Soccer’s Rising Popularity In China To Fuel Growth For EA’s FIFA Franchise
In 2015, Chinese president Xi Jinping announced a 50-point plan to turn China into an $813 billion sports industry, with a special focus on developing soccer. The plan aims to develop China into a soccer powerhouse, possibly host the 2030 FIFA World Cup and win the World Cup in the near future. The president’s plans have been backed by many Chinese businesses and businesspeople, who have started investing in soccer clubs and aim to bring their clubs on par with European clubs in terms of players and game quality. This significant investment has resulted in some big names moving to China, with an aim to help develop the sport in the country.
In this article we discuss the rising prominence of the sport in China and its possible impact on Electronic Arts (NASDAQ: EA), which owns the FIFA video game franchise.
How Will China Impact FIFA Franchise?
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Per Trefis estimates, FIFA contributes roughly 20% of EA’s valuation, and the franchise is one of the company’s major revenue drivers.
Soccer is immensely popular in Europe, and as a result of that popularity around two-thirds of total FIFA product sales come from Europe. While we expect modest growth in sales in Europe, if the franchise is going to drive significant growth for the company it will likely have to come from Asia and the U.S. The company has already been seeing strong growth in FIFA sales in the U.S., which we expect to continue going forward, but the Chinese market represents a massive opportunity.
China Market
China is a unique market for the gaming industry. In 2015, the Chinese government lifted its ban on the sales of consoles, which was welcomed by both console manufacturers and gaming companies. [1] Electronic Arts, along with other game manufacturers, derives a large chunk of its revenues from console games. However, due to the console ban, most people in China preferred gaming on the PC and Mobile platforms. To cater to those audiences, EA launched mobile versions (FIFA Online) of its successful games, the revenues from which are accounted for under its Digital Revenue stream.
However, with the ban lifted, EA has been looking at China to provide its next wave of growth. With China looking to increase its prominent in the soccer world, and the availability of consoles in the market, EA can expect strong sales of its most successful franchise in China and boost earnings in the coming years.
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Notes:- China To End Ban on Gaming Consoles, WSJ, July 25 2015 [↩]