Game Makers Looking to Ring in Holidays With Strong Digital Sales
By Sarah E. Needleman
Videogame companies are planning to lean further on high-margin
digital sales this holiday season, as more consumers ditch discs
for downloads and publishers find creative ways to generate revenue
from their biggest hits long after release.
Activision Blizzard Inc., Take-Two Interactive Software Inc. and
Electronic Arts Inc. all raised their end-of-year guidance for
revenue and net bookings in recent weeks, citing
stronger-than-expected consumer spending. The December quarter,
which is typically the largest revenue-generating period for these
companies, is expected to show continued demand for digitally
Game makers are organizing special events inside their
blockbusters and adding new features to keep players engaged. For
example, Electronic Arts late last month brought new factions,
maps, weapons and vehicles to "Battlefield V," the most recent
installment of the company's nearly two-decade-old war
"The holidays will also be a busy season for players in our live
services," Electronic Arts Chief Executive Officer Andrew Wilson
said on last week's earnings call, referring to spending that
occurs after a game has launched. "Our communities will all have
new content and new experiences to dive into during the holiday
quarter." The company also forecast the holiday quarter to be one
of its biggest for net bookings, an important measurement of
While Take-Two expects revenue to fall year over year due to a
lighter release slate, it forecast growth in spending inside its
videogames. That is because people can spend money on virtual perks
in its existing hits such as "Grand Theft Auto Online" and "NBA
2K20" any time.
"The business as a whole is overperforming," Take-Two CEO
Strauss Zelnick said in an interview Thursday.
In the latest quarter, digital sales made up roughly
three-quarters of net bookings for Take-Two and Activision
Blizzard, both companies said Thursday. Last week, Electronic Arts
said more than 60% of net bookings came from digital purchases.
"This is a trend we've seen happening for the last several
years," Stephens analyst Jeff Cohen said. "It's having a positive
impact on margins."
Investors also want to see these companies boost margins.
Share-price growth in all three companies has lagged behind the
broader Nasdaq Composite Index this year, in part because analysts
have raised concerns about their ability to lift profits.
This year, the major publishers are again serving up just a
handful of mostly sequels and spinoffs for the holidays, continuing
a decadeslong pattern that analysts attribute to rising development
costs. They say publishers are investing in more advanced
technology and talent to create beefier and higher-quality
With tentpole games now commanding budgets of around $100
million or more, up from single-digit millions in the 1980s,
analysts say big publishers view original properties as a major
risk, just like in sequel-heavy Hollywood for movies. "Franchises
have built-in audiences with proven customer loyalty," said
Jefferies analyst Alexander Giaimo. "They're a much safer
For those big-budget holiday releases, Take-Two introduced a
sequel to its decade-old Borderlands franchise in September while
Activision Blizzard put out a new installment of its 16-year-old
Call of Duty franchise last month. Next week, Electronic Arts is
expected to launch its latest Star Wars-themed game, a franchise
that has already been licensed for dozens of games over the last
The major game publishers are also pursuing opportunities to
boost revenue through new channels, such as Stadia, a cloud-gaming
platform launching later this month from Alphabet Inc.'s
Electronic Arts also said last week it is growing its digital
subscription business. The company ended the quarter with about 5
million subscribers on EA Access, a service that allows people to
play a collection of games through Microsoft Corp.'s Xbox One and
Sony Corp.'s PlayStation 4, up from 3.5 million in July. The
service is also expected to launch on the popular game-download
store Steam in the spring, Electronic Arts said.
Write to Sarah E. Needleman at firstname.lastname@example.org
(END) Dow Jones Newswires
November 08, 2019 14:03 ET (19:03 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.