In comparison to four years ago, things are looking up for Electronic Arts Inc. (NASDAQ:$EA), an American global interactive entertainment software company. In May, Electronic Arts stock surpassed $100 for the first time and it is now trading close to $110 a share. This has placed the California-based company’s market capitalization just under $34 billion. In the week of June 14, EA entertained 15,000 fans at its Electronic Arts Play event.
As mentioned, EA’s story was considerably different four years ago.
Former CEO John Riccitiello resigned in 2013 and when asked what prompted his resignation, Riccitiello noted his “accountability for the shortcomings in our financial results.” Additionally, there were hundreds of loyal employees who were terminated in two cost-cutting rounds and internal studios were shut down. As if that weren’t enough, The Consumerist labeled Electronic Arts as “the worst company in America” for the second year in a row because of the company’s unfriendly business methods.
Andrew Wilson was named CEO of Electronic Arts months after Riccitello left and since he joined the team, shares increased by 500%.
What prompted this turnaround? First and foremost, Wilson credits EA’s success to putting his team first.
“I feel like when this new team came together in 2013, we were kind of standing back from the ledge,” said Wilson. “Over the past few years, I think what you’ve seen from us is we’ve taken the leap.” More specifically, Wilson states that EA has taken the leap into the world of digital, live services, subscriptions and eSports.
Elaborating further, Wilson likens Electronic Arts situation to gravity. “If you leap off a tall enough building, you continue to accelerate,” he says, “I think what you’re seeing now is an acceleration.”
With that being said, Riccitiello did make a few contributions to Electronic Art’s revival. For instance, the former-CEO noticed that digital sales were starting to play a defining role in the sector, which caused him to shift EA in that direction a couple months before his departure.
Experts speculate that, in fiscal 2018, EA’s overall digital revenue will either reach $3.375 billion, or roughly two-thirds of its predicted total revenue of $5.1 billion for the year.
Mentioned previously, Wilson has lead his team in the direction of eSports which is another area expected to grow in the coming months. Newzoo, a game industry analysis firm, has predicted that industry-wide eSports revenues will hit $696 million in 2017 and will continue to grow $1.5 billion by the year 2020.
“There are a number of core motivations when we create a game: Inspiration, escape, creation, self-improvement, social connection and competition,” explained Wilson. “There’s a reason eSports and competitive gaming is growing at such a rapid rate – and it’s because it takes into account many of those inspirations.”
These changes have grabbed the attention of both investors and analysts. From an outsider perspective, Ben Schachter of Macquarie Capital stated, “certainly from an investor point of view, [EA has] done a wonderful job of turning the company around.” He added, “the question for them and [other publishers] is what to do now? The old model of ‘let’s sell a disc for $60 and multiply it by a number of units’ is long dead…Part of the success EA has had has been increasing average revenue per user.” According to Schacter, the question that lingers amongst investors are, where will this number go? Have we reached the top of the mountain already or is the hike just starting?
To make sure that these numbers continue to increase, Wilson and his team (8,500 unique individuals) are searching for the next big thing in game development. So far, Electronic Arts is exploring the possibility of combining data from player’s lives through Internet of Things connected devices as well as using AI’s to help illustrate stories in the game.
Still, Wilson has said that he has been hearing doubts of whether the company can maintain growth throughout his tenure as the CEO of Electronic Arts.
“At a fundamental level, more people are playing more games on more platforms in more geographies than ever before,” explained Wilson. “We as a company… accelerate that. And the digital transformation will continue to be a tailwind for us.”
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