EA Shows Why Mobile Games Are a Minefield

When one of the biggest video game makers in the industry dwells on the mobile market, it can say something for the entire industry.

With annual revenue of over $7 billion, Electronic Arts EA -12.15% is the largest standalone game publisher in the United States, excluding Activision Blizzard. ATVI -1.16% EA also has a few games capable of generating over $1 billion a year on their own, including “Apex Legends”. The battle royale-style shooter was EA’s answer to the “Fortnite” blockbuster and has been a smash hit since its surprise launch in 2019 for consoles and PC. Analysts estimate that the game’s total revenue has surpassed that of ‘Madden NFL’ to become EA’s second-largest property next to the hit football franchise ‘FIFA’, according to Visible Alpha.

But even that is not enough to ensure success in the capricious mobile gaming market. EA surprised investors on Tuesday by announcing it was pulling the plug on the mobile version of “Apex,” which has been out for less than a year. It wasn’t a quality issue: “Apex Legends Mobile” was named Game of the Year 2022 by Apple and Google for their respective mobile platforms. But during a conference call to discuss the company’s fiscal third quarter results, EA chief executive Andrew Wilson said that while the game resonated with many core players, not keeping enough of committed casual gamers still limited the audience. “And in a game that relies heavily on team play and competitive play, the liquidity of the overall player base is really, really important when you think about the future experience of players over time.”

The experience with “Apex Legends Mobile” also caused EA to kill off a planned mobile version of its “Battlefield” franchise, which has been in development since at least mid-2021. And that wasn’t the only bad news in the results. EA has delayed the release of the “Star Wars Jedi: Survivor” console game from mid-March to late April. Net bookings for the December quarter also rose about 6% from Wall Street’s forecast as EA’s games faced stiffer competition during the crucial holiday quarter, which included a new iteration. “Call of Duty” from rival Activision Blizzard.

In total, EA cut its net bookings forecast for the fiscal year ending March by 8% to around $7.1 billion. This implies a shortfall of around $500 million for the March period compared to the company’s previous target, much of which is due to the delay of the “Star Wars” title. EA’s stock price fell 12% late Wednesday morning.

A failure to attract enough casual gamers prompted Electronic Arts to discontinue “Apex Legends Mobile”. Photo: Patrick T. Fallon/Bloomberg News

Delays are now commonplace in a video game market where each release should just be a starting point for years of recurring revenue from live services. But EA’s struggles in mobile could prove to be a bigger problem in the long run. Mobile is the games industry’s largest addressable market. Apple alone said this time last year that its global installed base exceeded 1.8 billion devices. Market research firm Newzoo estimates that mobile games accounted for half of the games industry’s total revenue in 2022 and were 78% larger than what console games generated for the year.

But mobile has always proven a tough market to break into, at least in a way that reliably moves the needle for a company the size of EA. The industry remains dominated by casual titles – ‘Candy Crush Saga’ and ‘Clash of Clans’ are still among the top five grossing games more than a decade after their first releases. And the downturn in the economy has hit just as mobile game makers are already grappling with Apple’s changes to its iOS operating system that make it harder to effectively market games to new gamers. This has hurt even established players. Take-Two Interactive, which acquired mobile game maker Zynga last year, cut its own guidance for the March fiscal year by 7% in its latest quarterly report, citing release delays as well as the impact of the weakening economy, especially on mobile.

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EA’s struggles also challenge the idea that popular PC and console games translate easily to mobile. This logic not only supported Take-Two’s acquisition of Zynga, but is also a major theme in Microsoft’s efforts to buy Activision. “There is a cognitive dissonance in the desire to unite global gaming communities around core IP versus the reality of that IP that doesn’t always translate equally well across all platforms,” Clay wrote. MoffettNathanson’s Griffin in a Wednesday morning note. EA is far from disagreeing.

Write to Dan Gallagher at [email protected]

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