Electronic Arts (NASDAQ:EA) has long had a complicated relationship with some of the more enthusiastic segments of its consumer base. That hasn't stopped the company from successfully introducing new IPs and posting great sales from its premier franchises, but it has translated into EA being named Consumerist's "Worst Company in America" for two years running. With Electronic Arts being no stranger to controversy in 2013, the company is once again the front-runner to collect the publication's dubious honor. Does this indicate serious issues threatening the company's long-term value or is it simply the reverberation of a fever-pitched whine from one of the most vocal minorities in consumer goods?
With regard to quality control, it would be disingenuous to describe EA's software output in 2013 in terms more flattering than "dismal." The company released shoddy, bug-ridden entries for some of its biggest franchises. SimCity, positioned to modernize one of the best-selling series in gaming history, launched in a near-unplayable state. The game was intended to push EA's online ecosystem and it required an Internet connection in order to access its content. Problems arose from the fact that the company's servers were not equipped to handle the data load, which rendered the $60 title inaccessible and prompted vociferous outcry.
EA's software stumbles are not wholly attributable to its desire to push online requirements, digital rights management, and microtransactional revenue models. The company's NBA LIVE 14 has been broadly panned and it prompted a rare public apology from the company. The game's executive producer, Sean O'Brian, took to the net to deliver a combo of admissions and excuses. He rounded out the open letter with the promise that has come to define the routinely troubled series: Just wait, it will get better.
A different application of the competitive spirit
The company's handling of its sports series has been at once problematic and commendable. While Take-Two Interactive (NASDAQ:TTWO) subsidiary 2K Games appears to have built a reputation for crafting sports games of higher overall quality, EA has preserved sales and mind-share dominance through effective licensing agreements. Ever since EA acquired exclusive rights to the NFL license, some have pointed to a lack of competition as an incentive for the company to release yearly football titles that frequently amount to little more than roster updates at full price. Despite a recent downturn for Madden 25, strong sales from the series have long appeared to validate that strategy.
EA's hold over the NFL license is set to expire this year, and it is very likely that Take Two will position a bid to end its rival's claim to exclusivity. Rumors that NFL players have been scanned with 2K Sports' facial-mapping and motion-capture technology would suggest a testing of the waters, but odds that EA will retain exclusive access to the NFL license remain high. In May, the company renewed its licensing deal with FIFA until 2022 and a similar deal is probably in the cards for the NFL. News that Electronic Arts has renewed the license could be announced sometime around the Super Bowl and would undoubtedly be accompanied by a wave of Internet protests.
A dishonorable discharge
This year had many incidents that will help to bolster the inevitable campaign to once again crown EA as America's worst company, but the best supporting argument will come courtesy of Battlefield 4. The series has been the company's answer to "Call of Duty" from Activision Blizzard (NASDAQ: ATVI), but the latest version is receiving a thrashing for being unstable and bug-ridden. North American sales for Call of Duty: Ghosts are down substantially compared to last year's Call of Duty: Black Ops 2, but the game was still the top seller in North America for the month of November.
"Battlefield" may be overtaking "Call of Duty" elsewhere, however, with news from the UK that Battlefield 4 is outselling Ghosts on the PS4. Electronic Arts would be in much better position to continue the series' growth if Battlefield 4 were a stronger product. That said, the market has yet to rebuke EA's tendency to release incomplete games, and it was likely a good short-term move to push the game out to compete against "Call of Duty" rather than miss the holiday sales period. Still, a recently filed class action lawsuit alleging that EA misled consumers and investors about the state of Battlefield 4 speaks to missed opportunity.
Coming in for the three-peat
Consider that EA has twice beat out Bank of America, a company that endures frequent stories about its role in the financial crisis and its implementation of discriminatory lending polices, and it should be obvious that the voting block has a bone to pick with the company. That EA "won" by an almost 2:1 margin in the Consumerist's "Worst 2012" poll evidences the unique relationship between game publishers and their consumer bases. The approximate 50% growth the company has posted since first being crowned America's worst company in April of 2012 paints a much rosier picture, but EA has got to be dreading what is quickly becoming its new awards season.
Keith Noonan has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard, Bank of America, and Take-Two Interactive. The Motley Fool owns shares of Activision Blizzard and Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.