Electronic Arts (EA) puts gamers in action on the gridiron, the pitch, the battlefield, and in outer space with its most popular games. Its leading titles are Madden NFL, FIFA (soccer), and Star Wars (licensed from others) and its own Battlefield, Mass Effect, and The Sims. Long a publishers of gaming software, EA is generating increasing sales of games for mobile devices. Still, it makes most of its revenue from games played on consoles from Sony and Microsoft and on personal computers. EA also provides online social games such as those licensed from Hasbro, which include Monopoly. The company is moving into competitive gaming and eSports with its Competitive Gaming Division.
Electronic Arts collects revenue in several ways that include sales of its games on disc, digital downloads (onto several platforms), subscription fees, and in-game transactions.
Digital has become increasingly important for EA, bringing in 55% of revenue in 2016 (ended March) and rising 10% for the year. Packaged games account for 45% of revenue. Digital delivery enables EA to wring more life and revenue out of its games. It can download updates as well as sell in-game features to players. Its digital products and services are delivered via Sony’s PlayStation Network, Microsoft’s Xbox Store, Apple’s App Store, and the Google Play store.
EA's top three games generate 56% of its revenue. FIFA 16 accounted for 16% of revenue in 2016. Other popular games are Madden NFL 16, Star Wars, Titanfall, Battlefield, and Sim City.
In terms of sales by type of platform on which games are played, EA got half its revenue from games for the Xbox One and PlayStation 4 consoles and 17% from older versions of those consoles. Revenue from play on mobile devices rose 9% and accounted for 12% of revenue in 2016. PC/browser-based play dropped 7% and made up about a fifth of EA's revenue.
The company operates development studios in North America, Europe, Asia, and Australia. North America is its largest market, accounting for about 43% of sales. Sales outside the US and Canada make up 57% of it business.
Sales and Marketing
As EA's business becomes increasingly digital, more of its products and services are being purchased over the Internet through Origin, the company's direct-to-consumer platform, or through digital downloads from third-party retailers or via mobile application storefronts. The company also sells packaged games to retailers, including mass merchants (Wal-Mart), and consumer electronics stores (Best Buy), and specialty game shops (GameStop). Direct sales to GameStop stores have accounted for about 11% of EA's sales. The company, however, increasingly looks to mobile and third-party e-commerce marketplaces, and more so its own e-commerce platform, Origin.
Whether digital or physical, product revenues still drive the business, but EA's digital focus also means growing service revenue (43% of sales). Service revenue includes games and content that require hosting support for the essential game experience, as well as recurring subscriptions.
In 2016 (ended March) EA's sales slid 3% to $4.4 billion. The decline in sales was blamed on weakness of the Need for Speed, Battlefield, and FIFA World Cup franchises. EA cited FIFA 16, FIFA 15, and Star Wars as strong performers in driving revenue. Sales fell 3% in North America and internationally. As for platform. PC/browser sales dropped 7% while mobile games increased 9%. The gap between PC/browser revenue narrowed to $266 million in 2016 from $600 million in 2014.
Profit, on the other hand, jumped 32% to $1.6 billion in 2016 from 2015 from a $279 million benefit from taxes.
Cash flow from operations increased to $1.2 billion in 2016 from $1 billion in 2015 on the higher net income.
Where its gamers go, that's where EA will put them and that means, increasingly, on mobile devices such as phone and tablets. The company has created mobile and PC free-to-download games that generate revenue from sales of incremental content and features in transactions that might be small, but are repeated.
EA's ultimate team mode of play has increased player time and engagement. Ultimate team allows gamers to form teams in FIFA or Madden NFL franchises with players from multiple teams.
In Asia, EA teams up with TenCent and Nexon to distribute its games in Asia.
EA also is building out its competitive eSports programs, in which game competitions are shown to spectators. The development is to gain more engagement and compete with Twitch, which is owned by Amazon.
Looking ahead, EA is investing in developing applications of virtual reality and augmented reality.