Electronic Arts fiscal 2017 is ‘milestone year’
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Electronic Arts fiscal 2017 is ‘milestone year’

Market leading video game developer Electronic Arts (EA) reported fourth quarter and full year results for fiscal 2017 last week, demonstrating an incredibly robust business. The year saw EA become the number 1 publisher on Playstation 4 and Xbox One consoles in the Western World, and set record numbers for its flagship franchises. By the end of fiscal 2017, Battlefield 1 had amassed 19 million new players, 50% more than Battlefield 4 (its confusingly named predecessor) managed in the previous year, FIFA 17 had over 21 million players, and Star Wars: Galaxy of Heroes broke its own record for gameplay time per player, logging an average of 162 minutes per day.

EA’s share price surged on the back of strong earnings

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SOURCE: Yahoo Finance

EA’s CEO, Andrew Wilson, said:

“Fiscal 2017 was a milestone year for Electronic Arts, defined by groundbreaking games and live services that delivered more fun and connected more players with their friends. In Fiscal 2018, we are focused on innovating for our players with extraordinary new experiences across our portfolio, continuing to grow our global network, and extending our reach across new platforms and more ways to play.”

Fred Baccanello, Dominion’s Ecommerce Fund Manager, made the following comment:

“This quarter was another example of the transformative power of the shift to digital has upon margins within the Digital Entertainment industry. However, at this point we have to ask, how high can gross margins go? This quarter, with the majority of sales in digital gives a fair idea, suggesting that FY gross margins should be able to trend towards c.80% over the next couple of years, though the explosive rate of expansion is likely to slow past CY17.

“Likewise, we have passed the peak effect of digital sales – particularly incremental DLC and subscriptions – have on company growth rate, though this tailwind is by no means over. However, intellectual property success and increasing number of gamers (their market) will play greater importance.

“On the former EA has had a stellar year, though some part of Battle Front 1’s success can be attributed to rival Activision’s Call of Duty weakness, while the global gaming population is a steady long term structural growth story powered by demographics – interestingly the average age of a gamer in US is 31, though this has come down from 34 in recent years, as Millennials come to the fore.”

Disclosure

Dominion holds Electronic Arts in its Global Trends Ecommerce Fund.


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