Electronic Arts, Inc
Electronic Arts (EA) are a global leader in digital interactive entertainment.
They act as a developer, publisher, and distributor of video games.
Through their cutting-edge games, innovative services, and powerful technologies, they bring entertainment to nearly 600 million active players and fans around the globe.
Employees: 12,900
Revenue: $6.99bn for FY2022
HQ Location: Redwood City, California, U.S.
What they do:
They develop and deliver games, content, and online services for Internet-connected consoles, mobile devices, and personal computers.
EA Studios is made up of over 20 studios and more than 6,000 creators globally.
They are recognized for a portfolio of critically acclaimed, high-quality brands such as EA SPORTS™ FIFA, Battlefield™, Apex Legends™, The Sims™, Madden NFL, Need for Speed™, Titanfall™ and F1®.
Their vision and priorities:
To push industry boundaries, exceed player expectations, and blur the lines between games, entertainment, and reality.
To generate stable revenue year around driven by live services.
Financial and Business Goals
Expand their mobile business and build on opportunities with their EA SPORTS portfolio, particularly within their global football franchise which will move under a new EA SPORTS FC brand in 2023.
Continue to invest in new areas which they believe will translate into sustained growth.
Goals for Q4:
Firstly, Continue to execute well on the 2 most important drivers of their long-term success and growth, strong player engagement and the production of high-quality games like the just released and well-reviewed Dead Space.
Second, they are confident that EA SPORTS FIFA will sustain and build on the strong momentum that they exited Q3 with.
And third, based on their Q3 launch results, they are taking a more measured approach for the highly anticipated Q4 launches. These actions will reduce their total H2 operating expenses by approximately $140 million.
Things to know right now
Tougher than expected Quarter
“As market uncertainty mounted during the quarter, we took measures to protect underlying profitability,” said Chris Suh, CFO. “We are prioritizing the player experience, directing investment to where it can have the most positive impact for our players and on growth.”
Launch of Star Wars Jedi: Survivor Shifted
There has been a player-first decision to shift the launch of Star Wars Jedi: Survivor to Q1 of FY '24. While this changes the timing of reported net bookings, it does not change the overall lifetime economics.
Apex Legends Mobile Game Version stopped.
Apex Legends Mobile won Game of the Year on both iPhone and Android. Despite this strong start, the ongoing experience was not going to meet the expectations of their players. After months of working with their development partner, they made the mutual decision to sunset this version of the game.
The current development of Battlefield Mobile Title stopped.
AE felt that the best unified cross-platform experience for their players would not be met and so a decision to stop the development of the Battlefield mobile title was made.
Success with New Releases launched:
2 new AAA releases were launched this quarter, NHL 23 in October and Need for Speed Unbound in December, both earning strong reception and positive reviews. The just-released Dead Space has also earned high praise from fans and critics alike, being dubbed a new benchmark for remix and even one of the best games of all time.
EA SPORTS FC brand to deliver more for fans
Through experiences and different ways to watch, create, play, and connect through the player's love of football.
EA continues to invest in Madden NFL
They continue to invest in innovation to drive engagement and growth across this mega-franchise. They are expecting great things ahead with the upcoming Super Bowl LV11 and Team of the Year.
The Sims is growing as a live service
10 million new players were welcomed into the community, by opening it up as a free to enter. This drove strong engagement. Their teams are gearing up to add more collaborative ways to further empower their community to unleash their imaginations.
Operating Business Segments:
Full Game
This segment builds exceptional games. This segment is responsible for some of the world’s most beloved game franchises, including EA Sports FIFA, Battlefield, Apex Legends, The Sims, Madden NFL, Need for Speed, Titanfall, and Plants v. Zombies.
Live Services and Other
This business segment allows players to engage with their games and services over longer periods of time, and purchase additional content designed to provide value top layers and extend and enhance gameplay.
The additional digital content includes loot boxes, consumable virtual items that are bought with real money which can be redeemed to receive a selection of virtual items, or loot, ranging from simple customization options to game-changing equipment such as weapons and armor.
Their Competitors
Activision Blizzard
Ubisoft
Take-Two Interactive
Epic Games
Tencent
NetEase
Netmarble
Warner Brothers
Sony
Microsoft
Nintendo
- The market for interactive entertainment is intensely competitive and changes rapidly as new products, business models, and distribution channels are introduced.
Their financial calendar
Q1: May-July - Earnings 2nd August 2022
Q2: August-October - Earnings 1st November 2022
Q3: November-January- Around 31st January 2023
Q4: February-April - Around 9th May 2023
Next Earnings Report:
9th May 2023
Goals for Q3 vs Q3 results:
Q3 Goal: Their player network would continue to expand. Q3 Reality: New highs in their player network.
Q3 Goal: They would see strong momentum for Fifa. Q3 Reality: A record quarter was seen for the entire EA SPORTS FIFA Franchise.
Q3 Goal: That engagement metrics would remain healthy. Q3 Reality: Excellent engagement trends were seen.
Q3 Goal: Maintain Apex’s current form. Q3 Reality: The performance of new games, despite strong reviews and of the Apex franchise, was below the levels they had anticipated, reflecting the challenging market dynamics.
Positives from the last earnings report:
Growth at constant currency was driven by the strength of Fifa, with rapid growth occurring in FIFA Online 4 and FIFA Mobile. FIFA 23 is pacing to be the biggest title in franchise history, delivering record engagement in Q3. In North America alone, unit sales were up over 50% year-over-year. FIFA Mobile engagement was up triple digits in Q3, and FIFA Online in Asia was hitting the highest monthly active users in years. This engagement fueled strong financial performance.
Growth across the launch of Need for Speed Unbound.
Net revenue was up by 5% year over year
Costs were reduced by $60 million by moderating their hiring and prioritizing their variable spending.
The player network has continued to grow, to now over 650 million.
Challenges from the last earnings report:
Net bookings were $2.3 billion, down 9% due mainly to a tough comp as they launched Battlefield 2042 and Apex performance. Apex Legends had a quieter Q3 as the live service model ebbs and flows against a seasonally crowded launch slate this time of year.
Live service bookings were down 1% year on year
The macro-environment remained challenging and impacted their Q3 results. During the quarter, they took measured action to reduce their expenses, and they continued to exercise cost discipline, further focusing their investments in key areas of growth.
Risks to the business:
Their business is intensely competitive. They may not deliver successful and engaging products and services, their consumers may prefer their competitors’ products or services over their own.
They may not meet their product and live service development schedules and key events, sports seasons, and/or movies that are tied to their product, and the live service release schedule may be delayed, canceled, or poorly received.
Their industry changes rapidly and they may fail to anticipate or successfully implement new or evolving technologies, or adopt successful business strategies, distribution methods, or services.
Stakeholders have high expectations for the quality and integrity of their business, culture, products, and services. they may be unsuccessful in meeting these expectations or make business decisions to meet these expectations that impact their short-term financial results.
External game developers may not meet product development schedules or otherwise honor their obligations.
Their business depends on the success and availability of consoles, systems, and devices developed by third parties and their ability to develop commercially successful products and services for those consoles, systems, and devices.
They may experience declines or fluctuations in the re-occurring portion of our business.
They could fail to successfully adopt new business models.
Acquisitions, investments, divestitures, and other strategic transactions could result in operating difficulties and other negative consequences.
They may be unable to maintain or acquire licenses to include intellectual property owned by others in their games or to maintain or acquire the rights to publish or distribute games developed by others.
Their business partners may be unable to honor their obligations to them or their actions may put them at risk.
The COVID-19 pandemic and the various responses to it have affected how they are operating their business and the duration and extent to which this will impact their future operations and financial results are uncertain.
Catastrophic events may disrupt their business.
They have and may continue to experience security breaches and cyber threats.
They may experience outages, disruptions, or degradations in their services, products, and/or technological infrastructure
Attracting, managing, and retaining their talent is critical to their success.
They rely on the consoles, systems, and devices of partners who have significant influence over the products and services that they offer in the marketplace.
A significant portion of their packaged goods sales are made to a relatively small number of retail and distribution partners, and these sales may be disrupted.
The products or services they release may contain defects, bugs, or errors.
their business is subject to complex and prescriptive regulations regarding consumer protection and data privacy practices and could be adversely affected if their consumer protection, data privacy, and security practices are not adequate, or perceived as being inadequate.
Government regulations applicable to them may negatively impact their business.
They may be subject to claims of infringement of third-party intellectual property rights
Their products and brands are subject to intellectual property infringement, including in jurisdictions that do not adequately protect their products and intellectual property rights.
Their financial results are subject to currency and interest rate fluctuations.
Their business is subject to economic, market, public health, and geopolitical conditions.
Their stock price has been volatile and may continue to fluctuate significantly.