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What's Challenging Electronic Arts

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As I mentioned earlier, the fickle mentality of its target audience is proving to be one of the biggest challenges for the gaming industry, and companies such as Electronic Arts (Nasdaq: EA  ) are constantly having to think outside the box to ensure survival. What's good, however, is that the company seems to have a potential winner on its hands as it unveils a plan to unite different versions of a single game played on a variety of platforms such as personal computers, video game consoles, tablets, and smartphones.  

Imagine this: You start playing a game on your tablet computer, take a break as you attend to something else, and later restart the game on a console from the same point where you left off. Now that's what I mean by seamless connectivity. And if Electronic Arts can successfully pull this off, it might very well be the next game changer.

At the same time, this may be the company's last chance to counter the growing pressure from relatively inexpensive mobile-based games and casual online gaming. For instance, recent data from the NPD Group reveals that sales of new video games and related accessories have fallen by as much as 32% in April from the year-ago period. This is happening primarily as customers move away to newer on-the-go game-playing hardware such as tablets and smartphones.

Coming back to specifics, if there is any one factor that has proved to be a major letdown for the company, it is undoubtedly Star Wars: The Old Republic. After spending truckloads of cash trying to promote its biggest massively multiplayer online role-playing game, or MMORPG, the company revealed, during its recent fourth quarter, that its tally of actual subscribers has fallen to 1.3 million from 1.7 million in the previous one. The alarming truth is out: Customers are not willing to pay up and are more inclined toward casual, trial-period gameplay.

The Star Wars debacle has proved all the more disappointing as the company went all out to position the game as the next biggest best-seller, after larger rival Activision Blizzard's (Nasdaq: ATVI  ) iconic MMORPG World of Warcraft, which boasts of the largest subscriber base in the world. This is why EA has had to resort to certain recent measures such as offering up to 15 levels of the game completely free of cost to its target audience. But then again, the efficacy of such a move remains to be seen. EA is also battling it out with Zynga (Nasdaq: ZNGA  ) , as both engage in a race for acquisition of smaller gaming companies. While EA is not overtly dependent on Facebook like Zynga is, the latter does have an advantage in cloud-based gaming and offers multiple-platform games as well.

EA does have a lot of catching up to do. While its stupendous brand portfolio continues to be its biggest strength, the company has a long way to go in an industry where retention and creativity seem to be the two major buzzwords. This is one company I'd be keeping a close watch on, and if you want to do the same, be sure to add Electronic Arts to your free watchlist.

EA's future looks uncertain, which is why you should look at other options as well. Why not secure your future with nine rock-solid dividend stocks that have generated steady profits and cash flow? The report won't be there forever, so grab your free copy now.

Fool contributor Subhadeep Ghose doesn't own any shares in any of the companies mentioned above. The Motley Fool owns shares of Facebook. The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Activision Blizzard. Motley Fool newsletter services have recommended creating a synthetic long position in Activision Blizzard. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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Related Tickers

10/24/2016 3:55 PM
EA $84.19 Up +1.32 +1.59%
Electronic Arts CAPS Rating: ***
ATVI $45.45 Up +0.91 +2.03%
Activision Blizzar… CAPS Rating: *****
ZNGA $2.94 Up +0.06 +2.08%
Zynga CAPS Rating: *