Electronic Arts is feeling the pressure to deliver a new hit. The publisher reported strong earnings for the second quarter of its fiscal 2019 yesterday. But its stock price has since stumbled due to concerns about its outlook for the next six months. EA recognized those worries, and it tried to address many of them during a conference call with investors.
When fiscal 2019 began, EA said it was expecting to generate earnings per share of around $3.55. But in yesterday’s report, it has since revised that figure down to $3.11. And while EA is always conservative, investors can see why EA might expect to make less money.
Battlefield V is going to face tough competition from Call of Duty, Fortnite, and PlayerUnknown’s Battlegrounds. The military shooter launches November 20, but its battle royale mode isn’t coming until March. And the publisher is still recovering from enraging fans in 2017 with its implementation of microtransactions in Star Wars: Battlefront II. Finally, Battlefield V will only sell cosmetic items in the game, and a question still exists about whether that’s something Battlefield fans want.
Those questions put even more pressure on EA’s other big fiscal 2019 release to come through with big numbers.
Relying on Anthem
On top of the immediate challenges of Battlefield, EA’s only other blockbuster-sized release for the rest of its fiscal year is Anthem. This is the online cooperative shooter game with role-playing elements from Dragon Age studio BioWare. Anthem debuts February 22, and EA wants it to last for years as a live service. But as we’ve seen with Destiny 2, it can be difficult to build a game like that.
“While EA delivered a decent [September] quarter, we are less confident in our fiscal-year 2019 estimates,” Macquarie Research analyst Ben Schachter wrote in a note to investors. “FIFA and Madden Ultimate Team seem to be weaker than expected heading into the holiday, and Battlefield estimates have already come down. … The bottom line is that EA is going to have two disappointing holiday seasons in a row. The year is now much more dependent on a new IP, Anthem, performing well. Hitting fiscal ’19 numbers is far from certain.”
Investors are worried, and they have reason to question whether EA will deliver the hit it needs. That uncertainty is apparent, as EA’s stock price has fallen from nearly $150 per share in July to around $91 today. But the publisher laid out its argument to shareholders that highlighted current strengths, near-term launches, and long-term strategies.
Those include the ongoing success of FIFA, its subscription service, and its plans for cloud gaming.
EA’s massive soccer franchise is almost always a bright spot for the publisher. That’s still true for FIFA 19, but the company did point out that it is experiencing a slight lag in Ultimate Team spending. FIFA Ultimate Team is the game’s major live-service mode where players can spend money on cards that represent players of varying rarity and in-game stats. It is one of EA’s money-printing factories. But the problem is that players are spending too much time in FIFA 19’s other modes — although EA does not call that a problem.
“As we have seen previously when we have delivered innovative and creative new ways to play such as The Journey, FIFA players will jump into the new content first, and over time move into Ultimate Team,” EA chief executive Andrew Wilson said. “So far since launch, we have more players engaging across a great breadth of modes, from Career mode to Kickoff and Tournaments.”
This exposes a potential paradox for EA and other game developers. What incentive do you have to make other modes as engaging and fun if it’s keeping players from the mode where they can spend extra money? Wilson did note that the company designs all of its modes to eventually funnel players into Ultimate Team, and EA is confident that will work.
The publisher also said that it expects that more people should start jumping into Ultimate Team now that it has started its live events in the game. The company ran an event this past weekend, and it said it attracted a lot of excitement
“Despite Red Dead Redemption taking up a lot of attention, we had one of the best FIFA weekends in a long time,” EA chief financial officer Blake Jorgensen said.
Battlefield V, live services, and Origin Access Premier
When it came time to talk about Battlefield V, EA executives detailed a multi-front plan to ensure the shooter has every chance to succeed.
First, the company notes that Battlefield already has a huge fan base. And it intends to market directly to the people who continue to play previous entries in the series.
“We’ve still got over 10 million players in our existing Battlefield games as we go into launch,” said Wilson. “Battlefield has a rich and robust community who love those only-in-Battlefield moments. [And we have] the promise of a tremendous live service with content that is free for all players in the months and years to come.”
Battlefield developer DICE has plans to kick off its Tides of War live service campaign two weeks after launch. This will deliver regular events and smaller updates on a daily and weekly schedule. It also includes bigger updates like new maps at a more infrequent cadence.
Secondly, EA wants to combine those live-service elements with the Origin Access Premier subscription. It is expecting people to join that membership plan for $15 per month to get access to Battlefield V on PC. And then they will keep coming back because of Tides of War until Anthem launches early next year.
“[Origin Access subscribers] play more games, spend more time, and monetize higher in live services as well,” said Wilson. “What we have started to do with Origin Access Premiere is to add front-line blockbuster content. And Battlefield V will be our best chance to really see that happen.”
And if Battlefield leads into Anthem, EA could see a self-perpetuating cycle where people never want to end their Origin Access subscription.
Finally, EA gave more details about Project Atlas. The company announced the cloud technology on Monday, October 29. The goal is to break blockbuster games free of the confines of expensive hardware. And the company also spoke about its potential for creating games as well.
But during its investor call, EA focused on how Project Atlas could turn into a platform that it controls. And how it has the potential to do to gaming what Netflix did for films and television.
“As we think about the future of games, we see a world where games are no longer bound by device or CPU or GPU,” said Wilson. “We’ve continued to develop a streaming service. We’re working with some other third parties, and we believe our service can work in conjunction with their services. Ultimately, expanding the addressable market that our games can reach.”
With hindsight, Netflix feels like it was an inevitability. EA (along with Google, Microsoft, Sony, and Ubisoft) think the same is likely true for gaming.
And if Origin Access Premier grows into a massive success, EA could unlock its long-term future growth by welcoming in people who would never buy a console or gaming PC.