EA Sports is among the largest gaming publishers, with a hybrid strategy of fully-owned games and licensed games distributed with a cross-platform approach. FIFA is the game that most contributes to its revenues and live services (Ultimate Team in particular) are the largest revenue contributors to EA revenues.
Aspect
Description
Video Game Sales
EA Sports generates a significant portion of its revenue through the sale of sports video games. These games cover a wide range of sports, including football, soccer, basketball, hockey, and more. Customers purchase physical copies or digital downloads of these games for various gaming platforms, such as consoles, PCs, and mobile devices. Revenue is generated through the initial sale of the game titles. EA Sports typically releases new versions of its sports games annually to encourage sales and updates.
In-Game Purchases
EA Sports incorporates in-game purchases and microtransactions within its sports games. Players have the option to spend real money on virtual currency or in-game items, such as player packs, team uniforms, player upgrades, and more. These microtransactions are a significant source of additional revenue and can contribute to a game’s long-term monetization.
Ultimate Team Modes
One of the key features in EA Sports games is the Ultimate Team mode, which allows players to build and manage fantasy teams using in-game cards. The purchase of card packs, which contain player cards, boosts, and other items, is a major revenue driver. The randomness of card packs can encourage players to make multiple purchases to improve their teams.
Licensing Agreements
EA Sports holds licensing agreements with various sports leagues, associations, and organizations to use official teams, players, logos, and stadiums in its games. These licensing agreements not only enhance the authenticity of the games but also contribute to revenue through licensing fees paid to sports entities. Officially licensed content is a significant selling point for EA Sports games.
Downloadable Content (DLC)
EA Sports releases downloadable content (DLC) for its sports games, which includes additional gameplay modes, challenges, and features. Players can purchase DLC packs to expand their gaming experience. DLC sales generate additional revenue beyond the initial game purchase.
Challenges and Competition
EA Sports faces challenges related to competition from other sports video game developers and changing consumer preferences. Staying updated with sports rosters and maintaining the quality and realism of its games are ongoing challenges. Balancing in-game monetization with player satisfaction is crucial.
Future Growth Strategies
EA Sports’ future growth strategies may involve: – Continued Game Development: Ongoing improvement and innovation in its sports game franchises. – Expanding Sports Portfolio: Exploring new sports and expanding the portfolio beyond traditional sports. – Live Services: Enhancing live services to keep players engaged year-round. – Global Expansion: Focusing on international markets and esports. – Cross-Platform Play: Enabling cross-platform play to connect a broader player base.
Table of Contents
A glance at EA Sports vision, mission and strategy
EA is one of the global leaders in the broader entertainment industry, and more specifically within the gaming industry.
More specifically EA accomplishes this mission by developing, licensing, marketing, and publishing games and game-related services on a variety of platforms. From game consoles, PCs, mobile phones, and tablets.
EA Hybrid Strategy
EA Sports follows a hybrid strategy, where the company both licenses and develops its own games. For instance, some brands are fully owned by EA (Battlefield, The Sims, Apex Legends, Need for Speed) some other games are licensed (perhaps FIFA, Madden NFL, and Star Wars).
EA is focused on a few genres that go from sports, first-person shooter, action, role-playing and simulation.
The gaming industry, part of the entertainment industry, is comprised of three main types of players. From game engines, which help developers build their games. To publishing gaming houses. And gaming consoles. While the prevailing business model for decades has been that of selling the console at cost, and make money on games. Digital games changed the way games are distributed and sold, and it opened up the way to free-to-play models.
There are several models employed by EA to distribute its games. Games can be sold either in:
Traditional brick and mortar retail, where the physical game is sold.
Digital downloads.
For the traditional sales model the game will go through the gaming console. This implies a set of distribution agreements with large brands like Sony and Microsoft to make EA games available on the main consoles, PlayStation and Xbox. More precisely, EA will be an authorized distribution partner for its games, and as such it will give back a royalty fee. In short, EA payS the console manufacturers a per-unit royalty for each unit manufactured. On the other hand, for digital games downloaded through the consoles, it will be the gaming console company to release a royalty fee to EA, based on each download.
Here the model is straighforward, the game is sold at a given price, and the companies involved in the licensing/development, publishing and distribution of the game will split the revenues. On the other hand, for other channels, EA uses alternative models.
Perhaps, to distribute and monetize the EA gamers on PCs or mobile devices, EA also made available subscriptions (like EA Origin Access, which makes available to gamers a library of games) and free-to-play for app or marketplaces.
Breaking down EA Sports revenue models
Revenues consist of sales generated in multiple ways:
Games sold as digital downloads or as packaged goods and designed for play on game consoles and PCs.
Games for mobile phones and tablets (which will be distributed across apps marketplaces).
Live services associated with these games (like extra-content).
Subscriptions offering access to a selection of full games, in-game content, online services and other benefits.
Licensing of games to third parties to distribute and host.
FIFA is the hit game
The largest and most popular game for EA is FIFA. Indeed, in 2019, FIFA represented 14% of the total revenues for the company.
Additional revenue streams
Alongside games, EA also offers live services, including in-game purchases, downloadable content, and esports. Live services comprised 45% of EA total net revenue during 2019.
This is the most successful segment for EA, and it’s also the segment where the company is doubling down.
Ultimate Team is the hit live service
The most popular live service is the Ultimate Team mode associated with sports franchises. Ultimate Team allows players to collect current and former professional players in order to build, and compete as, a personalized team.
Ultimate Team represented 28% of the revenues for EA.
How does EA spend its money?
When it comes to the cost of product revenues, those consist primarily of:
Manufacturing royalties.
Royalty expenses for celebrities, professional sports leagues, movie studios and other organizations, and independent software developers.
Research and development expenses consist of expenses incurred by production studios for personnel-related costs, related overhead costs, and contracted services for pre-launch products.
EA Sports: Revenue Generation and Business Strategies – Key Highlights
EA’s Mission: EA’s mission is to inspire the world to play. The company achieves this by developing, licensing, marketing, and publishing games and game-related services across various platforms, including game consoles, PCs, mobile phones, and tablets.
Hybrid Strategy: EA Sports employs a hybrid strategy, involving both developing its own games and licensing others. Some brands, like Battlefield and The Sims, are fully owned by EA, while others, such as FIFA, Madden NFL, and Star Wars, are licensed.
Distribution and Monetization: EA distributes games through different platforms, each with distinct distribution and monetization strategies. This includes traditional brick-and-mortar retail, digital downloads, subscriptions (like EA Origin Access), and free-to-play models.
Revenue Streams: EA’s revenue sources include sales of games as digital downloads or packaged goods for consoles and PCs, mobile games for phones and tablets, live services (extra content), subscriptions, and licensing of games to third parties.
FIFA as Revenue Driver: The hit game FIFA is a major contributor to EA’s revenue, accounting for 14% of total revenues in 2019.
Live Services: Live services, including in-game purchases, downloadable content, and esports, comprised 45% of EA’s total net revenue in 2019. The company focuses on this segment for growth.
Ultimate Team Mode: The popular live service Ultimate Team, associated with sports franchises, allows players to build personalized teams by collecting current and former professional players. Ultimate Team represented 28% of EA’s revenues.
Costs of Product and Service Revenues: The costs of product revenues include manufacturing royalties, celebrity royalties, inventory costs, warehousing, distribution, and more. The costs of service revenues include royalty costs, datacenter expenses, payment processing fees, and more.
Research and Development (R&D): EA invests in research and development to cover expenses related to production studios, personnel, overhead, contracted services, and pre-launch products.
Focus on Live Services: EA’s strategy emphasizes live services, such as in-game content and esports, as a significant revenue source and growth area.
Gaming Industry Trends: The gaming industry has evolved from selling consoles at cost to monetizing through game sales, live services, and digital downloads, transforming business models and revenue streams.
Diversified Portfolio: EA’s game portfolio spans various genres, including sports, first-person shooter, action, role-playing, and simulation games, catering to a broad audience.
Market Leadership: EA is a global leader in the gaming industry, with a strong presence across different platforms and genres.
EA Sports is among the largest gaming publishers, with a hybrid strategy of fully-owned games and licensed games distributed with a cross-platform approach. FIFA is the game that most contributes to its revenues and live services (Ultimate Team in particular) are the largest revenue contributors to EA revenues.
The gaming industry, part of the entertainment industry, is comprised of three main types of players. From game engines, which help developers build their games. To publishing gaming houses. And gaming consoles. While the prevailing business model for decades has been that of selling the console at cost, and make money on games. Digital games changed the way games are distributed and sold, and it opened up the way to free-to-play models.
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Tencent is a Chinese multinational conglomerate founded in 1998 by Ma Huateng, Zhang Zhidong, and Xu Chenye. Among its various global subsidiaries are companies in the online services, music, and artificial intelligence industries. But it is perhaps best known for its interest in the video game sector – both as a game developer for the Chinese market and the acquirer of several established gaming companies. Tencent is a vast company with a stake in more than 600 companies. Following is a look at some of the companies and subsidiaries it has a majority stake in.
Epic Games is a gaming company, that develops, publishes, and distributes games. It comprises the Unreal Engine, making money through licensing agreements with developers and creators. Its games (like Fortnite) mostly follow a free-to-play model on PC and an in-app purchase model on the digital marketplace. And its storefront Epic Games Store, taking a 12% cut on games’ sales.
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The play-to-earn model is a business model allowing gamers to farm or collect cryptocurrency and NFTs that can be sold on the market. This model has become a standard already in the “crypto gaming industry,” where the blockchain-based games enable token economics to kick in as an incentives mechanism at scale for users to play and be engaged.
Candy Crush Saga is a match-three puzzle video game developed and published by King, a company specializing in social network-based games. Businessman Riccardo Zacconi co-founded King in 2003 after selling a subscription dating service he had also founded several years previous. The initial source of income for King was advertising revenue, but this strategy was abandoned in 2013. Today, Candy Crush Saga uses the freemium model (free to play) of revenue generation.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
