Electronic Arts, the sports games publisher that neglected the mobile games market for years, couldn’t have picked a better time to jump in at the deep end.
Last year, EA spent nearly $4 billion trying to build its way into a stronger position in mobile. This year, it launched a new version of its popular FIFA smartphone franchise and released a mobile spin-off of its wildly successful Apex Legends Battle Royale. The company’s competitors have followed suit with even more notable acquisitions, including Take-Two Interactive’s purchase of Zynga for nearly $13 billion in January and Microsoft’s record $69 billion of Activision Blizzard, including Candy Crush. Studio King, shortly after.
After that period of furious mergers and acquisitions and a nearly two-year pandemic-era boom for the industry, the video game market is slowing significantly, with billions of global business wiped out by stock prices, consumer spending and revenue declines in the process.
But that’s not alarming Jeff Karp, the head of EA’s mobile gaming division, who said EA is able to not only weather the storm, but thrive in a more cross-platform game industry that focuses less on which hardware product a player prefers and more about meeting players wherever they are.
“Challenging times with IDFA and COVID and all the unprecedented headwinds we are facing…I think EA is very well positioned in the power of our brand in games because of that,” Karp told Protocol in an interview last week. (IDFA is referring to Apple’s App Tracking Transparency, a privacy change on iOS introduced last year that has hampered digital advertising efforts.) “That’s something we established a year ago, and it’s something we’ll work around in the future build and what we double on.”
Live service future
In many ways, EA’s investment in mobile is intertwined with its transition to a live service business, where games are designed, integrated, and supported (and in many cases distributed for free) over many years rather than being secretly developed and then sold for $60 a pop.
EA’s biggest acquisitions of the past half-decade have been mobile game companies, including Golf Clash maker Playdemic and prolific smartphone publisher and developer Glu Mobile in 2021. And those investments, coupled with the growth of live services, now appear to be paying off. to throw.
While many of EA’s competitors have seen a double-digit share price drop this year, alongside declining sales and revised forecasts, the FIFA developer has remained stable. In the most recent quarter — a period of decline for Microsoft, Sony and many of EA’s third-party publishing competitors due to a major slowdown in the games market — EA’s revenue and profits rose. The company’s net bookings for the past 12 months are up 22% year over year to nearly $7.5 billion, and it now has nearly 600 million active player accounts.
It’s impossible to ignore the effect EA’s live service transformation has had on its business, and how resilient the changes have made the company in the face of external pressures ranging from Apple’s iOS privacy crackdown to a year of lackluster releases of video games and continued game console delivery restrictions.
“We are excited about where we are. No doubt the current times favor companies like EA that have established brands and IP,” said Karp. One challenge facing the industry is app tracking transparency. It limits the way advertisers can track users across the iOS ecosystem, using a code unique to each user, the IDFA, by requiring users to sign up. The change cost Meta more than $10 billion in lost revenue and rocked the user acquisition market for mobile gaming companies, many of which rely on in-game advertising to attract new players.
“IDFA is undoubtedly a significant change and we are all learning and adapting how to connect with our players. It all starts with high quality games, of course,” said Karp. “But we believe we will thrive in this environment. We are well positioned because we don’t just have to look at [user acquisition]which is important for bringing new players into our games, but also how we can leverage our brands and IPs that are clearly very trusted and have decades of communities and markets to build on.”
EA’s portfolio goes cross-platform
That approach of taking existing brands and finding new ways to grow them beyond the console market has become the cornerstone of EA’s live service approach. Live service products like Apex Legends and FIFA, both of which are now on mobile, account for more than 70% of EA’s revenue, the company’s chief financial officer Chris Suh told investors last week. Suh added that in the long run, live service games will be the “predominant engine” of his profits.
“We are delighted that there are 3.5 billion players in our addressable market. It makes our brand more accessible,” says Karp. “It really is an opportunity to expand our overall ecosystem for the brand, and it provides viable recurring revenue. It also offers the opportunity to bring our games across platforms.”
Apex Legends Mobile launched in May and the company is testing a smartphone version of its Battlefield shooter. Work is also underway on a new game based on “The Lord of the Rings” called Heroes of Middle-earth, which will test EA’s new mobile chops when it comes to delivering a premium smartphone game using the intellectual property of another company.
“We’re taking more time for soft launch than ever,” Karp said of the mobile division’s development process, which now often includes extended beta periods devoted to collecting data from players in the Philippines, Australia and other regions. “We know these games will last five to 10 years now, so we want to be very thoughtful and methodical about when we launch it globally.”
Accessibility is key to EA’s strategy of bringing games once considered exclusive to consoles and PC to smartphones, Karp said. It’s a balancing act that requires EA to weigh two conflicting goals: “How do we make sure we respect our brands in a meaningful way,” Karp said, while also ensuring EA can “meet the players where they are” with regarding how advanced their phone could be. The game can’t be a dramatic departure from its console counterpart in terms of graphics quality or performance, but it should also run on a cheap Android phone mainly used in mobile markets like India.
EA takes a similar measured and careful approach to monetization. The company is well aware of the dangers of transferring business models from one environment to games played on a completely different platform; that’s exactly how the company failed so dramatically with Star Wars Battlefront 2 and, to a lesser extent, with its recent failure with Battlefield 2042.
Monetization is a particularly sensitive topic as more and more console developers move to mobile and try to develop fair, yet profitable monetization strategies. For example, Blizzard’s recent foray into premium mobile gaming with Diablo Immortal has been marred by the game’s rampant and aggressive microtransaction model.
Karp said EA is approaching this dilemma by trying to set realistic expectations for players that align with why they play a game on a smartphone and what they might hope to get out of it.
“I think it’s just about understanding the needs they would expect from the different consumer value propositions,” he said. Karp compared playing a console version of a game to watching a movie, where a viewer expects a certain quality bar and is willing to pay for it. “It’s the best graphics facility and production value, and then you get a game on mobile, which still has phenomenal production values, but a different experience and a different kind of game.”
The approach seems to be working, especially for FIFA. The company said last week that FIFA Mobile’s fiscal first quarter had its best quarter ever in the company’s six years of releasing mobile ports of the franchise. “I think we’ve done a great job with FIFA,” said Karp, noting that EA’s mobile division is growing and that many of its new releases are turning out to be quick hits. “Those are things we are quite proud of. Also understand that there is a lot of opportunity and a great road ahead of us.”
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