Electronic Arts Inc.’s (EA) free-to-play division, Phenomic, recently announced the worldwide launch of Command & Conquer Tiberium Alliances. This is a browser-based multi-platform free- to-play massively multiplayer online (“MMO”) game, which went live after completion of beta testing.
The MMO includes real time strategic (“RTS”) techniques and challenges gamers to embark on a journey for world domination. In the course of the game, one has to ally with other players, produce and collect valuable resources and also fight battles to conquer and command new territories.
The game is available in 11 languages that include English, Spanish, Portuguese, Brazilian, Portuguese, French, German, Italian, Dutch, Polish, Russian and Turkish. In the quest for gaining new territories and to keep a vigil on allies and enemies alike and monitor their every move, gamers have the option of choosing between the two groups, the Global Defense Initiative (“GDI”) or the Nod.
The game will also be available on mobile devices such as smartphones and tablets, thereby making it accessible on the move.
In December last year, EA’s BioWare division announced the revival of this popular franchise through a new installment of Command & Conquer: Generals 2, a sequel to the 2003 release of Command & Conquer: Generals. The company plans to release Command & Conquer: Generals 2 exclusively for PCs in 2013 .
Free-to-play games, popularly known as freemium games, have become a rage among gamers. Although gamers access the game for free, developers and publishers earn revenues through the sales of in-game items and advertisement. The freemium model has gained further momentum with the increasing popularity of social games, co-operative games and mobile games.
According to research firm IBISWorld, social gaming is expected to reach $11.3 billion by 2016. The worldwide market for virtual goods was worth $9.0 billion in 2011 and is expected to touch the $15.0 billion mark by 2014 according to market intelligence firm In-Stat. As per Juniper Research, revenues from purchases of virtual goods totaled $2.1 billion in 2011 and are expected to grow to $4.8 billion by 2016.
According to ABI research, mobile gaming is expected to generate $16.0 billion in revenues by 2016, a massive increase from approximately $5.0 billion reported in 2011. It is believed that the social gaming market will further benefit from increased usage of smartphones and tablets going forward.
In this scenario, EA has been focusing on building its social free-to-play portfolio to counter strong competition from the likes of Zynga Inc. (ZNGA) and also to offset declining sales of its core packaging division. Incidentally, in the recently concluded quarter, EA’s Publishing Packaged Goods and Other Revenue suffered a 22.9% slump with Distribution Packaged Goods Revenue plummeting 43.9% on a year-over-year basis. However, revenue from the digital segment rose 58.6%, fuelled by a 23% increase in revenue from mobile and other handheld devices. Moreover, the Sims Social and PopCap Games also contributed to the uptrend in digital revenue.
EA’s strategic acquisitions of Klick, PopCap games and Playfish over the last couple of years have strengthened its presence in the social and mobile gaming market. The company has an important partnership with Facebook, which has helped it to counter significant competition from Zynga.
We have a Neutral recommendation on Electronic Arts over the long term (for the next 6 to 12 months). Currently, Electronic Arts has a Zacks #3 Rank, which implies a ‘Hold’ rating in the short term.
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