Electronic Arts’ FIFA Franchise To Maintain Dominance In Sports Genre

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Finally, the wait is over for FIFA lovers around the world, as Electronic Arts (NASDAQ:EA) released its annual edition of the most popular football simulator franchise- FIFA 15– on September 23 in North America, September 25 in Europe and September 27 in the United Kingdom. Unlike the last year’s edition, it was released on both the new generation consoles-Sony’s PlayStation 4 and Microsoft’s (NASDAQ:MSFT) Xbox One- and previous generation consoles (PS3 and Xbox 360) together. The game is the most awaited title every year and the excitement is much more this year due to the recently held Brazil FIFA World Cup. Apart from improved graphics, this year’s edition has new exciting features such as addition of new soccer legends in the all new ‘Concept Squad’, new stadium chants and songs, as well as addition of all 20 Premier League stadiums, requested by FIFA fans last year.((All 20 Premier League Stadiums officially licensed for FIFA 15))

FIFA 15 is more popular in Europe than in North America, where Madden NFL is the key title. FIFA has always been the highlight of the year for the company in terms of sales; the soccer franchise accounted for 27% of the company’s net revenues and 23% of the company’s gross profits in 2013. With technological advancements, improved graphics, detailed visuals and new digital content features, the demand for FIFA has increased exponentially over the last five years. The number of FIFA units sold has almost doubled from 6.4 million in 2010 to 12.45 million in 2013.

Our price estimate for the company’s stock is $36, which is in line with the market price.

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FIFA 15 Sales Might Accelerate In Holiday Season

According to Gfk Chart-track, the number of FIFA 15 units sold in the first week is almost same as the number of FIFA 14 units sold. However, FIFA 15’s higher price range (Price of £54.99 in the U.K and $60-$70 in the U.S.), compared to that of FIFA 14, led to a 6% jump in FIFA 15’s first week revenues. The new generation consoles accounted for 54% of the net game unit sales, whereas the previous generation consoles accounted for 45%. Hardware sales in August reached $196 million, up 116% year-over-year (y-o-y). [1] Considering the fact that the demand for next generation consoles was tremendously strong in the last 3 months, the performance of core titles on these consoles was fairly average.

If we exclude the sales of FIFA 14 on next generation consoles and consider only the sales on PS3 and Xbox 360, then FIFA 15’s one week sales in the U.K is up 15% in volume and up 23% in revenues y-o-y. [2] However, these figures only include 3 days’ figures in the U.K. One can expect an exponential increase in sales in the next two months, primarily due to the increase in title demand during the holiday season.

Sales of the annual FIFA franchise went up 25% after the last world cup in 2010. [3] The higher prices of core titles this year might offset the loss in revenues due to decreasing software demand over the last 6 months. Considering the above factors, Trefis estimates the FIFA unit sales to rise by 18% in 2014.

Almost one third of FIFA 15’s sales in the U.K. was on the PlayStation 4, as the game accounted for 80% of all video game sales last week in the region. Moreover, the title alone accounted for 87% of the total revenues. PlayStation 4 version of the game is estimated to be about 100,000 units ahead of Xbox One version, despite the fact that Microsoft made a deal with EA for FIFA’s Ultimate Team Legends exclusivity. [4] Sales on Xbox 360 almost equalled that on PS4. [5] However, it is too early to comment on the leader of FIFA unit sales among the consoles. FIFA 15 replaced Activision Blizzard (NASDAQ: ATVI)’s Destiny as the number one selling game in the U.K. in its first week of the launch.

Will Konami’s Pro Evolution Soccer 2015 be of any Competition To FIFA 15 This Year?

Pro Evolution Soccer (PES), also known as World Soccer: Winning Eleven in Asia, is a football simulation game developed by PES productions and published by Konami (NYSE: KNM), a Japanese game company. Like FIFA, PES is also released annually and this year’s version- Pro Evolution Soccer 2015 is coming to the European markets on November 13.

FIFA sales were overshadowed by Pro Evolution Soccer’s sales in the early 2000s, before the release of FIFA 2008 with a total redesign of the game. Since then, FIFA has been a blockbuster release every year, topping the sports titles chart with huge unit sales figures. Apart from better in-game details and excellent graphics, the factor that makes FIFA more widely popular is EA Sports’ exclusive rights with the English Premier League and German Bundesliga. Both these leagues are among the most popular football leagues followed by football fans across the world. As a result, Konami uses inaccurate team jerseys, names and players in their gameplay. However, Konami has exclusive rights with UEFA Champions league, Europa League, Super Cup and several other tournaments from other regions, making it popular among those fans who like these championships.

Although PES does not pose a huge threat to FIFA in terms of unit sales, but is the direct competitor in terms of its gamer base. In 2013, a total of 12 million FIFA units were sold, whereas around 3.5 to 4 million PES units were sold in the same period. Nonetheless, EA have no reasons to worry about PES, as the latter is still far behind in terms of actual retail value. In 2013, the increase in demand of Pro Evolution Soccer in South America was offset by the game’s poor performance in Europe and North America. [6] Considering the performance of PES in the last 2 years, EA Sports has nothing to worry about in terms of FIFA’s market share.

With no close competition in the sports genre by any other football simulator game, widespread popularity in Europe and Asia, and increasing sales curve of the franchise, FIFA is set to dominate the sports genre for the next 3 to 4 years.

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Notes:
  1. August 2014 NPD []
  2. FIFA 15 scores number one in UK chart []
  3. VGChartz, 2010 Global Yearly Chart []
  4. FIFA 15 on PS4 beats Xbox One by 100,000 sales in UK charts []
  5. FIFA 15 Ultimate Team: Trading and coin making guide []
  6. Konami: Annual Report 2013 []