Electronic Arts, the sports game publisher that spent years neglecting the mobile gaming market, couldn’t have picked a better time to jump in the deep end.
Last year, EA spent close to $4 billion acquiring its way to a stronger position in mobile. This year, it launched a new iteration of its popular FIFA franchise for smartphones and released a mobile spinoff of its hugely successful Apex Legends battle royale. The company's competitors have also followed suit with even more eye-popping acquisitions, including Take-Two Interactive’s purchase of Zynga for nearly $13 billion back in January and Microsoft’s record $69 billion acquisition of Activision Blizzard, which includes Candy Crush studio King, soon after.
After that period of furious M&A and a nearly two-year pandemic-era boom for the industry, the video game market has begun to slow down significantly, wiping billions from the global business through share price, consumer spending and revenue declines in the process.
But that’s not worrying Jeff Karp, the head of EA’s mobile gaming division, who said EA is in a position to not only weather the storm, but also thrive in a more cross-platform game industry that focuses less on what hardware product a player prefers and more on meeting players wherever they are.
“Challenging times with IDFA and COVID and all the unprecedented headwinds we’re facing … I think that puts EA very well positioned in the strength of our brand in games,” Karp told Protocol in an interview last week. (IDFA refers to Apple’s App Tracking Transparency, a privacy change on iOS introduced last year that has hindered digital advertising efforts.) “That’s something we identified a year back, and it's something we continue to build around and double down on in the future.”
Live service future
In many ways, EA’s investments in mobile are intertwined with its transition into a live service company, in which games are designed, integrated upon and supported (and in many cases distributed for free) over the course of many years instead of developed in secret and then sold for $60 a pop.
EA’s biggest acquisitions of the last half-decade have been mobile game companies, including Golf Clash maker Playdemic and prolific smartphone publisher and developer Glu Mobile in 2021. And those investments, combined with its live services growth, appear to now be paying off.
While many of EA’s competitors have seen double-digit declines in stock price this year, in addition to slumping sales and revised forecasts, the FIFA developer has remained stable. In the most recent quarter — a period of decline for Microsoft, Sony and many of EA’s third-party publishing competitors due to a major slowdown in the game market — EA’s sales and profit increased. The company’s net bookings for over the last 12 months are up 22% year over year to nearly $7.5 billion, and it now has almost 600 million active player accounts.
It’s impossible to ignore the effect EA’s live service transformation has had on its business, and how resilient the changes have made the company in the face of external pressures ranging from Apple’s iOS privacy crackdown to a year of lackluster video game releases and continued game console supply constraints.
“We’re excited about where we are. Arguably, today’s times favor companies like EA that have well-established brands and IP,” Karp said. One challenge the industry faces is App Tracking Transparency. It restricts how advertisers are able to track users throughout the iOS ecosystem, using a code unique to each user called the IDFA, by requiring users to opt in. The change has cost Meta more than $10 billion in lost revenues and upended the user acquisition market for mobile gaming companies, many of which rely on in-game advertising to attract new players.
“No doubt IDFA is a significant change, and we’re all learning and adapting on how to connect with our players. Obviously, it all starts with great quality games,” Karp said. “But we believe we will thrive in this environment. We’re well positioned because we have to look at not just [user acquisition], which is important to bring new players in our games, but also how we can leverage our brands and IPs that are obviously very familiar and have decades of communities and markets to build upon.”
EA’s portfolio goes cross-platform
That approach of taking its existing brands and finding new ways to grow them beyond the console market has become the cornerstone of EA’s live service approach. Live service products like Apex Legends and FIFA, both of which are now on mobile, account for over 70% of EA’s business, the company’s chief financial officer, Chris Suh, told investors last week. Suh added that live service games will be the “predominant driver” of its profits in the long term.
“We’re excited that there are 3.5 billion players in our addressable market. It brings accessibility to our brand,” Karp said. “It’s really an opportunity to expand our overall ecosystem for the brand, and it creates practicable recurring revenues. It also brings the opportunity to bring our games across platforms.”
Apex Legends Mobile launched in May, and the company is testing a smartphone version of its Battlefield shooter. Also in the works is a new game based on “The Lord of the Rings” called Heroes of Middle-earth that will test EA’s new mobile chops when it comes to delivering a premium smartphone game using another company’s intellectual property.
“We’re taking more time in soft launch than we ever have,” Karp said of the mobile division’s development process, which often now includes extensive beta periods spent collecting data from players in the Philippines, Australia and other regions. “Knowing these games now last five to 10 years, we want to be really thoughtful and methodical about when we launch it globally.”
Key to EA’s strategy of bringing games once considered exclusive to consoles and PC over to smartphones is accessibility, Karp said. It’s a balancing act in which EA has to weigh two conflicting goals: “How do we make sure we respect our brands in a meaningful way,” Karp said, while also ensuring EA “can meet the players where they’re at” with regard to how sophisticated their phone might be. The game can’t be a dramatic departure in graphical quality or performance from its console counterpart, but it also has to run on a cheap Android phone used predominantly in mobile-first markets like India.
EA is taking a similarly measured and careful approach to monetization. The company knows full well the dangers of transplanting business models from one environment into games played on a totally different platform; that’s precisely how the company misfired so dramatically with Star Wars Battlefront 2 and, to a lesser extent, with its recent failure with Battlefield 2042.
Monetization is an especially sensitive subject as more console developers transition into mobile and try to engineer fair, but also profitable, monetization strategies. For instance, Blizzard’s recent foray into premium mobile gaming with Diablo Immortal has been marred by the game’s rampant and aggressive microtransaction model.
Karp said EA approaches this dilemma by trying to set realistic expectations for players that align with why they’re playing a game on a smartphone and what they might hope to get out of that.
“I think it’s just understanding the needs that they would expect on the different consumer value propositions,” he said. Karp compared playing a console version of a game to watching a movie, in which a viewer expects a certain quality bar and is willing to pay for that. “It's the best graphic facility and production values, and then you get a game on mobile, which is still phenomenal production values, but a different experience and a different type of play.”
The approach appears to be working, especially so for FIFA. The company said last week that in fiscal Q1, FIFA Mobile had its best-ever quarter in the six years the company has been releasing mobile ports of the franchise. “I think we’ve done a great job with FIFA,” Karp said, noting that the mobile division at EA is growing and many of its new releases are proving to be quick hits. “Those are things we’re quite proud of. Also understand there’s a ton of opportunity and a great road ahead for us.”