This is Electronic Arts’ next big growth opportunity
Electronic arts (NASDAQ: EA) is not the same company it was a few years ago. Over the past two years, net bookings from in-game spend and subscriptions have grown from 59% of business to 71% on a 12-month basis. The recurring nature of these direct service revenues led Electronic Arts to launch its first dividend towards the end of 2020.
While subscriptions are still only a small portion of the company’s live services, they are only in the early stages of growth. EA previously offered two subscription services with EA Access on console and EA Origin on PC, which are now part of EA Play.
Now after launching EA Play on the Microsoft (NASDAQ: MSFT) Xbox Game Pass cloud gaming service, EA hopes to gain millions of new subscribers.
Memberships open the door to more players
With EA Play, the company wants to reduce gaming costs and friction, such as the need to even own a video game console. Making games more accessible to more people around the world is one of the reasons cloud gaming is such a great opportunity for the world. video game industry.
EA Play has attracted 6.5 million players so far, which is a good start. “Our EA Play service is the most successful multiplatform subscription in the industry,” CEO Andrew Wilson said on the company’s fiscal second quarter conference call in November. “[W]We believe we have the potential to double our subscriber base over the next 12 months. “
Gamers want to be able to access the games anywhere on any device. Game companies don’t have the capacity to offer a cloud gaming service anywhere, but this is where Microsoft can help.
Xbox Game Pass officially launched in September and offers the ability to play Xbox titles on PC and Android mobile devices. Microsoft reported on a conference call in late October that Game Pass had 15 million subscribers.
Microsoft’s games service is expected to reach millions more gamers, given that Xbox Live had nearly 100 million users at the end of Microsoft’s 2020 fiscal year (which ended in June). It’s a deep pool that EA Play can tap into.
Develop awareness of the EA brand
Some might think that EA’s deal with Microsoft is a sign of weakness due to the appearance that EA is ceding its intellectual property to the tech giant, but it isn’t. EA Play works like a store within a store on Game Pass. By offering a select catalog of titles on a widely used platform like Xbox, EA can establish a close connection with millions of new players.
Gaining more exposure through Xbox Game Pass means it all, as most of EA’s bookings come from in-game spending, not game sales. It is only after the players are in the game that EA really starts to make a lot of money. Over the past four quarters, EA has generated nearly $ 4 billion in net bookings from live services, including in-game spending and subscriptions.
EA Play is also available on Steam, one of the most popular platforms for buying and playing PC games. Last year, Steam’s parent owner Valve revealed it has more monthly active users than Xbox or Sony PlayStation with over 120 million players.
By offering EA Play through these platforms, Electronic Arts can reach a much larger audience than it could on its own. It can leverage the wider reach of Steam or Xbox to build a larger audience for its own future releases and continue to grow its live services business.
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