You've sold 90,000 cars. You watch more than 180 billboards. You're peddling energy drinks, scrapbooks, and charisma. You also happen to run the second most popular primetime online show in Korea. Your only Kryptonite is Superman himself.
Honestly, now. If you didn't know that this story was about Electronic Arts
EA CFO Warren Jenson spoke at the Credit Suisse Annual Technology Conference last week. He offered a little insight into how the 2006 holiday season was shaping up before moving on to discuss some tantalizing revenue channels that the company is starting to explore.
Happy holidays, indeed
It's another Christmas season, and EA titles are selling like hotcakes. Need for Speed: Carbon has moved 5 million copies. The latest FIFA and Tiger Woods installments for EA Sports have sold 3 million and 1 million units, respectively.
Why is the Tiger Woods title producing double-digit year-over-year gains, when the market was supposed to pause and catch its breath as diehard gamers migrated to new consoles? Furthermore, there's still a scarcity of Sony
EA seems to be an all-weather hit factory. The only real dud that Jenson elaborated on was Superman. EA was hoping to cash in on the Man of Steel's return to the silver screen in TimeWarner's
Needs for speed
Moving on to digital initiatives, Jenson outlined five things that his company needs to do to be successful.
- Win in next-generation gaming.
- Win in Asia.
- Win online.
- Build more EA-owned intellectual properties.
- Win in mobility products like cell phones and iPods.
So how is EA's driving in these areas? Probably a lot better than you may think. In May, EA launched an online version of FIFA in Asia. The company has signed up 4.5 million users, and at one point as many as 85,000 soccer fans have been playing at the same time. The game itself is free. Over the summer, EA began tempting addicted players with small in-game purchases for things like an expert coach, charisma, energy drinks, and even the ability to wipe your slate clean and start from the beginning.
Skeptical? It's the same kind of strategy that Chinese Internet gaming pioneer ShandaInteractive
No checkered past for this checkered flag
There are two great things about selling so many copies of EA's latest installment in the Need for Speed series on the Xbox 360 platform. Microsoft's
There's money to be made in online gaming. For starters, the game features 180 in-game billboards. Through Microsoft's Massive in-game advertising arm, companies can buy ad space to plaster their graphical ads inside the game. Sponsorships for Need for Speed: Carbon will generate at least $4 million in incremental revenue for EA this quarter.
The game also encourages additional purchases online. There have been 136,000 in-game purchases, with the average buyer snapping up $11 worth of merchandise. The top draw is online racing cars; EA has sold 90,000 off its virtual lot. Players can also upgrade their games through Xbox Live.
The already high-margin software model is changing for the better. The transaction no longer ends at the retail store. Selling in-game ads and merchandise has become important ways for sponsors to reach folks who don't watch all a whole lot of television these days. The ability to upgrade titles through digital distribution is also something that will play a bigger part of EA's future.
Selling the invisible has also become a productive pastime at Pogo. EA's casual-gaming site received 14 million unique visitors. Pogo's 1.4 million subscribers put in an average of 12 hours a week playing the site's casual-game collection. Ad revenue and premium subscription revenue have been part of the Pogo story for some time, but now folks are purchasing things like custom gaming challenges, as well as a virtual scrapbook that holds their Pogo badges and accolades.
To infinity, and iPod
Even Apple Computer's
With its recent acquisition of cell-phone gaming heavy JAMDAT, EA's mobile business is now showing 75% year-over-year improvement -- yes, another new revenue stream for EA.
Can EA keep it up? Digitally delivered trends are encouraging, and even if the migration to next-generation consoles proves challenging, EA's got a wide range of games that have weathered past transitions with ease.
Buying charisma in an Asian soccer game? EA doesn't have to. It's got it in spades, my friends.
Electronic Arts and Time Warner are active recommendation in the Stock Advisor newsletter service. You're welcome to read up why with a free 30-day pass to access all of the newsletter's content services including a lively subscriber-only discussion board. Microsoft is an Inside Value selection. Shanda is a Rule Breakers pick.
Longtime Fool contributor Rick Munarriz has been a fan of EA's sporting titles, dating back to the Earl Weaver baseball franchise and the One-on-One basketball games. Graphics and gameplay have sure come a long way since then. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.