Specialist
Former Senior Manager at Electronic Arts Inc (EA)
Agenda
- Electronic Arts' (NASDAQ: EA) operating environment – industry consolidation trends and role of mobile gaming
- EA Play update – drivers behind subscription model go-to-market, growth prospects and net new platform partnership opportunities
- Apex Legends update – audience growth prospects and monetisation scheme evolution
- Role of licensed content in pipeline management and development strategies
- Outlook for 2021 and beyond – new business opportunities such as cloud streaming and e-sports
Questions
1.
Could you give an industry-wide overview of AAA publishers, highlighting the markets most impactful trends and drivers?
2.
How should we stack up EA’s development capabilities vs its peers, given rising development costs across the industry and EA’s large employee base? On your point around the need to work externally on bigger projects, do you think Chief Studios Officer Laura Miele and her team have sufficient rapport across the studios it will occasionally need help from?
3.
Do you expect EA’s focus to centre on bringing in talent at the developer level, and should we expect that across game types? The company recently announced plans to acquire Glu Mobile, but do you anticipate a need for AAs and independents at a console level to augment the console portfolio?
4.
Do you think catalysts around user growth and engagement are more temporary or permanent, given the unprecedented environment over the last year or so? What retracement might you expect for user cohorts that only play because they’re stuck at home? To what extent will engagement averages decrease as things normalise over the next few quarters?
5.
What about the next-gen consoles that were released amid coronavirus? How might their role evolve as the console cycle really starts to take off? What big themes are you monitoring that will impact the publishers?
6.
EA Play’s subscriber base is strong relative to industry standards, but the company doesn’t yet have a broad-based portfolio. Instead, it is sports-heavy and focuses on hit titles, while Apex Legends is somewhat of a mixed bag from a free-to-play standpoint. What improvements could EA Play make to ride the wave alongside Xbox Game Pass as subscription products and free-to-play dynamics take over?
7.
You mentioned mobile and APAC, which I consider to be the largest growth components for the video game TAM and tough ones for EA to achieve. Can you elaborate on how EA could benefit more from mobile and APAC video game growth trends?
8.
Would you say that you don’t expect EA’s existing franchises to do well in APAC, or the company at least needs to launch a new version of a game to succeed in that region? How would you compare its new games vs newly launched versions of existing games on the ability to drive success in APAC?
9.
How much of a threat is increased competition from global competitors such as Tencent and Nexon? Do you expect more competition from similar players, given they can expand into western regions more easily
than US players can expand into eastern regions?
10.
What differences do you anticipate between EA, Take-Two and Activision in the long term, considering EA’s strategic direction? How might those companies compare over the next 5-10 years? It seems like there are important nuances to consider.
11.
You mentioned CoD’s [Call of Duty’s] success, but there has been roughly a five-year gap since the last Battlefield release, which some might call a flop. Has CoD’s growth been at the expense of Battlefield? Are you concerned about the longevity of the Battlefield franchise?
12.
Do you think the five-year wait has enabled R&D spend and development to sufficiently improve Battlefield, given the previous iteration fell so short? How confident are you in the release doing well vs potentially flopping to the extent that there might not be another instalment?
13.
EA Play has around 13 million subscribers and is relatively industry-leading. You mentioned that Fifa and Madden can be almost considered subscription products, but users churn out with each annual release. Can you outline the benefits of EA’s business model, considering its USD 60 cost for a game vs all-you-can-eat or all-you-can-eat-plus discounted offerings?
14.
EA promotes EA Play where certain game franchises are discounted, which could incentivise the subscription product. What steps do you think EA might take to improve its stickiness and encourage users to extend their pay-monthly tenure?
15.
Do you find that the cadence of releases is susceptible to churn? What can EA tie in to make up for a potentially slow cadence due to its somewhat limited portfolio?
16.
Is Xbox Game Pass a new subscriber vehicle rather than a retention tool? Would you expect it to be driven towards maintaining 13 million subscribers or do you think the combined value prop might further accelerate subscriber growth?
17.
How do you imagine the subscription trajectory for EA Play and the broader industry? Is there an extensive growth runway? You split users into serious and least serious cohorts. Do you expect users on average to cater
towards this go to market?
18.
EA aims to have 500 million EA Sports users in the next five years, which is a loftier goal than the 30-50 million you mentioned for EA Access. What are the puts and takes of being able to reach that? What will dictate whether it is attainable?
19.
Is there a good way to isolate what is attainable for consoles alone? If EA Sports is at around 230 million users now and the 500 million is largely going to come from mobile growth, mobile ARPU will obviously be much lower than what comes in from Fifa. How much runway do you think exists for consoles? Have we hit a saturation point?
20.
Can you outline the monetisation opportunities for Ultimate Team? How stable is it? Again, keeping in mind how long ARPU happens to be for things like free-to-play or mobile relative to Ultimate Team.
21.
Could loot box regulation risk apply to Ultimate Team?
22.
Do you think loot box regulation would dampen time spent on the Fifa game itself? Is there anything EA could pivot to, such as increasing in-game advertising? How would you imagine Fifa or Madden in a post-loot box ecosystem?
23.
What is the probability of increased loot box regulation, and at what point do you expect tighter restrictions? Are we several years away from broad-based, sweeping changes where Fifa would have to change?
24.
To what extent do you expect loot box regulation to fall in line with broad-based platform shifts? It’s hard to gauge whether there are tailwinds or headwinds in light of Stadia shuttering its internal development studio and the Epic Games vs Apple lawsuit. Could platform fees drive down in favour of publishers and the economics improve relative to Microsoft and Sony in the cloud setting? Would any of that offset some of the challenges we’ve discussed for the Fifa franchise?
25.
Do you think Apex will turn into a USD 1bn run rate company? If not, what should we consider around why growth might be challenging?
26.
What are you monitoring around the Glu Mobile acquisition? Are you anticipating attempts to drive more in-game advertising, or an improved Fifa on mobile? What are you hoping for from the acquisition?
27.
Is there anything else that you would monitor that we haven’t yet discussed?
28.
Is EA’s low marketing spend a function of the company’s reliance on licensed content? Do you think its marketing costs may increase as it seeks to broaden the portfolio?
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