Why EA's Market Valuation Has Crashed

apoppin · Posted: Thu Jun 21, 2012 3:40 pm

http://www.gamesindustry.biz/articles/2 ... pean-daily

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Electronic Arts' stock has lost almost 40 per cent of its value since the start of this calendar year - and in fact, since the middle of last holiday season (around November 2011) the company's stock has been in a steady decline which has now wiped close to 50 per cent off EA's valuation. It's not a decline as sharp as THQ's, but it represents a much larger loss of value - THQ's market capitalisation is only around $50 million, whereas even after this enormous loss of value, EA is still capitalised at around $4 billion.

To visualise EA's share price decline, let's look first at a simple graph of its performance over the past 12 months.

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Something has gone terribly wrong for EA, at least in the eyes of stock market investors. There are several plausible explanations for this - each of which is likely to be true to a certain degree, since it's unlikely that any one factor alone is responsible for driving the price down so far.

Firstly, there's Star Wars: The Old Republic. EA's stock price went into decline after The Old Republic's launch, and hasn't recovered yet - and that timing is unlikely to be a coincidence. Expectations among investors for SWTOR were extremely high, given the game's much-publicised high development costs (which probably make it the most expensive game project ever), the strength of the Star Wars license, the track record of developer Bioware and, crucially, the tantalising possibility of building an ongoing MMO revenue stream for EA which would match the one enjoyed by rival Activision Blizzard from World of Warcraft. While it would be unfair to characterise SWTOR as a complete failure, it has certainly not been a success on the level which EA or its investors would have wanted. The game has lost 400,000 subscribers since February, and it seems inevitable that the company will be forced into an embarrassing (but probably commercially sensible) transition to a free-to-play model sooner rather than later.

For many investors, the disappointing performance of SWTOR is almost certainly seen as the "final straw" in terms of the second factor in this decline (more)

Ocre · **Joined:** Mon Nov 22, 2010 5:22 am **Posts:** 2149

i think its getting close to time to buy into EA stock. Sooner or later it will level at its lowest then start to shoot up again.

Investors drive the market and they arent very bright. EA is a mega player in the game industry and they arent going away any time soon. With dumb plans like this:

Quote:

EA is considering adopting a subscription model for future Battlefield titles, according to the publisher's games chief Patrick Soderlund.

http://www.eurogamer.net/articles/2012- ... eld-titles

its clear they are putting their heads together for milking gamers dry. Its not a bright idea but its stuff like this that gain investor hype and stocks shoot up. EA is a company that can deliver hits, they are capable and have a lot of pull. they are not going anywhere. These wild ideas can result in stocks shooting up and down. Buy EA stock when its really low and sell it when its high.

In the EA link i posted you see the greed kicking in. Every one of these big players want to cash in like blizzard has and they have really dont get it. They got to be genuine and not so full of greed they are desperate. WOW was created without knowing the huge cash cow it would turn out to be. It is a very fulfilling experience witrh most players so pleased they have no interest in any other game what so ever. It is a satisfaction unmatched.

Sadly the mega game developers arent happy with making a successful title anymore. Millions just aint enough. They are plotting every day to find ways to squeeze money from gamers, to milk them monthly on a regular basis and this is leading them to create titles with this in mind. With such a goal in mind, we are gonna see many manyy attempts. DLC just isnt rewarding enough i guess. Anyway, expect these dumb ideas to be manifested into future titles. It will be a short lived failure i am sure. But its sure to gain attention of investors!!!!

BoFox · Posted: Fri Jun 22, 2012 2:37 am

It's a nice read, thanks Ocre, man!!

Why EA's Market Valuation Has Crashed

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