Electronic arts (NASDAQ: EA) is having a record year and management is already forecasting increased growth in fiscal 2022. Longer term, the company expects it can more than double its players and viewers to $ 500 million over the next five years. only within EA Sports.
The plan is bold but appears to be within reach based on existing trends in sports video games, in addition to EA’s strategy of launching several new offerings across different sports.
EA Sports fans want more
The company said it had 230 million players and viewers for its EA Sports titles in the past year. The audience is more and more important, because the interest in esports competitions produces more exposure for the EA Sports brand. For example, the 2021 Pro Bowl went virtual this year with NFL stars competing in EA Madden NFL 21.
“More and more people, especially younger Generation Z players, are now defining their sports fandom through the games they play as FIFA, Madden, NHL, and UFC“said CEO Andrew Wilson on the fiscal third quarter conference call.
The pandemic has accelerated the growth that was already happening at EA Sports. FIFA Ultimate Team set a record with six million active players per day in December, and Madden reached its highest player count in franchise history, which dates back to the early 1990s.
Even less popular sports titles like EA’s NHL the franchise saw growth in the last quarter with engagement in the game up 13%.
“Our fans tell us they want more of what EA Sports can offer,” Wilson said. “They’re playing our games more than ever. They’re spending more time with our content. And they’re connecting to each other, players, teams, and the sports they love through our experiences.”
To capitalize on the growing interest in sports games, EA is planning an aggressive expansion of its EA Sports line starting with its largest and most popular game, FIFA.
Launch of new sports games
Soccer is the most popular sport in the world, and there is no better way to capitalize on this interest than by unleashing more experiences on the most important and fastest growing gaming platforms, which are mobile devices. EA has already had great success with FIFA Mobile in Asia where the game has 21 million players. But there is more to come.
It has just announced a new license extension with the Union of European Football Associations (UEFA), which is the governing body of European football. As part of this agreement, EA will launch several mobile offerings within the FIFA franchise, including a free PC version. The company believes these games could reach 80 million players in more than 15 countries.
Current transactions to be acquired Glu Mobile (NASDAQ: GLUU) and Codemasters (LSE: CDM) will help EA in this vast expansion plan through EA Sports. Glu Mobile can help develop EA Sports franchises on mobile, given the success Glu Sports has had with its Tap Sports Baseball franchise.
And EA thinks Codemasters, which has the best racing games like F1, Dirt, and Project cars, will enable EA Sports to innovate and expand its global audience for racing entertainment.
Wilson said on the recent earnings conference call that this was just the start. EA is relaunch its college football franchise, which is currently under development. There’s also an expansion into another sport, which Wilson wouldn’t name, which will launch next fiscal year.
What is the financial opportunity?
EA estimates the global sports video game market to be over $ 11 billion with $ 7 billion on console and PC, while the mobile market is at $ 4.3 billion. As a prospect, EA’s total bookings are expected to reach $ 6.1 billion in fiscal 2021 (which ends in March), meaning the opportunity to gain more market share in the sport is a major growth opportunity.
Additionally, spending on sports is growing faster than other types of games, with mobile sports growing at a compound annual rate of 24% over the past four years.
EA’s goal of reaching 500 million players and viewers shouldn’t come as a surprise. The interactive entertainment market has grown since day one. New technologies and new ways of playing games such as cloud-based subscription services and mobile platforms have only expanded audiences in the past decade and will continue to do so.
The company currently shoots all cylinders with The sims and Apex Legends also showing steady growth in bookings. Recent acquisitions and new games underway provide this industry leader with many catalysts over the next few years.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.