Madden Rushes Stores, but Will Players Rush to Buy?
“Madden” day is coming — and HR offices are bracing themselves. The release of Electronic Arts’ most popular football franchise, which takes place on Tuesday Aug 10, always brings a surge of “sick days” from dedicated fans, who opt to stay home from work and play the day away.
The “Madden” franchise is, in many respects, EA’s crown jewel.
A consistent moneymaker for the video game publisher for over 20 years, it’s responsible for as much as 10 percent of the company’s annual revenues.
Historically, it has been a fixture in the year’s Top 10 selling games. The one-two punch of the game’s fan base and EA signing an exclusivity deal with the NFL in 2004 was powerful enough to knock Take-Two Interactive Software out of the football genre. (The company tried to jump back in three years ago with a game based on a fictional league, but players weren’t interested.)
“Madden,” though, may be showing its age. Over the past few years, it hasn’t been the powerhouse it once was. Sales of the 2009 version of the game were well below the 2008 installment, resulting in EA CEO John Riccitiello calling them “discouraging” in an earnings call.
The problem’s hard to pinpoint exactly. While the economy and changing game market certainly have played into it, the consensus is that Madden, which was at one time a title that could bring core and casual gamers together, became too difficult. Hoping to remedy this, EA announced an overhaul of the game earlier this year, with the goal of making it more accessible.
So far, though, pre-orders for this year’s installment are flat, meaning people are still taking a wait and see attitude.
“It’s a ‘show me’ story,” says Colin Sebastian, an analyst with Lazard Capital Markets. “It’ll be one of those games where word of mouth is important. … People who are tired of what ‘Madden’ has become are saying ‘I know some of my fiends are going to pick it up and I’ll see what they have to say first’.”
“Madden” is one of the few annual titles that has a long tail in stores. Traditionally, there’s a big push for the game when it’s released, then another sales bump as the holidays (and NFL playoffs) draw near.
While the game is the company’s flagship, “Madden” doesn’t come cheap. Beyond the usual $9 per copy royalty payments to console manufacturers Microsoft, Sony and Nintendo, EA has to give a portion of each sale to the NFL (as part of its exclusivity deal) and the NFL Players Association. And that’s after retailers get their 20 percent of the sale.
Wholly owned intellectual properties, such as “Medal of Honor” or “Need for Speed,” are much more profitable when they succeed, which is part of the reason the company focuses so much marketing effort on those games.
But because of its history, and because it still sells millions of copies each year, investors keep a close eye on “Madden.”
This year, they’ll be watching the long-term sales to see if the game can reconnect with—and lure back—former players. If it can, that could mean good things for EA shares.
“You like to see growth,” says Sebastian. “EA Sports has had more than its share of challenges selling games this cycle. If investors can point to [the unit] turning around, then it becomes more interesting from an investor’s perspective. … It’s always difficult to lose an audience and then get it back. But it’s not an insurmountable challenge.”