Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Electronic Arts  (NASDAQ:EA)
Q2 2019 Earnings Conference Call
Oct. 30, 2018, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, my name is Erica, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Q2 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. Mr. Chris Evenden, VP of Investor Relations, you may begin your conference.

Chris Evenden -- Vice President of Investor Relations

Thanks, Erica. Welcome to EA's second quarter fiscal 2019 earnings call. With me on the call today are, Andrew Wilson, our CEO; and Blake Jorgensen, our COO and CFO. Please note that our SEC filings and our earnings release are available at ir.ea.com. In addition, we have posted earnings slides to accompany our prepared remarks. Lastly, after the call, we will post our prepared remarks, an audio replay of this call, our financial model, and a transcript,

With regards to our calendar, our Q3 Fiscal 2019 earnings call is scheduled for Tuesday, February 5, 2019. This presentation and our comments include forward-looking statements regarding future events and the future financial performance of the company. Actual results and events may differ materially from our expectations. We refer you to our most recent Form 10-Q for a discussion of risks that could cause actual results to differ materially from those discussed today.

Electronic Arts makes these statements as of today, October 30, 2018 and disclaims any duty to update them. During this call, the financial metrics, with the exception of free cash flow will be presented on a GAAP basis, all comparisons made in the course of this call are against the same period in the prior year unless otherwise stated. Note that our results reflect our adoption of ASC 606 as of the beginning of fiscal 2019. This doesn't materially impact on net bookings metrics, but does change our GAAP reporting in several ways. Prior periods have not been restated. For more information on this change, please see the accounting FAQ, we've posted on our IR website.

And now I'll turn the call over to Andrew.

Andrew Wilson -- Chief Executive Officer

Thanks, Chris. We had a strong second quarter, launching high-quality new games in our EA SPORTS franchises, and delivering revenue and earnings above our guidance.

With a busy and competitive holiday quarter ahead, our focus is on delivering for our players with new games, new experiences in our live services, and more fun and excitement across all platforms during one of the most popular times of the year for playing games. At EA, our strategy is to create and offer a collection of amazing games and content, wrapped in compelling services, with more ways to play, watch, share and connect for players around the world. In Q2, we delivered against that with four new games, hundreds of content updates in our live services, record viewership in our esports programs, and continued expansion of the experience in our subscription services.

For EA SPORTS, we released highly rated new experiences and content in Q2, including major updates and new ways to play on mobile. With FIFA 19, we set out this year to create a game that expanded our core FIFA product, adding the UEFA Champions League and innovative new game modes. Our objective is always to grow the audience for FIFA through content that extends and enhances the experience, and our amazing development team delivered with a game that has been critically acclaimed as one of the best games of the franchise. As we have seen previously when we have delivered innovative and creative new ways to play such as The Journey, FIFA players will jump into the new content first, and over time move into Ultimate Team. So far since launch, we have more players engaging across a great breadth of modes, from Career mode to Kickoff and Tournaments.

For those players that have already moved into Ultimate Team, engagement is high, with more games played and more games per player on average year-over-year since launch. Players in Weekend League, our most competitive mode in FIFA Ultimate Team, have grown more than 75% year-over-year since launch. As we now ramp into our live events inside the service, we expect that participation in Ultimate Team will continue to grow.

We design FIFA for long-term engagement, and while Blake will talk about how some of the engagement in this new content has shifted our FUT monetization in the near-term, FIFA 19 is a game that will engage a growing global community, every day from now until we launch the next one, and beyond. Madden NFL 19 continues to bring new players into the franchise with the most immersive NFL experience we've ever delivered. Madden Ultimate Team, including popular modes like Seasons, Solo Challenges and Weekend League are showing strong year-over-year engagement as we ramp into some of our biggest live events. Across our EA SPORTS portfolio,

NHL 19 was our highest-rated NHL game on current generation consoles, NBA LIVE 19 has been recognized by fans and critics for the unique connection to basketball culture, and FIFA Mobile daily active players increased significantly year-over-year in Q2, leading up to the new season that is set to launch on November 7.

Excitement and engagement in our competitive gaming programs continues to grow. The 2018 FIFA eWorld Cup Final wrapped up our second FIFA esports season in August, setting records including a 4x increase in global viewership over last year, and more than 20 million players participating through the course of our FIFA 18 Global Series. As we set out this quarter for our third season, FIFA esports is now a global phenomenon. We will have three times as many major events, and we expect to launch with 15 official football league partners holding top-flight competitions, including the Bundesliga, La Liga, Ligue 1, MLS and the world's most popular league-The Premier League.

Both FIFA and Madden are proven unique multiplier of traditional sports through the context of esports. Players who watch our esports content play more, return more frequently, and are choosing to invest more. With expanded competitive ecosystems and new experiences for our players this year, we see strong potential for continued growth, including increased revenue streams through sponsorships, licensing deals with esports leaders, and broadcast agreements including ESPN that continue to reach new audiences.

Across consoles, mobile and PC, live services are increasingly the lifeblood of the experiences that players are engaging with today. This is where games continue to evolve for our player communities, and where we can continue to deliver the choice, value and fun that keeps them together with their friends over weeks, months and years.

In our Sims 4 live service, fans have downloaded nearly 30 million expansion packs life-to-date, and with our monthly average players continuing to grow year-over-year, we see a long future ahead for this game and its thriving community. We've also learned a lot through Star Wars Battlefront 2 about how to construct a strong first-person shooter live service. We're now beginning to deliver fan-requested Clone Wars content, and we have more to come for the community next year. These two games, and many more, give an important view into how we are creating games today that evolve with their communities well into the future.

Throughout Q2, we had more than 10 million unique players engaged in our Battlefield games, building excitement for the launch of Battlefield V. On November 20, we will bring the community into a new Battlefield that has been designed from the ground-up as a service. At launch, Battlefield V will be the deepest game we've ever made in the franchise, taking players into the unseen fronts, untold stories and intense combat of the world's greatest conflict though bigger-than-ever multiplayer and gritty single-player War Stories.

Then, just about two weeks later, our Tides of War live service will begin a regular cadence of major content updates delivered to all Battlefield V players. Each chapter of the service will bring a new dimension to the experience, fundamentally changing how the game is played. For the first three chapters, here's what to expect: In early December, our first chapter will launch, including a new single-player War Story, a new multiplayer map, tank battles, and more customization options for players.

In Chapter 2, we're adding co-op and new multiplayer experiences including the fan-favorite Rush mode. In our third chapter, set for March, Firestorm Battle Royale will arrive, along with another new location in Greece. Tides of War is a highly innovative new model for a massive, ever-expanding Battlefield, and we're very excited to begin bringing players in to Battlefield V next month.

As you saw with our announcement this morning, Command & Conquer: Rivals is now set to launch worldwide for mobile players on December 4. It will also be our next official EA competitive gaming franchise, with a complete ecosystem beginning to roll out in Q4, including community tournaments and a championship pro scene.

This is a fast-paced, head-to-head strategy game that is easy to play, a lot of fun, and perfect for competitive play. We've had great engagement and feedback in our soft-launch testing, and strong interest from competitive players. This is our first entry into mobile esports, and we're excited for Command & Conquer: Rivals to expand our global audience of players and spectators. Looking ahead, our focus continues to be on connecting more players to more great experiences. On February 22, BioWare will launch their stunning and ambitious shared-world game, Anthem. The team has done an outstanding job executing against their vision for a game with amazing levels of complexity, scale and innovation.

Anthem has won more than 90 awards, including recognition as one of the most anticipated games of the year, and player feedback continues to be highly positive through our pre-launch testing. We can't wait to see this game come alive for fans at launch and through the long-term live service to come. Across multiple studios, we have new projects under way, including games from Respawn that are slated to launch by next holiday season. In our multi-product subscription services, we are pioneering a new value model that is lowering friction for members to access new content, including more than a hundred games from EA and third-party developers and publishers.

We have deeply talented creative leaders and teams across the company, driven by the opportunity to put our scale behind their ideas, and helping us continually push the boundaries for the global gaming community. We're looking forward to our opportunities ahead, building long-term engagement and lifetime value for players in ever-evolving live services like FIFA 19, Battlefield V, Anthem, and more.

Now I'll hand the call over to Blake.

Blake J. Jorgensen -- Chief Operating Officer and Chief Financial Officer

Thanks, Andrew. We're pleased with the strong profitability of our business through the second quarter, and particularly with the record Q2 digital net bookings. The digital transformation continues, with growth in full-game downloads and live services and the launch of our first frontline subscription service.

I'll report our results on a GAAP basis, then use our operational measure of net bookings to discuss the dynamics of our business. To compare this quarter's results to historically reported non-GAAP measures, please refer to the relevant tabs in our downloadable financial model. EA's net revenue was $1.286 billion, above our guidance by $16million. Operating expenses were $610 million, $64 million lower than our guidance, driven by compensation and related expenses, and some phasing of marketing expenses.

GAAP operating income was $258 million, compared to an operating loss of $41 million a year ago, and resulting in earnings per share of $0.83, $0.35 better than our guidance. Underlying profit was much stronger than we had expected, driven by increased sales, better gross margin and lower operating expenses. Operating cash flow for the quarter was negative $126 million, down $178 million from last year. The decrease was driven primarily by the timing of cash receipts, the timing of royalty payments, and by increased tax payments. Operating cash flow for the trailing 12 months was $1.458 billion.

Capital expenditures for the quarter were $31 million, resulting in a free cash flow of negative $157 million. See our earnings slides for further cash flow information. During the quarter, we also repurchased 2.3 million shares at a cost of $299 million, leaving $1.88 billion in our two-year $2.4 billion buyback program we began in May. Our cash and short-term investments at the end of the quarter were $4.5 billion.

Now, I'd like to turn to the key drivers of our business this quarter. Total net bookings for the quarter were $1.222 billion, up $43 million on the prior year, and $62 million above our guidance. Performance over guidance was primarily driven by full game sales of FIFA 19, and FIFA and Madden Ultimate Teams. Digital net bookings were $637 million, up 10% on the year-ago period, and a new record for the second quarter. The main drivers of the increase were FIFA 19, FIFA and Madden Ultimate Teams.

Digital net bookings now represent 69% of our business on a trailing 12-month basis, compared to 63% in the prior year. This is a new record for the period. Looking at each of the components of this quarter's digital net bookings in turn: Live services net bookings were up 6% year on year, to $328 million, a new Q2 record. The increase was driven by FIFA, Madden and Madden Ultimate Teams and The Sims 4, offset by the effects of the transition from FIFA Online 3 to FIFA Online 4 in Asia.

The Sims 4 live services are in their fourth year, continue to perform very strongly, and are on track to grow 20% over fiscal 2018. In addition, our subscription services continue to grow, and we expect the launch of Battlefield V to drive additional subscriptions to our Origin Access Premier service. As a reminder, over the course of a year, our Live Services business is about 50% Ultimate Team, 30% other live services such as Sims 4 Expansion Packs and FIFA Online 4, and 20% subscriptions, advertising and other.

Mobile delivered net bookings of $152 million, up 1% year on year, with growth in our FIFA franchise on mobile mostly offset by a decline in Madden Mobile. The Madden team is working hard to turn this around, adding new social features, new game modes and competitive tournaments. We have two updates out already, and a major update coming in December. FIFA Mobile also has a long list of new features coming. Full game PC and console downloads generated net bookings of $157 million, 32% higher than last year, another Q2 record.

Growth was driven by the ongoing shift to digital, timing of the recognition of net bookings from FIFA 19, and the earlier launch of Madden this year. The digital portion of Madden sales increased 9 percentage points year on year, to 42%. FIFA 19 launched just days before the end of the quarter, but based on the first three weeks of sales, it was about 29% digital, up from 24% in the comparable period for FIFA 18. Over 42% of our unit sales were digital rather than physical, measured on Xbox One and PlayStation 4 over the last 12 months. This compares to just 36% a year ago.

Turning to guidance: Our expectation for full-year GAAP revenue is $5.15 billion, and earnings per share of $3.11. We expect operating cash flow of about $1.65 billion. We continue to anticipate capital expenditures of around $125million, which would deliver free cash flow of about $1.525 billion. The reduction from prior estimate is driven by lower net income and a greater balance of bookings in the fourth quarter, some of which will be collected in fiscal 2020. To reiterate our guidance from our August announcement, we anticipate net bookings of $5.2 billion. This guidance was driven by the later launch of Battlefield V, which also reduces our expectations for live services and subscription revenue in the year, the FX headwind, and lower mobile net bookings.

Our revised outlook is for net bookings to be roughly flat to the prior year. We are updating our digital growth targets for the fiscal year to give you more visibility into the changes within our business. We now expect live services to be approximately flat to up 5% year on year, with growth driven by FIFA Ultimate Team. This is lower than our original guidance, primarily due to reduced expectations for Ultimate Team, the delay of Battlefield V, and the FX headwind. As Andrew mentioned, FIFA players are engaging with the new content we have added to FIFA 19, and this may be delaying the entry into FIFA Ultimate Team.

However, once playing FIFA Ultimate Team, engagement metrics are up on last year. We expect our mobile net bookings to be about flat year on year. We have a couple of titles performing below our expectations, and we have moved Star Wars Rise to Power out of fiscal 2019. Meanwhile, Command & Conquer: Rivals is performing well in soft launch, and FIFA Mobile is off to a strong start in China. Net bookings from full-game downloads are expected to grow 20% to 25%. This is significantly above our original expectations, primarily driven by the strength we are seeing in Anthem, which we expect to skew strongly digital, plus the digital shifts for our other titles.

We continue to model an underlying shift of around five percentage points a year to digital. For the third quarter, we expect net revenue of $1.375 billion, cost of revenue to be $446 million, and operating expenses of $730 million. OpEx is up year on year, primarily due to increased investment in R&D. The results in earning per share of $0.61 for the third quarter using the diluted share count of 306 million. We anticipate net bookings for the quarter to be $1.725 billion. This is down 12% year-on-year, primarily because we had two extra launches in Q3 last year: Need for Speed Payback and The Sims 4 for consoles.

The fourth quarter will be stronger than we had originally forecast, driven by higher expectations for Anthem and Command and Conquer Rivals. In conclusion, we delivered a strong quarter. Our business model is robust because it is diverse, with global revenues across multiple platforms, business models and geographic territories. As a result, even with the challenges this year, we expect net bookings to be roughly flat year on year, with strong cash generation and continued growth in underlying net income.

The digital transformation continues, and we are moving ahead with our growth strategies. Now, I'll turn the call back to Andrew.

Andrew Wilson -- Chief Executive Officer

Thank you Blake. At EA, our transformation continues in constant pursuit of the future of interactive entertainment. The very definition of a game is changing, much as it did when we went from offline to online experiences. Games are evolving from finite experiences to live services with infinite potential. These are experiences that are constantly evolving, and beginning to bypass the boundaries of devices, geography and time.

This is how games become an even more meaningful part of our daily lives, creating shared connections between you and your friends that exist both in-game and in the outside world. We are investing in the talent, the content and services, and the technology to deliver these breakthrough experiences in our games today and in the years to come.

Across our organization, we have more than 5,000 deeply talented creators in our development team. We've cultivated incredible teams in our studios that deliver that across an unmatched breadth and depth of franchises and IP. These are the teams launching Battlefield V, and beginning a long-term journey with millions of players through our live service.

These are the teams that continually deliver for hundreds of millions of fans across EA SPORTS, The Sims, Star Wars and more. Our Command & Conquer team is not only delivering a great new mobile game, they are also working to deliver content for the franchise's PC core. Teams across our studios including BioWare, Respawn and Motive are executing on their visions to bring next-generation experiences and content to life. And in other areas, we're fostering new dimensions of our creativity. We've recently launched a new internal creative council to incubate great content ideas and provide support to nascent projects, and we're advancing the work of our SEED labs team working on disruptive new game designs.

We are also well-positioned to lead through the rapid advancements in the technology landscape that are shaping the future of games. Engine technology, cloud, social layers, services and distributed networks are converging to unlock new possibilities. We are expanding the capabilities of Frostbite with advances in ray tracing, scalable world editing, A.I. and other features that are bringing next-generation experiences to life.

As we shared yesterday, we've also been developing Project Atlas, bringing together Frostbite with an expanding suite of digital services into a fully integrated platform that will enable us to more efficiently create and execute on new games that deliver amazing, scalable, social and deeply interactive experiences.

Cloud gaming will enable games to reach new audiences and geographies, and we're continuing development of the streaming capabilities we debuted in June and exploring the disruptive combination we see for streaming with our industry-leading subscription services. Underpinning it all will be our Player Network, enabling our players to stay connected to their friends and the content they love, wherever they are in the world. We are executing for our players today, and positioning EA to lead and grow in the next evolution of games and entertainment.

Now Blake and I are here for your questions.

Questions and Answers:

Operator

(Operator Instructions) And your first question comes from Alex Quadrini with JPMorgan.

Alex Quadrini -- JPMorgan -- Analyst

Thank you very much. My question is really on the confidence you have for sort of the outlook for fiscal Q4 when you mentioned higher expectations for Anthem. I'm curious, what sort of gives you confidence behind that and also how much certainty, do you have at the delayed live services revenue will materialize on FIFA?

Blake J. Jorgensen -- Chief Operating Officer and Chief Financial Officer

I think we're, we're confident in both, I think everyone knows, we tend to approach things fairly conservatively. And I think we've shown that in our recent guidance and results where we monitor FIFA on a daily basis and Ultimate Team on a daily basis and we're seeing extremely good strong metrics as Andrew mentioned and I mentioned around all the players who are playing.

We also know how players are playing in other modes in the game, and we know the game is designed ultimately to steer them into Ultimate Team and so we're confident that as they consume the content in FIFA, they will move into Ultimate Team. And we have a great many said of exciting events leading up to the holidays and then after the holidays.

For example, this weekend we had our Halloween events around the globe and despite the fact of Red Dead Redemption taking up a lot of attention in the marketplace. We have one of our strongest FIFA weekends we've seen -- Ultimate Team weekends, we've seen in a long time, so we're confident and we're, but we're also careful in how we forecast, we want to make sure that we're being straightforward with investors.

We're also very excited about Anthem, Andrew mentioned it was getting a lot of positive feedback. We think it's a fabulous game and you'll see a lot more of it to come after we get out of this holiday window into early next year and I think our original expectations of the game were probably too low. And thus we think that's important. Remember also that our assumption is, we'll sell more Battlefield V in Q4 than we would have originally anticipated as we move that out by four weeks and any live services associated with that game or with Anthem obviously will also benefit Q4.

Alex Quadrini -- JPMorgan -- Analyst

Okay, thank you very much.

Operator

And your next question comes from Mike Olson from Piper Jaffray.

Mike Olson -- Piper Jaffray -- Analyst

Hi, good afternoon. I just have two questions on Battlefield V, is the strength of the launches of the competitive titles in recent weeks, leave you encouraged that there is a strong appetite for console titles in the current environment or does that leave you, I guess, concerned that gamers may be spending their budgets on those titles now?

And then second, can you talk about some of the changes in creative leadership during the quarter and just how investors should be thinking about the talent that's kind of moving in and out of the business? Thank you.

Andrew Wilson -- Chief Executive Officer

Sure, I'll take both those questions, Mike. In terms of our confidence in the Battlefield V launch with respect to other things that are happening in the industry. I think the industry is vibrant and growing and we couldn't be more excited for our Battlefield V launches, I said in the prepared remarks, we've still got over 10 million players now existing Battlefield games that we are in direct communication with as we going to launch Battlefield has a tremendously rich and robust community who love those only in Battlefield moments.

We're coming out with strong multiplayer, strong single player, but also the promise of a tremendous live service with content that's free for all players in the months and years to come. So I think we feel good about that even in the context of what it have been from some other strong launches and I think that's additive to what we're going to do there,

In terms of creative leadership, again as I talked about in the prepared remarks, we have over 5,000 developers in the organization. I think we've got one of the deepest and broadest benches of creative leaders. We made some changes through the quarter in service of stronger creativity and the organization as well as stronger execution across the organization. Again, as we think about the future of games and I touched a little bit about that in my prepared remarks and we are planning for the future.

We see a worldwide games are no longer bound by device or CPU or GPU. We see a world where they span across platforms, across business models, across geographies and some of the decisions we made during the quarter, specifically around Samantha Ryan (ph), we're bringing these types of games together who serve as a very particular player cohort in the context of action adventure RPG and simulation, and we feel very good about the level of collaboration we're going to go to achieve across that group to deliver both creativity, innovation and execution more broadly.

Mike Olson -- Piper Jaffray -- Analyst

Thank you.

Operator

Your next question comes from Eric Sheridan from UBS.

Eric Sheridan -- UBS -- Analyst

Hey, guys, maybe one on capital, given how much the stocks under-performed recently, wanted to get a refreshed view on the way you guys are thinking about leverage possibly returning capital to shareholders. And when the arsenal of ways to create equity value, how you also might be thinking about the M&A landscape? Thanks guys.

Blake J. Jorgensen -- Chief Operating Officer and Chief Financial Officer

So good questions. Clearly we've been active at buying back stock in the quarter. We try to pace our buybacks around the life of the program versus any certain stock price. We oftentimes don't even pay attention to the stock price on a day-to-day basis, because we know that there's lots of things that move the market, that are well beyond our control, and so our goal is to simply allocate a certain amount of capital to buybacks and then be in the market to buy back that stock every single day and hit our targets of in this case 2.4 billion over 2 years.

In terms of M&A. We're clearly keeping our eyes open on everything that's out there. This is all about collecting great content and talent, and we're looking for ways to do that every possible opportunity we have and we'll continue to do that. I can't predict anything at this point in time, but part of the reason that we want to leave dry powder, both in the terms of cash and in terms of debt capacity. Our capital structure is for the opportunity that could come to us at some point in time to be able to step in and buy end up an asset or it's acquire talent and titles that would be helpful to our long-term vision of both subscriptions and streaming.

Eric Sheridan -- UBS -- Analyst

Great, thank you.

Operator

Your next question comes from Laura Martin from Needham.

Laura Martin -- Needham -- Analyst

Hi, there. I need some help on mobile. So it looks to me like we have a trailing 12-month mobile fees of $93 million, for a projected full year for '19 of $220 million, but Mobile is growing at 1%. And can you bridge -- I thought those were rev shares on the Mobile platform, how is this -- the Mobile fees are growing so much faster than the Mobile revenue? That's my first question.

Blake J. Jorgensen -- Chief Operating Officer and Chief Financial Officer

Yeah, I think you're probably missing possibly some deferrals as you go from non-GAAP to our management reporting numbers. The Mobile platform fees are purely what we paid to the mobile platforms like Google or Apple . So essentially that's 30% that they take and we book 70%. We can probably go through with you offline the specific numbers, just to line them up. I think the key growth driver to remember is, we will add a new title Command & Conquer on December 4. We just announced this morning that will drive substantial growth in mobile during the tail end of the third quarter or the fourth quarter and give you some of the mobile growth for the full year. But we have, as we showed in the script, adjusted our mobile full year guidance half of what we originally thought we would do, to now a lower level, which we believe be around flat for the year.

So after that, for to have a combination of all those things will probably get you back to where you would like to see in your model.

Laura Martin -- Needham -- Analyst

Okay. And then I was really intrigued by this prior comment on Samantha Ray, where you're servicing a particular player, is that a pivot toward looking at creating an organizational design around identifying players segments and actually targeting games as there is of game to particular players now?

Andrew Wilson -- Chief Executive Officer

So, yes, that's one piece of the puzzle. Again, we have a lot of data across more than 350 million players in our network and certainly many more players across our mobile games that we don't know as much about. And what we've come to understand over recent years is that players always looking at full very specific motivations in the context of play and some players are looking to perform different motivations at different times or on different platforms and we've started to better understand that in terms of creating new and innovative and creative content for our players. And one of the things that we've seen, particularly as we look to the future, we think about moving many of those experiences to the cloud over time, which unbounce them from the platform that they may have previously been subjected to, is that we have to start thinking about in the context of how they fulfill those motivations over time.

We've seen tremendous strength in the collaboration across our EA SPORTS portfolio, both in the context of our core game, core feature sets and the live services that we build on top of those. And part of what we've looked at in this construct is our ability to do that across action adventure RPG and simulation, all of whom support a collected player set who are looking fulfill similar motivation. And you should expect over time as we continue to transform the nature of discovery purchase and enjoyment across games that will continue to try and organize around play of cohorts to better service their needs and support what they're looking for out of their games.

Laura Martin -- Needham -- Analyst

Thanks , that's super helpful. Thank you very much.

Operator

Your next question comes from Stephen Ju from Credit Suisse.

Stephen Ju -- Credit Suisse -- Analyst

Thanks, Andrew FIFA is already out and localized in China, but can you update us on what your distribution partners maybe saying about changes to the approval process there, what looks like a more stringent operating environment as this might impact your ability to release other new games in the country? And Blake the digital download gap between Madden and FIFA is at 13% now based on your prepared remarks. So I guess some of this was due to greater payment friction in Europe and other factors. So is the adoption path for those users now similar to what you saw in the US at the same time?

Andrew Wilson -- Chief Executive Officer

So, sure. I'll take the first one. Right now, we have our product out in China and because they're approved there in the marketplace and doing well. As far as we can tell at this stage, it should not impact our titles, FIFA Online 4 and FIFA Mobile are doing well in the next title launch in China for us is some way off. And so our hope is that delays are fixed by then and while we continue to monitor the situation, we don't see any direct impact right now.

Blake J. Jorgensen -- Chief Operating Officer and Chief Financial Officer

Yeah, our understanding is this more through interactions with Tencent and other partners, is more of a backlog problem that and actual, not that really approving games, I think that they changed agencies, the backlog built up fairly quickly. So we don't see that as an impact for us at least in the next year or so as we focused mainly on FIFA.

In terms of the full game downloads that we've always seen FIFA lag Madden, because Madden is pretty much a domestic US business, where FIFA is a global business. And in many parts of the world, where FIFA is shift the bandwidth speeds are still slow and there may be some payment issues or just payment cultures that differ Germany for example tends not to use credit cards and so we have lower full game downloads in that marketplace.

That is changing and we've seen the pace of change of FIFA track pretty much the same pace of change with the other games that just started from a lower base. And some of it historically was due to the fact that retailers would use FIFA to drive traffic into their stores, that's starting to abate, because once again fewer people are buying physical discs.

So we believe that same pace will continue and obviously it's great to see all of our games tracking as a whole at 42% meaning that some games are well north of that and FIFA is on the south side of that.

Stephen Ju -- Credit Suisse -- Analyst

Thank you.

Operator

Your next question comes from Colin Sebastian with Robert W. Baird.

Colin Sebastian -- Robert W Baird -- Analyst

Great, thanks. Couple of questions from me, I guess first, with respect to the third quarter guidance. Wondering if you could expand on how much of a promotional environment you're baking into the outlook for the Battlefield V release. And then as a follow-up to the live services segment and the guidance, just given some concerns that still exists around user monetization maybe begin to flatten out a bit. I wonder if you could talk about how much growth we should expect in ARPU within individual franchises such as FIFA and Battlefield versus growth in the user base as a driver? Thank you.

Blake J. Jorgensen -- Chief Operating Officer and Chief Financial Officer

Yeah, so in terms of the promotional plans, our promotional plans are pretty consistent with what we had in the past with case of Battlefield actually will be -- we will not be on promotion on Black Friday, because we shipped that week. There may be selected retailers that choose to promote it on their own, but we're not supporting those promotions. And then we'll have the regular promotion schedule that you would see through December into the holidays, similar things for each title, the timing is different than the retail mix will be different. But you should see promotions both digitally and physical copies, but not that different than what we've seen historically with the exception of the Battlefield V issue relative to Black Friday. And we see that's pretty consistent with past year, they may have always a promotional time of the year, it drives a lot of volume and we are very supportive of retail partners and our platform partners, who want to continue to keep people engaged.

In terms of the Q3 numbers, where our focus is always on driving more users into the live service, that's the way to keep a very large market in place and continue to keep it very healthy. The moment you start focusing on that you really lose the strength of live services, which is a large marketplace, where people can all play together. If you focus too much on revenue generation per person, you start to squeeze the players and we're very careful not to do that. It happens naturally in some cases due to people's in level of engagement, but we're very careful not to allow people to start to spend too much, because we know they'll churn out of the business.

So our goal is, I think Andrew mentioned before, is to build really exciting great games. We think we've done an amazing job with FIFA probably the best FIFA we've ever built. And it's got so much content in there that allows people to play a long time and if that means that they start playing Ultimate Team, we're playing Ultimate Team at a level a little bit later. We're fine with that as long as they're enjoying themselves in the game and then we think that's what's going on during the -- and what we're seeing in the quarter.

I also remind people, we didn't give new phasing for the quarter, when we moved Battlefield out, we just told people what the total year's numbers were and we left it to everyone to deliver their own phasing, and so I caution people to be overly fork, overly emphasis on comparing to what they had, because what they had before wasn't informed by our giving some sense of things like the mobile titles that moved out, when Command & Conquer would start, the impact of FX on the quarter and the general overall view of our business during the quarter. So I just don't over index on the two quarters focused on the full-year guidance, which did not change.

Colin Sebastian -- Robert W Baird -- Analyst

Okay, that's helpful. Thank you.

Operator

Your next question comes from Brian Nowak from Morgan Stanley.

Matthew Cost -- Morgan Stanley -- Analyst

Hi it's Matt Cost on for Brian. Thanks for taking my questions, I have two, so on that point about the Battlefield delay, can you give a little bit more color, if you can around sort of the unit potential for the game and then bigger picture. How you think about the potential for in game monetization in the new Battlefield compared to the prior installment? And then the second question is, subscription and streaming obviously is the topic you guys have been very forward on, recently announced project Atlas, what do you think are sort of the key next steps needed to drive a material transition into subscription and streaming based ecosystem? Thanks.

Blake J. Jorgensen -- Chief Operating Officer and Chief Financial Officer

Yes, So I start and then I'll let Andrew talk about the second question. Battlefield, the overall forecast really only change just because of the timing. So when we told people that moved roughly 3 plus million units out of the quarter that we originally had expected, some of that into Q4 and some of it into next year's Q1.

What you'll find when you get into Battlefield and I'll leave it up to the Battlefield team to help people understand the excitement around where Battlefield is going and how that might include game monetization, but what I'll just say is there will be a dramatic evolving game play over time, new ways to experience it, things like fortification and reinforcements and new hardware, vehicles, weapons, gadgets and there could be exciting ways to earn those over time or possibly even purchase those over time.

New experiences, through the single player stories that will get rolled -- continue to be rolled out, game improvements and excitement around a Battle Royale style mode that will come in the March time frame and pretty exciting live service that we hope we'll keep people highly engaged and over time that may include monetization opportunities to keep them even more engaged.

Andrew Wilson -- Chief Executive Officer

In terms of content streaming, we've talked a lot about this the greatest disruption of the consumption of entertainment media over the last five years has been the combination of those two things. Right now we are treating them on separate vectors, but ultimately expect that we will bring them together over time.

We launched our first subscription what is now over four years ago as a catalog subscription on Xbox and then took that to PC, and I would get tremendous learning out of that. And what we have seen is that people who come into that subscription again by definition, a subscription is the offering of an amazing collection of high quality content at a great consumer value proposition with as low friction as possible. And what we've seen from people who've come into that is they play more games, they spend more time and also when that monetize higher in live services as well. We know that great new blockbuster content add subscribers and we know the great catalog content retain subscribers, no different than traditional linear media.

And so what we have started to do with the launch of our Origin Access Premier this year is to add front line blockbuster content and Battlefield V will be the first opportunity for us to truly understand that we saw really strong uptake after Madden, remember the Madden hadn't been on PC for nearly a decade. The PC community of Battlefield is very, very strong and we expect to get tremendous learning out of that as we grow that. As in terms of next steps, you should expect us to continue to try and aggregate more content for our players, again always improving the collection of content and the consumer value proposition. So the players can come in and play more games and spend more time.

Some of that will be the creation of new content organically inside of our company, some of that will be working with indie developers or third-party developers and publishers. And as Blake pointed out as a long-term vision, we also expect that we would look to acquire both content IP and talent over time.

As you think about the context of streaming, we announced and demonstrated in June a streaming service that was working at EA PLAY, we've continued to develop that, and continued to work on making that a better experience for players. We're also working with some other third parties that you may have heard about, we're developing streaming services and we believe that our service can work in conjunction with their services over time.

Ultimately, substantial increasing the total addressable market of players that we have access to and the ability to deliver great games and experiences too, you referenced project Atlas, that's really an ambitious plan that we've been executing again to make it easier to move these experiences to the cloud by bringing Frostbite anti-collective digital platform of services together, so that our game makers arrival to effectively execute and deliver the types of innovative game experiences that I see players want over the next 3 years.

As you can imagine, we've had a lot of inbound requests around that platform and third parties out there, who would look to -- who would love the ability to utilize that technology, that combined platform of engine plus digital services and as we think about adding more content throughout subscription over time, we also see that as a tool that would allow us to do that.

So add more content to our sub-through licensing and potentially acquisition continue to develop on our streaming solutions both as an isolated service for us as well as in conjunction with others and then bringing our combined digital platform engine and digital service and project Atlas to help us get there faster, more quickly, more efficiently and with more innovative and creative games both developed internally and potentially at some time developed externally.

Matthew Cost -- Morgan Stanley -- Analyst

Got it. Thank you.

Operator

Your next question comes from Raymond Stochel from Consumer Edge Research.

Raymond Stochel -- Consumer Edge Research. -- Analyst

Great, thanks so much for taking my question. I guess a couple of things on Project Atlas, so number one would be, how are you thinking about user generated content in games, longer term you sort of alluded to that in that project Atlas announcement. And then secondarily in a streaming world, can you give us a better sense as to your mobile strategy. You obviously have a number of mobile titles in development that are exclusive mobile titles. How do you think about development over time and more cross platform and streaming way? Thanks.

Andrew Wilson -- Chief Executive Officer

Two great questions. So first in terms of user generated content, as we look at in the world today, some of the richest eco systems have a robust community of creators that are delivering new content experiences for their fellow players on a daily basis, and for us, the Sims franchise has been there since its inception. Part of what we're doing now, we're building that capability into our tool set, so the game makers can implement that in future games and bring communities together.

Again, in a world that we have a vision of entertaining a billion people in play. We are very aware that delivering against the insatiable appetite of that many players across the globe is beyond the scope of just that creative organization. But in the context of having our creative organization see these great world, these great characters and these great stories and having AI amplify that effort in conjunction with a large and robust communities of 10s and potentially hundreds of millions of players creating content in large scalable simulated worlds. We feel like that's the future of games.

We've been investing for some years against it. We're now in a place where we're ready to talk about it and we started to invite people in including these community creators to help us really build out that robust tool set. As we think about mobile strategy going forward, again, over time, we do believe that many experiences will move to the cloud and that no longer be bound by local devices, whether it's CPU, GPU, memory or battery life and more the experiences will be governed by the screen size you have access to and the session time that you have.

With that said, we also understand that there will be some players that only have to play on their mobile device and some players who spend a great or disproportionate amount of time playing on an 80 inch screen, and so that we will continue to develop experiences that are rich and robust as those negative experiences today.

But always with a view of allowing them to connect their experience across range, but more importantly to connect with the global community of players regardless of which screen they access the game through. And that's a fundamental shift in how we designed the architecture of games, it's also a fundamental shift in how we design the features of games . But in all things at the back, entertaining with innovative and creative experiences that you can experience based on your choice of how you want to play, but where you never feel disconnected from this global community of friends that you have.

Operator

Your next question comes from Ryan Gee with Barclays.

Ryan Gee -- Barclays -- Analyst

(Technical Difficulty) Thanks for taking my question. So my question on the experiences, clarification. So -- plus or minus, plus 5%, and I think -- seem as a biggest driver there which seems to be growing, maybe single digits if the first half results -- indication, so help us understand the second half live -- overall should it be -- year-over-year just given battlefront II with Star Wars -- last year, I think you have -- already in December with -- kind of -- ultimate -- growth year-over-year?

Blake J. Jorgensen -- Chief Operating Officer and Chief Financial Officer

Yeah. So assume that we've got very little live service revenue in for either Battlefield or Anthem because they're very new and until we understand exactly how well as we monetize. We didn't put lot of -- much of that into our forecast. We still see some of the transition impact on FIFA Online 4, which will continue to be a drag and we've got a forecast for subscriptions, but we're guessing a little bit as to the uptake of Premier based on the fact that we haven't yet seen the real true PC-based titles like Battlefield and Anthem, who are better sense once we get through so. I'd say, some of it just conservatism and forecasting and some of it is the associations that I just mentioned around live services.

Ryan Gee -- Barclays -- Analyst

(Technical Difficulty) Okay, great. And then just a clarification -- year since -- has done anything with its flagship -- satellite we should expect that came from this -- from -- next year? Did I hear that correct. I know that you revealed Star Wars -- is there anything else that we should aware of?

Blake J. Jorgensen -- Chief Operating Officer and Chief Financial Officer

So you weren't coming through very loud, but I think I got what you said, which is, you heard Andrew you use a plural when he said games from Respawn that's just consider that little Easter egg left in the earnings call for you. We will announce more when we get there, but we're clearly got a lot of things working with all of our studios and you should assume that there will be some things that we haven't announced that come out later in the year when we go to give guidance for next year.

Ryan Gee -- Barclays -- Analyst

Great, thank you.

Operator

And your next question comes from Brandon Ross with BTIG.

Brandon Ross -- BTIG -- Analyst

Hi, thanks for taking the question. A couple of topics, first on Anthem, can you talk a little bit about what you're seeing there that made you raised your outlook for Anthem in your guidance? And then a follow-up on mobile, I guess growth there has really stalled. What changes need to be made to restimulate growth in mobile and if you could just tell us how important you see mobile being to your future and if you need to make an acquisition there potentially a larger one to improve that business?

Blake J. Jorgensen -- Chief Operating Officer and Chief Financial Officer

Let me start with Anthem, and I'll let Andrew address the mobile piece. Anthem, the brand new IP and so when we originally forecasted that we've forecasted at a pretty low level as we thought about without, without a lot of information. Right. That was last May or April when we put that forecast together.

As we've gotten deeper into the final parts of the game, and we've had it tested with a lot of people, clearly it is the excitement is building, it started building at E3, and people just learned what the game was inside, and so typically when you're forecasting a brand new IP, you usually start lower and then build that forecast over time and that's essentially what we've done.

We're getting excitement both internally and externally about the game, as Andrew mentioned its very different than anything, BioWare has built in the past, it looks stunning and it plays extremely well and that's what's giving us more confidence around the forecast. But remember also, as I said earlier, we did not provide new phasing of forecast, so you should assume that it's not all coming from Anthem, there maybe obviously stub (ph) from Battlefield V in Q4 than we originally were thinking in our forecast as well as the mobile titles that we talked about Command & Conquer.

Andrew Wilson -- Chief Executive Officer

In terms of Mobile as Blake highlighted earlier where there is an opportunity to bring on new teams or new IP of any category or across any platform, we're open to that right now. However, as I look at the Mobile industry and the Mobile top 20 chart or top 30 chart, it's not immediately apparent, what you would go after. We've seen some fairly significant shift in the mobile marketplace from where it was even a year or two years ago and is now also pretty well understood that many of the players that we're reaching some fairly serious revenue height over the last year or two. What also outspending their revenue and weren't profitable companies and weren't growing profitably.

I think what we've always maintained across our mobile business is that we believe we have a tremendously strong portfolio of content and we were going to take the time to ensure that we delivered profitable growth over time and what all that growth has slowed this year as a result of some title shifts and title moves, we feel actually very bullish on the future.

Command & Conquer, I'm very excited about. I think it's a unique and innovative new entrant in the mobile genre. I think we are, we clearly have a leading sports business, which is a business that we are committed to and we will continue to grow. We're seeing, we have some other products in development right now, that will come out of the years to come, but I think has started to play into the strength in mobile was mobile players are looking for creativity and innovation in their experience.

And again as we looked at the top 10 chart or top 20 chart, there's also a much greater representation from China, Japan, Korea and Southeast Asia in terms of titles strength. And as I look at what we're doing with Command & Conquer which has a tremendous fan base throughout the Asia region and FIFA, I feel good about that. And so what we're always open to acquisitions, I think that we also feel very good that the mobile industry is actually moving in a direction where there types of games that we make will be very, very well received.

Brandon Ross -- BTIG -- Analyst

Great, thank you.

Operator

And your next question comes from Matthew Harrigan with Buckingham Research.

Matthew Harrigan -- Buckingham Research -- Analyst

Thank you. I was just curious if you had any thoughts on the decision by Sony as well as Microsoft to do a next-gen council on how that laces into your perspective -- innovates into your perspective on the business and evolution toward the cloud and the continued importance of councils?

Andrew Wilson -- Chief Executive Officer

So, I think there is a few articles out there and a little a few rumors, and a little hearsay (ph) as to what they are and when they're coming and what they might be. I don't think we're in a position today to have a conversation on that, but just know that we've worked with Microsoft and Sony and Nintendo for many, many years and look forward to working with them for many, many years more, even as collectively we all seek to move either some portion or all of our experiences to the cloud.

Matthew Harrigan -- Buckingham Research -- Analyst

Great. Thank you.

Chris Evenden -- Vice President of Investor Relations

One Last question.

Operator

Your last question comes from Matthew Thornton with SunTrust.

Matthew Thornton -- SunTrust -- Analyst

Hey, good afternoon guys. Thanks for us taking me in here, couple of clarifications if I could. Blake you talked about the FIFA franchise. To be clear I mean our front-line players and ours up year-on-year. And thus we just need to get the monetization lever kind of moving over the coming months and quarters or our players and ours down in those monetization has got to work harder, that was question number one. And again, I apologize if I missed that answer.

Secondly, you talked a little bit about second Respawn title next year, would that also be in the holiday quarter. And I'm not sure if you mentioned that or not or you have any color around timing. And then just finally, Andrew, you talked a lot about project Atlas obviously. So it sounds like that might be a platform, you would think about licensing out to other developers, either on a per seat type of basis or revenue share type of a basis, but building apart that's opened outside third-party monetization. I just want to make sure I understood that correctly? Thanks guys.

Blake J. Jorgensen -- Chief Operating Officer and Chief Financial Officer

Yeah, I mean it's FIFA, we said sales were strong in the quarter. So you should assume we've done well with FIFA. We also mentioned that people were playing more modes in FIFA. We also still are quite a few people playing FIFA 18, we were successful bringing them into World Cup and many of those have not yet converted over to FIFA 19. So it's hard to say today ultimately how it will play out, because we are still early in the third quarter. So I would just say we'll see what that looks like over the next 2.5 months or 2 months as we get into the rest of the year and even into the fourth quarter. FIFA tends to sell well all through the holidays and so it's just, it's too early to say one way or the other, what people are spending their time on or not.

Andrew Wilson -- Chief Executive Officer

In terms of project Atlas, again what we set out on this journey the objective was to ensure that we had industry-leading technology for our developers to build the most innovative and immersive and creative gains everything from sports games to large, large world simulations and in a world where it's becoming increasingly complex to do that, we also understand that is hard for other people. And so as we have started talking to developers and publishers about bringing content into our subscription over time. As you might imagine, we've got a lot of inbound interest on the utilization of the technology platform like project Atlas that would make it easier for them to create content in these growing complex world and to what we have no locked in plans or timelines today, we're certainly developing the technology with a view that over time our objective is to bring the greatest collection of content together as part of our industry leading subscriptions and at some level, that might mean offering our technology for use by third parties, so that they can do that and then ultimately put their content into our subscription.

Blake J. Jorgensen -- Chief Operating Officer and Chief Financial Officer

And on your Respawn question, I skipped over it. We have more to come on that. We will -- we'll brief people as we get into the fourth quarter timeframe before we run into next year's full-year guidance. Thank you, everyone. Talk to everyone next quarter.

Operator

Thank you, that concludes today's conference call. You may now disconnect.

Duration: 62 minutes

Call participants:

Chris Evenden -- Vice President of Investor Relations

Andrew Wilson -- Chief Executive Officer

Blake J. Jorgensen -- Chief Operating Officer and Chief Financial Officer

Alex Quadrini -- JPMorgan -- Analyst

Mike Olson -- Piper Jaffray -- Analyst

Eric Sheridan -- UBS -- Analyst

Laura Martin -- Needham -- Analyst

Stephen Ju -- Credit Suisse -- Analyst

Colin Sebastian -- Robert W Baird -- Analyst

Matthew Cost -- Morgan Stanley -- Analyst

Raymond Stochel -- Consumer Edge Research. -- Analyst

Ryan Gee -- Barclays -- Analyst

Brandon Ross -- BTIG -- Analyst

Matthew Harrigan -- Buckingham Research -- Analyst

Matthew Thornton -- SunTrust -- Analyst

More EA analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

Motley Fool Transcribers has no position in any of the stocks mentioned. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.