The worldwide gaming industry is waiting eagerly for several big releases for the start of the holiday season this year. Microsoft’s XBox One and Sony’s Playstation 4 are both currently being pre-ordered for delivery in November. Within games, Take-Two Interactive recently released “Grand Theft Auto V.” Analysts estimate that the game will generate $1.5 billion in revenues. But even keeping the new releases aside, the video game industry has seen a recent surprising surge. According to NPD, video game sales in the country grew 1.0% to $521.0 million in August this year. Growth was driven by software sales, which reported a 21% increase to $293.4 million. Hardware sales were down 40% over the year to $90.8 million, and accessories sales grew 7% to $136.7 million in August 2013.
Electronic Arts’ Financials
Electronic Arts’ (NASDAQ: EA) Q1 revenues remained flat over the year at $495 million but were significantly ahead of the Street’s expectations of $453 million. Loss per share of $0.40 for the quarter was also ahead of the market’s projections of a loss of $0.60 per share.
By segment, digital revenues grew from $324 million a year ago to $378 million. Publishing and packaged revenues fell 30% over the year to $102 million. Distribution packaged goods revenues fell 29% over the year to $15 million.
By region, revenues from North America grew 11% over the year to $205 million and international revenues fell 5% to $290 million
For the current quarter, EA projects revenues of $975 million with EPS of $0.12, compared with the market projections of revenues of $980 million with EPS of $0.12. EA expects to end the year with revenues of $4 billion and EPS of $1.20, compared with Street projections of revenues of $4 billion and EPS of $1.21.
EA’s Asian Expansion
EA is focused on tapping the international gaming market, especially that of Asia. Last December, they announced a partnership with Nexon in Korea to deliver the beta version of “FIFA Online 3” in the country. The partnership has helped EA’s FIFA Online 3 become the leading online sports game in Korea and the second biggest game overall in the country. The company also recently announced a partnership with Chinese publisher, TenCent. As part of that agreement, TenCent will help bring FIFA Online 3 to the Chinese market. EA plans to tap into the fast-growing Chinese online gaming market, which according to market researcher, Niko Partners, is projected to grow to $11.9 billion this year from $9 billion a year ago.
EA’s Mobile Success
Meanwhile, EA remains focused on the mobile gaming segment and continues to offer its latest releases in mobile versions. It recently released the latest “FIFA 14” and “Madden NFL 25” games on mobile. The biggest success though, has been the sequel to “Plants vs Zombies.” “Plants vs Zombies 2” is said to be doing even better than King.com’s “Candy Crush Saga.” Within a week of its launch, the game has become the leading downloadable app on iTunes store. EA has also realized the importance of the freemium model to the mobile gaming segment. Unlike its predecessor, “Plants vs Zombies 2” is free to download, with additional features and upgrades available for sale through in-app purchases. The game has received strong positive reviews and also extends EA’s franchising capabilities with its animated characters that are being sold as plush toys and T-shirt logos.
EA’s stock is trading at $26.60 with market capitalization of $8.16 billion. It touched a 52-week high of $28.13 last month.