Electronic Arts
Electronic Arts Inc. (NASDAQ:EA) is one of the two biggest players in the video game space. The company has a strong collection of massive multi-player games and highly popular sports games. Some of its top titles include Battlefield, Star Wars: The Old Republic, and FIFA.
The company has been fairly aggressive in its efforts to expand in the casual game market. It purchased game makers PopCap and Playfish to quickly build a presence in this space. While it is creating casual games, like its successful title The Simpsons: Tapped Out, it has also been working to bring its hard core game titles to the casual market. Such titles as Need for Speed and FIFA are good examples. It has also been moving more toward digital game delivery.
These efforts have come under the just departed CEO and look like solid decisions that position the company well for a changing game market. Unfortunately, while the company has been changing with the times, its core business of selling games through retailers has been experiencing a material slide.
After hitting a high point in 2009, revenues have been erratic and earnings have been downright dismal. In fact, along with the announcement of the CEO’s departure, the company warned that first quarter earnings would be weak.
Activision Blizzard, Inc. (NASDAQ:ATVI)
Activision Blizzard is EA’s biggest competitor. It owns the World of Warcraft, Call of Duty, and Diablo franchises, which are among the most popular “serious” games around. Call of Duty: Black Ops 2, a sequel, set a sales record after its release. In the first 24 hours the game had $500 million in sales, a total that reached $1 billion after 15 days. Activision, however, has been slower in its efforts to tap the casual game market, using something of an outsourcing model. While this is a safer course to sail, it may be a long-term weakness.
The company also owns the highly popular Skylanders title. This innovative system combines a video game with action figures and is aimed at enticing younger children to play video games. The company claims to have sold 100 million figurines. The product is so enticing that The Walt Disney Company (NYSE:DIS) is launching a similar product, called Infinity.
Activision’s top line has been growing steadily, though its bottom line hasn’t shown much consistency. Although publicly traded, Activision is effectively owned by French entertainment giant Vivendi SA (EPA:VIV). There have been off and on rumors that Vivendi wants to sell its stake, but so far nothing definitive has been announced. So long as Vivendi is around, however, Activision has a deep pocketed sponsor.
New Consoles
The video game industry is somewhat cyclical, so that it is out of favor of late isn’t surprising. A lack of new game consoles is partly to blame, since there’s nothing new and exciting to upgrade to and push new game sales. Time, however, recently published an article suggesting that game consoles are dead, pointing to the move toward digital downloading.
Sony Corporation (ADR) (NYSE:SNE), for example, is planning to launch a new version of its PlayStation game console later this year. The company has made it clear that the new device will make extensive use of the Internet for both game play and, importantly, for the delivery of content. For example, the console will be capable of allowing game play to take place before a game is fully downloaded.
Time’s contention, however, is that this is actually a step toward obsolescence since it means that game consoles could easily be absorbed by a more complex television. That’s a big risk for Sony, which is already struggling on the product front. Sony, for the most part, looks like a good company to avoid.
Not a big deal?
No matter what happens to game consoles, gamers aren’t going away. And, if there is demand, games will still need to be created. So, the game industry’s current malaise could be a good buying opportunity.
Indeed, if Sony’s new console sparks sales and pushes Microsoft Corporation (NASDAQ:MSFT) to up its game, the game industry could see a bump. If televisions become game consoles, an additional round of buying might take place. This could be a good time to get aboard a changing industry with the industry’s biggest players. This includes Electronic Arts Inc. (NASDAQ:EA) and its aggressive efforts to change with the times.
The article A Casualty of a Changing Market originally appeared on Fool.com is written by Reuben Gregg Brewer.
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