Why Electronic Arts’ Return to College Football Is a Big Deal

Electronic Arts (NASDAQ:EA) is finally returning to the college ranks with EA Sports College Football currently under development. This will mark the first college title EA has produced since NCAA Football 14 in 2013. 

EA announced the new franchise in partnership with CLC, the nation’s leading collegiate-trademark licensing company. Similar to the former NCAA game, the partnership will allow EA’s game to include official logos, stadiums, uniforms, and game-day traditions from more than 100 colleges and universities. 

The previous franchise was a consistent top-five sports title in North America. While EA has yet to set a release date, there’ll be plenty of pent-up demand when the new franchise launches. More players are engaged with sports video games than ever before, and management believes the market for the sports genre is only going to expand from here.

The EA Sports College Football logo and the words college football is coming back shown over a football field.

Image source: Electronic Arts.

EA Sports momentum is surging

The news came the same day EA released fiscal third-quarter earnings results that showed continued momentum from sports games, including EA’s two biggest sellers overall in Madden NFL and FIFA. EA originally expected to generate $5.55 billion in net bookings for fiscal 2021, which ends in March, but now expects full-year bookings to come in at $6.1 billion. 

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Live services, including digital sales from Madden and FIFA Ultimate Team and subscriptions to EA Play, grew 24% year over year in the last quarter. Live services now make up 72% of EA’s total bookings on a trailing-12-month basis. 

EA Sports titles attracted more than 230 million players over the past fiscal year. In addition to Madden and FIFA, EA also makes officially licensed games for the NHL and UFC, in addition to NBA Live on mobile. 

These games are very important to EA’s future growth. In fiscal 2020, revenue from Ultimate Team comprised 27% of total revenue. However, it’s unclear what type of content EA might add to a college title to generate live-services revenue.

Ultimate Team makes money from selling digital cards of real professional athletes in Madden and FIFA that players use to build fantasy teams. EA got into a legal mess years ago over depicting likenesses of real college athletes in its NCAA Football franchise. NCAA Football 14 launched in July 2013, which turned out to be EA’s last college sports release. 

Because of this crucial difference between college and professional sports, EA Sports College Football likely won’t generate the same level of annual bookings as Madden. Still, there are few reasons why the release of College Football is a growth catalyst for EA.

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The gaming market is starved for college sports

Years before EA discontinued NCAA Football, Take-Two Interactive gave up its college basketball franchise after the release of College Hoops 2K8 in 2007. The absence of these two titles from EA and Take-Two has created a massive void in the video game market for a college sports experience.

Meanwhile, the market for sports video games is growing. Over the last four years, revenue from sports titles across all platforms has grown faster than the rest of the video game market, with sports titles generating more than $11 billion in revenue per year. 

A chart showing the sports gaming market growing faster than non-sports video games.

Image source: Electronic Arts fiscal Q3 2021 earnings presentation.

Moreover, during the company’s fiscal third-quarter conference call, CEO Andrew Wilson alluded to the growing audience for sports video games when he stated that the market for a college title could be larger than it was for NCAA Football 14: “I think that we could look to the past as a factor for the future. But I’d also say that I think college football, as a fan, audience has grown dramatically since we launched the last game in 2013.” 

EA said that a college football game has been the most requested title from EA Sports fans lately. For that reason, it wouldn’t be surprising to see EA Sports College Football sell as many copies as Madden when it releases.

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The announcement of College Football is part of EA’s long-term strategy to grow its player reach from the recent level of 330 million unique player accounts to 500 million over the next five years. EA’s strong earnings results and prospects for more growth with the EA Sports brand are two reasons why it remains a top video game stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.


View more information: https://www.fool.com/investing/2021/02/09/why-electronic-arts-return-college-football-big-ea/

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