Electronic Arts (NASDAQ:EA) closed up slightly on Wednesday, gaining 0.17% on the day. Pretty calm and sedate. That was a far cry from Tuesday’s performance. EA stock opened the day at $92.32 but was worth $89.55 at close, for a 3% loss. So what happened to spook EA investors?
Blame it on soccer.
EA Stock Takes a Hit on Soccer Loss
Soccer has been making headlines in this country in recent weeks after the U.S. women’s soccer team won the Women’s World Cup. That was big news, but otherwise professional soccer doesn’t really have the same sort of presence in the American market as other sports. Football, baseball, basketball and hockey tend to dominate.
However, professional soccer is a huge, globally, and it’s also a big deal for Electronic Arts.
The American video game company happens to be behind the FIFA soccer franchise and it’s a solid performer. As of last fall, FIFA games had sold a total of 260 million copies worldwide, making it the best-selling sports game of all time.
In addition, the mobile version had been installed 193 million times. With those kind of numbers, it’s safe to say that soccer is a big deal for EA stock.
That importance came into focus on Tuesday. Electronic Arts announced that it had lost the rights to use Juventus — an Italian soccer club — in the next version of its game, FIFA 20. As a result, Electronic Arts stock tumbled, losing as much as 4% on the day before recovering slightly to close down 3%.
The reason for the market reaction is that Cristiano Ronaldo plays for Juventus, and Ronaldo happens to be one of the — if not the — most popular professional soccer players in the world.
EA’s next FIFA game will be missing its star player, the guy that was on the game cover for the past two versions. The timing also means that Electronic Arts will need to scramble to scrub Juventus from FIFA 20 prior to its scheduled September 27 release.
When talking about big video game companies that compete against Electronic Arts, the usual suspects are Activision Blizzard (NASDAQ:ATVI), Take Two (NASDAQ:TTWO) or Ubisoft. But the company that signed the Juventus deal that hit EA stock was Japan’s Konami.
Konami publishes a video game franchise called Pro Evolution Soccer (or PES) that competes against EA’s FIFA series. But PES has never had the kind of numbers FIFA scored. Last summer, it was estimated that latest version of FIFA had been outselling its PES counterpart by close to an 18 to 1 margin.
When it was announced that Konami had signed Juventus — stealing the club from Electronic Arts — it was headline news, especially in Europe where soccer rules and the vast majority of EA’s FIFA sales are generated. Ronaldo has been on the cover of the past two FIFA games, but this year one of soccer’s most recognizable stars will instead be gracing the cover of PES 2020. That’s going to turn this fall’s annual competition between FIFA and PES into a more interesting match.
And an interesting match is not what you want if you own EA stock. The company said in a May securities filing that FIFA games represent 14% of its total net revenue.
As InvestorPlace contributor James Brumley points out, Electronic Arts stock is well positioned to recover from last year’s epic selloff that saw the EA stock price cut in half.
However, with Juventus and Ronaldo jumping to the competition, the company is going to have to deal with a speed bump in its planned launch of FIFA 20 in the fall.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.