EA Shows Why Mobile Games Are a Minefield
When one of the biggest videogame makers in the business gets hung up in the mobile end of the market, it can say something for the whole industry.
With annual revenue now over $7 billion,
Electronic Arts
EA -12.04%
is the largest stand-alone game publisher in the U.S. save for
Activision Blizzard.
ATVI -0.68%
EA also has a few games capable of generating more than $1 billion a year on their own, including “Apex Legends.” The battle-royale style shooter was EA’s answer to the blockbuster “Fortnite” and has been a resounding success since its surprise launch in 2019 for consoles and PCs. Analysts estimate the game’s total revenue has surpassed that of “Madden NFL” to become EA’s second-biggest property next to the blockbuster soccer franchise “FIFA,” according to Visible Alpha.
But even that is not enough to ensure success in the finicky mobile game market. EA surprised investors Tuesday with the news that it is pulling the plug on the mobile version of Apex, which has been in release for less than a year. It wasn’t a quality problem; “Apex Legends Mobile” was named Game of the Year for 2022 by both
Apple
and Google for their respective mobile platforms. But during a conference call to discuss the company’s fiscal third-quarter results, EA Chief Executive
Andrew Wilson
said that while the game resonated with many core players, failure to keep enough casual players engaged still limited the audience. “And in a game that relies a lot on team play and competitive play, liquidity of the overall player base is really, really important as you think about the future experience for players over time.”
The experience with “Apex Legends Mobile” also caused EA to kill a planned mobile version of its “Battlefield” franchise, which has been in development since at least mid-2021. And that wasn’t the only bad news in the results. EA delayed the release of the console game “Star Wars Jedi: Survivor” from mid-March to late April. Net bookings for the December quarter also came up about 6% shy of Wall Street’s forecasts, as EA’s games faced stronger competition during the crucial holiday quarter, which included a newly resurgent “Call of Duty” iteration from rival Activision Blizzard.
All told, EA cut its projected net bookings for the fiscal year ending in March by 8%, to around $7.1 billion. That implies a shortfall of about $500 million for the March period relative to the company’s prior target, much of which is owing to the “Star Wars” title delay. EA’s stock price slid 11% Wednesday morning.
Delays are now common in a videogame market where each release is expected to be merely a starting point for years of recurring revenue from live services. But EA’s struggles in mobile might prove a bigger problem over the long term. Mobile is the game industry’s largest addressable market. Apple alone said at this time last year its global installed base surpassed 1.8 billion devices. Market research firm Newzoo estimates that mobile games accounted for half the game industry’s total revenue in 2022—and was 78% larger than what console games generated for the year.
But mobile has still proven a hard market to crack—at least in a way that reliably moves the needle for a company the size of EA. The industry remains dominated by casual titles—“Candy Crush Saga” and “Clash of Clans” are still top-five grossing games more than a decade after their initial releases. And the slowing economy has hit just as mobile game makers were grappling with changes made by Apple to its iOS operating system that makes it harder to effectively market games to new players. That has hurt even well-established players.
Take-Two Interactive,
which acquired mobile game maker Zynga last year, cut its own forecast for the March fiscal year by 7% during its last quarterly report, citing release delays as well as the impact of the weakening economy “particularly in mobile.”
EA’s struggles also call into question the idea that popular games on PCs and consoles easily translate to mobile. That logic not only underpinned Take-Two’s acquisition of Zynga, but also is a major theme of Microsoft’s effort to buy Activision. “There’s cognitive dissonance in the desire to unite global gaming communities around core IP vs. the reality of that IP not always translating so well across platforms,” wrote Clay Griffin of MoffettNathanson in a note Wednesday morning. EA is hardly in a space to disagree.
Write to Dan Gallagher at [email protected]
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