that date.
Analysts are also expecting strong quarterly results for
Take-Two Interactive Software Inc. and Activision Blizzard Inc.
based on viewership statistics from Amazon.com Inc.'s Twitch
streaming service, critics' reviews and company statements about
holiday-season releases. Both companies are scheduled to release
their quarterly reports on Feb. 6. Take-Two faces a somewhat
tougher comparison, though, because its 2018 holiday release, "Red
Dead Redemption II," was a smash hit that generated opening-weekend
sales of about $725 million.
Wavering interest in Epic Games Inc.'s megahit "Fortnite" also
likely helped the big publishers' performance during the holiday
season, analysts have said. In the fourth quarter, digital revenue
for "Fortnite" across platforms, including consoles, was down 70%
from the year-earlier period, according to estimates from Nielsen
Holdings PLC's SuperData.
Wall Street's earnings forecasts for later this year, though,
are more muted. And EA's shares fell in after-hours trading, as the
company's guidance for net bookings in the current quarter fell
short of analysts' forecasts.
EA doesn't have plans to release any games in this quarter or
next. The company has also said it would wait to release the next
installment of its "Battlefield" franchise until the 2021 holiday
season, when more people are likely to own new gaming consoles
coming to the market later this year from Microsoft Corp. and Sony
Corp. Usually the war series, one of the company's best-selling
properties, comes out every two years, so it had been expected to
be on tap for the 2020 holiday season instead.
"The publishers don't want to rush out their biggest hits before
people have had time to buy the new consoles," said Jefferies
analyst Alex Giaimo.
For now, EA has indicated that it plans to grow its business
this year by focusing on live services, which consists of revenue
from in-game purchases and subscriptions. The strategy reflects a
broader industry trend where game companies work to generate
revenue from hits long after their release.
Other game publishers also are likely to keep their release
slates light until after the new consoles hit store shelves.
Analysts expect companies to lean on annualized franchises like
"Call of Duty" and Take-Two's "NBA 2K" to drive results.
EA, Activision and Take-Two historically have dominated
game-industry sales with their blockbuster console games. But these
days such titles account for a shrinking slice of the overall
market as more people opt to play games on smartphones and tablets
-- platforms where the three publishers have a smaller
presence.
Global revenue from console games rose 7.3% last year to reach
$45.3 billion, according to gaming and esports research firm Newzoo
BV. Yet mobile games took in the largest chunk of the industry's
$148.8 billion world-wide revenue, accounting for $68.2 billion, or
46% of the total, Newzoo says. Console games accounted for just
under a third of that total.
Activision also hasn't announced any major games for 2020 aside
from "Call of Duty" and introducing new content within its "World
of Warcraft" game, though it has said a sequel to "Overwatch" and a
new "Diablo" action game are under development. Meanwhile, Take-Two
hasn't said whether it will release a marquee title for the 2020
holiday season.
Mr. Giaimo of Jefferies cautioned that it is possible the
companies will release a surprise hit akin to last year's "Apex
Legends," a popular, free combat game from EA that generates
revenue from in-game purchases. The company didn't promote the free
combat game ahead of its release, and its swift success caught
investors off guard.
Over the past 12 months through Thursday, shares in all three
companies are up between 24% and 31%, compared with a 23% rise in
the S&P 500 and a 29% gain in the tech-heavy Nasdaq Composite
Index.
Alex Perez, 44 years old, is waiting until publishers start
releasing games made for the new machines before adding any more
titles to his library. He doesn't care that Microsoft and Sony have
said their new consoles will be capable of playing older games.
"I want the full immersive experience," said Mr. Perez, an
elementary school principal in Long Beach, Calif., who intends to
buy the PlayStation 5 on launch day. "I'll hang tight."
Write to Sarah E. Needleman at sarah.needleman@wsj.com
(END) Dow Jones Newswires
January 30, 2020 17:48 ET (22:48 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Electronic Arts (NASDAQ:EA)
Historical Stock Chart
From Aug 2024 to Sep 2024
Electronic Arts (NASDAQ:EA)
Historical Stock Chart
From Sep 2023 to Sep 2024