EA Sets Battlefield 3 Launch Date
Video game developer and publisher, Electronic Arts (NASDAQ:ERTS) better known as EA is slated to release its highly anticipated Battlefield 3 on October 25, 2011. Battlefield 3 was initially expected to be released in November 2011.
EA studio DICE announced the date of the launch at the Electronic Entertainment Expo (E3) trade show in Los Angeles. We believe the early release is an attempt on behalf of EA to grab a headstart over Activision Blizzard Inc.’s (NASDAQ:ATVI) latest installment of the Call of Duty franchise, Modern Warfare 3, which is scheduled for release on November 8, 2011.
However, we don’t expect EA to gain much from this move. Despite releasing Medal of Honor one month ahead of Activision’s Call of Duty: Black Ops in calendar year 2010, the game failed to live up to its expectations due to controversies surrounding the game components.
Moreover, we believe the back-to-back release of Battlefield 3 and Modern Warfare 3 makes it a difficult choice for consumers as both belong to the same genre.
The latest Battlefield game will run on EA’s Frostbite 2 game engine. EA will use the Battlefield release to showcase its new online service called Origin, which will allow players to download expansion packs and full PC versions of the company’s games.
EA is scheduled to release a multi-platform beta for Battlefield 3 in September 2011. The game can be played on Sony Corp.’s (NYSE:SNE) PlayStation 3, Microsoft Corp’s (NASDAQ:MSFT) Xbox 360 and the PC.
Battlefield 3 is expected to face strong competition from Modern Warfare 3. Both the games boast strong visual graphics. However, Battlefield 3 is more PC oriented than Modern Warfare 3, as the PC version will support servers with up to 64 players, while the console version of Battlefield 3 will be limited to 24 players.
Moreover, EA commented that the players can use the online multi-player services attached to the game free of charge. Recently, Activision announced the launch of Call of Duty Elite, which will charge monthly subscriptions for some online services.
At the end of fiscal 2011, EA sold more than seven million units of Battlefield: Bad Company 2, the last installment of the Battlefield franchise. We expect Battlefield 3 to drive incremental revenue growth for EA going forward.
At the E3 trade show, EA also previewed a number of other games apart from Battlefield 3, such as Mass Effect 3 (scheduled to release in March 2012), Need for Speed: The Run (scheduled to release on November 15, 2011), SSX (scheduled release in January 2012), and NHL 12 (scheduled release in September 2011).
EA also showcased a preview of its planned “Star Wars” online game and announced that it will put Sims Social game on Facebook to challenge Zynga Inc. However, the company did not announce the release date of Star Wars, which is expected to challenge Activision’s World of Warcraft franchise.
We believe EA has a strong product pipeline for fiscal 2012 and beyond, which will drive its top-line growth going forward. We believe that the high quality titles, impressive product line, increasing online exposure, social games and portfolio diversification guarantees market share gains over the long term.
EA expects to earn approximately $1.0 billion from its digital business. Based on the strength of its Chillingo franchise, which surpassed 140 million downloads across the iPhone, iPod touch and iPad, as well as strong growth from Playfish (revenue soared approximately 100.0% year over year in the fourth quarter); we believe EA will be successful in achieving its outlook.
EA plans to launch its first online service Origin, which will also drive its digital revenue growth going forward. Through this service, the company plans to offer its downloadable titles (more than 150) directly to customers.
However, EA continues to face tough competition from a number of companies including Activision Blizzard, Sony, Microsoft, Nintendo, Capcom, Infogrames Entertainment SA, Koei, Konami, LucasArts, Midway, Namco, Sega, Take-Two Interactive Software Inc. (NASDAQ:TTWO), THQ and Ubisoft.
Diversified media companies such as Fox, Disney, Time Warner and Viacom are also expanding their software game publishing efforts, which may put pressure on EA’s sales and lead to market share losses.
We have a Neutral recommendation on Electronic Arts over the long term (for the next 6 to 12 months). Currently, Electronic Arts has a Zacks #3 Rank, which implies a Hold rating in the short term.