Video game developer and publisher Electronic Arts Inc. (ERTS), popularly known as EA, has entered into a distribution agreement with Aeria Games to display its top Play4Free titles in the latter’s network. Battlefield Heroes, the arcade shooter game, will be the first title to be available in the Aeria Games network. Soon to follow will be Need For Speed World.
Aeria Games is touted to be the most successful publisher of high quality online free-to-play games in North America, Europe and Latin America. The company boasts of a diversified and increasing portfolio of popular and critically-acclaimed titles that range from action, MMO and shooting games to the social genre. The company has a community of 23 million gamers and has presence in 30 countries.
EA has its own free-to-play online games portal, Play4Free, and following the partnership with Aeria Games, EA hopes to expand its brand to the global market through the latter’s strong community of multiplayer gamers.
The company is targeting a large percentage of revenues from digital platforms based on its broad array of titles and through strategic partnerships. EA has been leveraging its titles to attain more popularity globally. EA has a well thought out plan that is likely to create a niche in the social and casual gaming market through strategic acquisitions that the company has displayed in the recent past.
We believe that EA has a solid product pipeline for fiscal 2012 and beyond, which will drive top-line growth going forward. In the first-person shooter game category, EA’s Battlefield is the most notable franchise. The next version, battlefield 3 is currently expected to be launched in October this year. Of course it will be up for some competition when Activision Blizzard Inc (ATVI) launches its Call of Duty: Modern Warfare 3 in November.
In October itself, EA expects to launch another first-person shooter franchise, Crysis, for the first time on Xbox LIVE and PlayStation Network. We believe the twin release of Crysis and Battlefield will provide a competitive edge to EA against Activision going forward.
However, while we think the new games will shed some light in the next few months, it is hard to discount the gloomy macro environment in North America, increasing competition and weak video game results over the last 12 months, which compel us to remain cautious in the near term.
We therefore have a Neutral recommendation on Electronic Arts over the long term (for the next 3 to 6 months). For the short term (1-3 month) also, we have a 'Hold' rating on the stock, as indicated by the Zacks #3 Rank.
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