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FIFA Is Looking for More Video Game Partners Than Just EA. Could These 2 Stocks Benefit?

By Jon Quast and Sanmeet Deo – Nov 5, 2021 at 8:41AM

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This could open the door for new companies to capitalize on the world's most popular sport.

On Oct. 15, FIFA -- the world's premier organizer of international soccer events -- said it was looking for new partners in creating video game content to bring its brand to fans. This is noteworthy because FIFA video games are a very big part of Electronic Arts' (EA 1.77%) business.

In this video from Motley Fool Backstage Pass, recorded on Oct. 18, Fool contributor Jon Quast talks about the announcement with Fool analyst Sanmeet Deo. Watch until the end to hear why he believes this announcement could be good news for Sea Limited (SE 3.44%) and Activision Blizzard (ATVI 5.62%).

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Jon Quast: Well, I guess this is good place maybe to segue into this conversation when we just looked at the most recent video game data here for September and I was foreshadowing when I brought up Electronic Arts, EA, because of some news that broke over the weekend here.

I'm going to preface this by sharing how important FIFA is to Electronic Arts. This is from their annual reports for the most recent complete fiscal year. I think its fiscal year 2021, but that covers the year 2020. It's net revenue from Ultimate Team represented 29% of our total net revenue during fiscal year 2021, a substantial portion of which was derived from FIFA Ultimate Team. FIFA is accounting for a very large percentage of Electronic Arts' revenue. As we just saw in one of the previous slides that Sanmeet showed, it's a top 10 game over the past year. It makes sense. Soccer is the most popular sport around the world, maybe not here in the United States, but certainly in virtually [laughs] every other country around the world, it's a very popular sport, and so FIFA is the league around the world.

What is very interesting is FIFA came out here. This is from FIFA's official website, Oct. 15th, so what is that? Friday. I believe Friday afternoon that this report dropped, FIFA was talking about their long-term videogame content strategy, and up to now, Electronic Arts is pretty much the exclusive licensor of the FIFA brand. It's says, "FIFA is bullish and excited about the future in gaming and e-sports for football, soccer, and it is clear that this needs to be a space that is occupied by more than one party controlling all the rights."

That is very substantial news for this company. The fact that FIFA is putting out there that, you know what? We want to explore a variety of ways to monetize our brand via video games and it's probably going to look like more than just one partner that we're aligning ourselves with for our video games strategy. Different companies have different strengths and they're going to explore how do we partner with strong companies in each of these different areas so that we get the best games out there for our fans.

Sanmeet Deo: I saw that news as well. I would think that EA you would have expected this, would you not? I mean, they've had exclusive rights with FIFA. I mean that's what it's implying I guess or at least maybe not exclusive, maybe they had just most of the rights. FIFA didn't really explore other avenues. But I have to imagine that EA must have been preparing for this.

Quast: I mean, you'd think so. To your question, I don't know if there's official exclusivity between FIFA and EA. What we can say with certainty is that Electronic Arts is the video game developer generating the majority of the revenues for FIFA. I don't know the terms of their license agreements, frankly. I don't know if there are certain things that were set to expire, but there's no way that Electronic Arts with the franchise that is as important as it is as FIFA, there's no way that they are caught off guard here. Definitely, I'm sure that they knew that something was coming.

To be fair, it doesn't say that they're going to move away from Electronic Arts in any way. It says that they're going to seek new ways to bring the best video game content out there. Perhaps FIFA, as it currently stands, remains an Electronic Arts property.

Now, I have read other sources that said that some of the issue here is the terms of the license agreement that EA is going to have to pay up a lot more if it wants to keep its current iteration. Whether or not EA is going to be willing to do that or not remains to be seen.

But there are other ways that this content can be monetized via video games such as esports. This is something that FIFA specifically mentioned.

It's plausible to see the company partner with perhaps an Activision Blizzard, who has a long history in esports with its Overwatch League, one of the very first esports league where teams are actually in a physical place playing video games. There's a crowd, a stadium of people watching them play video games. I know that sounds maybe perhaps the older you are the stranger that sounds. But as they say, the kids are really into it these days.

Esports is a big time, multibillion-dollar business. You could see a company like Activision succeeding here. Another company that has done really well in esports, these live big events is Sea Limited with their Garena platform, the Garena part of their business.

Since Sea Limited is this big international company, especially in your Asia markets, your Europe markets as well, it's plausible to see FIFA go with a company like this that already has this big international presence, not that Electronic Arts doesn't, but the combination of international plus esports experience, you could see Sea Limited being a good partner here.

Sanmeet Deo has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Activision Blizzard and Sea Limited. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.

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