FIFA 11, the latest version of Electronic Arts‘ (NASDAQ: ERTS) perennial soccer videogame, has sold 2.6 million copies in its first week on sale. The football simulation was released across Europe last Friday and in the United States the previous Tuesday and has since earned $150 million for EA Sports. The week one totals of FIFA 11 represent a 29% increase in week one sales over last year. This is the third straight year that Electronic Arts has seen dramatic year-on-year increases in FIFA sales. FIFA 10 sold around 4.5 million copies between its release in October 2009 and January 2010, a 26% increase over the same period in 2008. These represent unit sales over a variety of platforms—Microsoft‘s (NASDAQ: MSFT) Xbox 360 and Windows operating system, Sony‘s (NYSE: SNE) Playstation 3, Playstation 2, and Playstation Portable, as well as Nintendo‘s (PINK: NTDOY) Wii and DS consoles—but they also represent the healthiest performance for one of EA Sports’ titles this year.
While the biggest portion of Electronic Arts’ revenue comes from its EA Sims publishing arm and The Sims family of software, EA Sports is the company’s work horse, publishing annual editions of sports video games with official league licenses. Many of the company’s traditional bestsellers have underperformed in 2010 though. Tiger Woods PGA Tour 2011, released last June, sold a mere 32% of Tiger Woods PGA Tour 2010 released the same month one-year prior. While the game undoubtedly suffered from Tiger Woods’ very public marital troubles, this is still a shocking decline for a series that has reliably performed for ERTS.
The publisher’s American football games, NCAA 2011 and Madden NFL 2011, didn’t experience the same drop in sales that Tiger Woods did, but both games had flat year-on-year performances. Madden 2011 sold just 1.97 million units in August 2010 compared to 1.9 million units in 2009, while NCAA 2011 saw 692,000 units sold in July 2010 compared to 689,000 in 2009.
Another blow struck EA’s sports division last week when the company announced they were delaying the release of their highly anticipated NBA Elite 2011 into October due to technical issues with the finished product. Wedbush Morgan analyst Michael Pachter believes that the delay will be catastrophic for EA’s NBA offering, lowering his sales estimate from 1.65 million units by March 2011 down to a mere 500,000. Pachter predicts that the delay will cost EA $60 million in lost revenue over the third quarter of the fiscal year, bringing down his expected annual revenue of $3.96 billion for the company by 1.5%.
While ERTS stock has stayed steady thanks to the strong performance of FIFA 11, it’s clear that the publisher needs to shake up its annual sports game business in order to resume the growth the label was experiencing prior to the 2008 crash. EA Sports president Peter Moore needs to start repositioning the publisher’s offerings as services rather than physical products. The Tiger Woods, Madden, NCAA, and FIFA franchises, in addition to the company’s other sports properties, should be re-imagined as subscription services that receive digitally delivered, for-pay annual updates rather than new physical retail products made every year. This will dramatically lower production costs while maximizing potential profits through monthly subscriptions. ERTS shareholders need only look at Activision Blizzard‘s (NASDAQ: ATVI) World of Warcraft to see how profitable subscription-based games can be.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
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