How Digital Revenue Continues To Drive Revenue For Electronic Arts Inc. (NASDAQ:EA)

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The gaming industry has gone through a big transition and change to digitalization in the past few quarters. Last year, Activision Blizzard, Inc. (NASDAQ:ATVI), one of the major players in the gaming industry bought King Digital Entertainment PLC (NYSE:KING), also a key player in the online gaming industry.

Electronic Arts Inc. (NASDAQ:EA) ‘s digital revenue collection accounted for 54% of the company’s non generally accepted accounting principles- GAAP revenue collection in the third quarter of 2017 financial year. The company reported 36% raise in digital revenue as a result of growth in consoles such as Sony Corp (ADR) (NYSE:SNE)’s Play Station and Microsoft Corporation (NASDAQ:MSFT)’s Xbox which reported a growth of 46%. Digital revenue growth was also driven by full-game downloads and mobile revenue.

 

Digital revenue collection rose by $288 million in the fiscal 3Q17. Total digital sales account for 60% of the total revenue in 12 months. Over 32% of Electronic Arts Inc’s unit sales are come from digital sales above the company’s annual budget of 29%. In the fourth quarter of 2016 digital sale revenue of Activision Blizzard accounted for 72% of the company’s total revenue compared to 54% reported the previous year.

According to a survey done by the PricewaterhouseCoopers (or PWC), the world distribution of digital games is expected to hit $12.9 billion by the year 2019 and will account for 19.6% of the industry’s total revenue. The research however said the market for physical console is expected to drive more revenues because “The ability to trade in physical games, frequently higher digital pricing and a lack of network infrastructure will keep physical distribution relevant.”

The social gaming industry is expected to hit %22.55 billion by the year 2019 with more gamers using social media platforms like Facebook Inc (NASDAQ:FB). According to the research by PWC, South Africa and India are expected to major players in driving social gaming revenue in years to come.

Electronic Arts Inc’s plan is to change from a premium price model accessed on mobile devices and adopt an in-app and free-to-buy model. The company has been able to perform beyond market expectations thanks to the shift in its strategic plan.

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