EA is the most predictable company in gaming because it owns Sports.
While other studios rely on "hit driven" cycles (releasing a game every 5 years and praying it works), EA releases FC (formerly FIFA) and Madden every single year. Players reset their teams, buy new card packs (Ultimate Team), and start spending all over again. It is a subscription business disguised as a video game company.
Product Deep Dive: Live Services
1. EA Sports FC (Ultimate Team)
- The Product: A digital trading card game inside the soccer simulator.
- The Mechanics: Players buy "Packs" (Loot Boxes) to get Messi or Ronaldo.
- The Revenue: This "Live Services" revenue dwarfs the actual game sales. It is high-margin digital goods.
2. Apex Legends
- The Product: Battle Royale shooter (competitor to Fortnite).
- The Value: Provides EA with exposure to the FPS (First Person Shooter) market and eSports.
- Volatility: Unlike sports, this game fluctuates based on "Seasons" and trends.
3. The Sims
- The Product: Life simulation.
- The Audience: Massive female gamer demographic, historically underserved by the industry.
- Monetization: Endless expansion packs ($20 for a "Pet" expansion, $20 for "Seasons").
The Business Model
- Game Sales: $70 per unit (Base revenue).
- Live Services: Microtransactions (75% of total bookings). This is the profit engine.
- Licensing: They pay heavy royalties to NFL and Players Associations, but it locks out competitors.
Risks
- License Loss: They lost the "FIFA" name (saving money), but if they lose the "NFL" exclusive license, Madden could face competition from 2K.
- Loot Box Regulation: Governments (especially in Europe) view "Ultimate Team Packs" as gambling for kids. Regulation could ban this mechanics.
- Mobile Weakness: EA has struggled to replicate its console success on mobile.
Conclusion
EA is a defensive gaming stock. In a recession, people stay home and play FIFA. The recurring revenue from sports creates a high floor for the stock.