Need For Speed To Give An Upper Hand To Electronic Arts This Holiday Season
Need for Speed is making a return, and this time it’s bigger and better. Certainly, it will be a boost to Electronic Arts’ (NASDAQ:EA) revenue growth, but the question is: By how much? Can it be an out-and-out blockbuster, or just a second-tier title that will merely be an incremental revenue generator?
On September 30, 2015, Electronic Arts launched Need for Speed: No Limits, exclusively for mobile platforms and available for free download on iOS and Android systems. [1] The game has generated a lot of hype in the last few months, as it is the first original title developed specially for the mobile devices. Although the beta version of the game was available in January 2015 in Taiwan and the Netherlands, the worldwide release for the finished game, was decided to be just before the onset of the holiday season.
The company is all set to release the console version of the game, perhaps by far the best edition ever, in the first week of November 2015. It will be the 21st major installment in the franchise and 2nd for the next-generation platforms. Electronic Arts broke the annual trend of 13 consecutive years, when the company decided not to release any Need for Speed title in fiscal 2015. The re-entrance of the title will boost the company’s revenue growth in the latter half of the current fiscal. Let’s find out how:
Our $76 price estimate for Electronic Arts’ stock is 15% below the current market price.
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Big Brand Name
Apart from the sports titles, Electronic Arts is well known for its racing franchise: Need for Speed. It has been a path breaking franchise for the company, with its last 7 editions selling over 30 million units. The last edition of the franchise, Need for Speed: Rivals, sold close to 4.34 million units worldwide. [2] The absence of the title last year affected the company’s revenue growth during the holiday season of 2014.
The popularity and the brand appeal of the game are, no doubt, much higher than that of any other racing game franchises. Return of the Need for Speed series this year will encourage those racing game lovers to buy the game.
Timing Couldn’t Be Better
Last year, the gaming industry was struggling in terms of software sales, as most of the gamers were busy buying the new console systems and less of the physical video game software. The gaming industry is usually dependent on top tier games to augment the software sales in the latter half of the calendar year. Looking at the numbness in the game sales segment, due to the absence of any blockbuster release in the first half of the year, the core gamers are eagerly waiting for the new editions of these games to be launched.
Unlike last year, video game software sales for the first 8 months are keeping pace with its year-over-year comparison, despite any big names in the industry. This indicates that unit sales per title have increased compared to last year’s figure, as more gamers have now made a shift to new generation console platforms and the transition seems to be almost over. As a result, the market is speculating that the holiday season 2015 will be better than last year, considering that more gamers will be eager this season to buy games to try out on the new systems. [3]
Absence Of Other Major Racing Games
Last year, in the absence of Need for Speed, the only other major games that managed to make it to the top 100 in terms of number of units sold included Mario Kart 8, Gran Turismo 6, Driveclub, and Forza Motorsport 5. Among these, the leader in this category was Mario Kart 8 with more than 4 million unit sales. On the other hand, 5 out of the last 7 Need for Speed titles crossed 4 million, indicating the dominance of the franchise in the category. The only competition for the title this year in its category will be Forza Motorsport 6, whose previous edition last year managed to sell less than a million units in 2014, and has sold close to 2 million units to date. [4]
Trefis estimates for the number of units sold per title for EA can be analyzed below.
Considering all the above mentioned factors, there is no doubt that the title will be a major driving force for the company’s top-line performance this holiday season. Moreover, with the improved graphics and additional attractive features in the game-play, we can say that it will keep the gamers hooked for a longer time than its previous editions. In short, it is one of the games to look out for this winter.
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