EA's main source of revenue comes from microtransaction (live services). In 2020 it represented about 2/3s of their total revenue. A large chunk of it is via the FIFA franchise. The idea is that you can buy player card packs with random players in it to build a team that you can use to play with others online. Like with physical cards, you don't know the contents of the pack prior purchase nor the likelihood of getting any given player. Unlike physical cards, you can't trade the digital counterparts. This model is now implemented across most of their franchises. You can check here the sales vs live services revenue.
The risks are that there has been a strong backslash from the console and pc community on the use of the 'live service' business model. And given its "chance" nature it is leading to legislation to classify the practice as gambling.
This has already been banned in Belgium and EA, Activision Blizzard and others have halted services sales or they show you what the pack's contents are before you buy it.
In the UK there is already proposed legislation to follow Belgium.
The EU is trying to implement "Consumer Protection" regulations against the practice all across Europe.
In the US the efforts have been more timid with Hawaii taking the lead, but probably very far from being something to be discussed in Congress.
It isn't surprising that Activision Blizzard is transitioning all its IPs to mobile where these practices are more tolerated.
Ubisoft is also following suit by focusing in "Free to Play" products as microtransactions are also more tolerated on those and the data shows that you'll get more money out of a consumer via microtransactions rather that the upfront sale of the game.
I see EA making similar moves towards mobile and free to play. I am not sure what will it become of their player cards, but you can imagine that if forced to disclose the card's content, or allow you to buy the player you want outright, their revenue would drop dramatically.
This may not happen in 2021, but it is in the horizon.
My only concern with EA is that its main revenue source is at risk in the european markets.
Hi Rodrigo - I'm interested in your thoughts on this. Could you elaborate on your concern more specifically?
It is important to note that EA is fighting actively via lawsuits or lobbying any attempt to implement any regulation.
EA's main source of revenue comes from microtransaction (live services). In 2020 it represented about 2/3s of their total revenue. A large chunk of it is via the FIFA franchise. The idea is that you can buy player card packs with random players in it to build a team that you can use to play with others online. Like with physical cards, you don't know the contents of the pack prior purchase nor the likelihood of getting any given player. Unlike physical cards, you can't trade the digital counterparts. This model is now implemented across most of their franchises. You can check here the sales vs live services revenue.
https://ir.ea.com/press-releases/press-release-details/2020/Electronic-Arts-Reports-Q4-and-Full-Year-FY20-Financial-Results/default.aspx
The risks are that there has been a strong backslash from the console and pc community on the use of the 'live service' business model. And given its "chance" nature it is leading to legislation to classify the practice as gambling.
This has already been banned in Belgium and EA, Activision Blizzard and others have halted services sales or they show you what the pack's contents are before you buy it.
In the UK there is already proposed legislation to follow Belgium.
The EU is trying to implement "Consumer Protection" regulations against the practice all across Europe.
https://gamerant.com/eu-loot-boxes-gambling-consumer-protections/
In the US the efforts have been more timid with Hawaii taking the lead, but probably very far from being something to be discussed in Congress.
It isn't surprising that Activision Blizzard is transitioning all its IPs to mobile where these practices are more tolerated.
Ubisoft is also following suit by focusing in "Free to Play" products as microtransactions are also more tolerated on those and the data shows that you'll get more money out of a consumer via microtransactions rather that the upfront sale of the game.
I see EA making similar moves towards mobile and free to play. I am not sure what will it become of their player cards, but you can imagine that if forced to disclose the card's content, or allow you to buy the player you want outright, their revenue would drop dramatically.
This may not happen in 2021, but it is in the horizon.
This is great analysis! Thanks so much for taking the time to write this up!