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Can EA Shrug Off the Loss of "NCAA Football"?

By Demitri Kalogeropoulos - Sep 28, 2013 at 12:00PM

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Electronic Arts won't have a new college football game to sell next year. Here's what that means for the company.

For the first time in 17 seasons, a new Electronic Arts (EA -1.38%) NCAA Football video game won't hit shelves next year. EA said in a blog post on Thursday that it won't publish a 2015 chapter in the franchise, putting the brand on ice for the foreseeable future.

The NCAA and a few college conferences quit supporting the game as lawsuits pile up around the use of student-athletes' likenesses without revenue sharing from the NCAA. For example, EA used licenses for 2,500 former college players in this year's title to create its "ultimate team" game mode. But without conference and NCAA support like that, EA said it couldn't deliver an "authentic sports experience" any longer.

Source: Electronic Arts.

So what kind of hit are we talking about to EA's business? The short answer: not much.

Sure, NCAA Football makes a solid annual contribution to sales and profits. But the title is eclipsed by much bigger sports franchises, including FIFA, which accounted for 17% of EA's revenue last year. Madden NFL is a bigger draw for EA, too, and had a decent start with its newest chapter launched last month. All told, the loss of NCAA Football might lop just 3% off EA's revenue next year, according to Michael Olson, an analyst for Piper Jaffray.

However, cutting NCAA Football out of the lineup won't be painless for EA. It has to find new homes for the talent that was dedicated to that franchise, for one.

And EA has a much less diverse group of titles to rely on than in prior years. It put out 36 major games in 2011, but this year it expects to publish just 11, as the video-game business gets more hit-driven. Rival Activision Blizzard (NASDAQ: ATVI) knows the feeling. Activision got 83% of its revenue last year from just four franchises: Call of Duty, Skylanders, Diablo, and World of Warcraft. Losing a steady performer like NCAA Football puts more pressure on the relatively few other titles in EA's arsenal.

On that score, at least the company can look forward to launching its new Ultimate Fighting Championship game next year. That game boasts what EA calls "unprecedented" character likenesses, with fighter models created using 3-D head and body scans. With any luck, the title could grow into a multi-year franchise and keep EA Sports growing despite the loss of one of its steadiest brands.

Fool contributor Demitrios Kalogeropoulos owns shares of Activision Blizzard. The Motley Fool recommends and owns shares of Activision Blizzard. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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