Gamers are overreacting to EA's ‘Star Wars’ controversy; publishers should raise prices: Analyst
- KeyBanc Capital Markets says outrage over video game micro-transaction pricing is not justified.
- "If you take a step back and look at the data, an hour of video game content is still one of the cheapest forms of entertainment," the firm's analyst writes. "Quantitative analysis shows that video game publishers are actually charging gamers at a relatively inexpensive rate, and should probably raise prices."
Gamers livid over Electronic Arts' in-game moneymaking strategy in its new "Star Wars Battlefront II" title are overreacting, according to one Wall Street firm.
"We view the negative reaction to Star Wars Battlefront 2 (and industry trading sympathy) as an opportunity to add to Electronic Arts, Take-Two, and Activision Blizzard positions. The handling of the SWBF2 launch by EA has been poor; despite this, we view the suspension of MTX [micro-transactions] in the near term as a transitory risk," KeyBanc Capital Markets analyst Evan Wingren wrote in a note to clients Sunday.
"Gamers aren't overcharged, they're undercharged (and we're gamers). … This saga has been a perfect storm for overreaction as it involves EA, Star Wars, reddit, and certain purist gaming journalists/outlets who dislike MTX," Wingren wrote.
Shares of Electronic Arts have declined 10 percent month to date through Monday. Wall Street is worried controversy over EA's "Star Wars Battlefront II" in-game monetization model will hurt the video game's sales.
Wingren noted there is now a "slightly higher probability" the title will not hit his 13 million sales unit forecast.
The analyst estimated cost per hour for a typical "Star Wars Battlefront II" player. He said if a gamer spent $60 for the game, an additional $20 per month for loot micro-transaction boxes and played around 2.5 hours a day for one year, it comes out to roughly 40 cents per hour of entertainment. This compares to an estimated 60 cents to 65 cents per hour for pay television, 80 cents per hour for a movie rental and more than $3 per hour for a movie watched in a theater, according to the firm's analysis.
"If you take a step back and look at the data, an hour of video game content is still one of the cheapest forms of entertainment," he wrote. "Quantitative analysis shows that video game publishers are actually charging gamers at a relatively inexpensive rate, and should probably raise prices."
As a result the analyst reiterated his overweight ratings for Electronic Arts, Activision Blizzard and Take-Two with price targets of $134, $78 and $144 respectively.
Electronic Arts announced Thursday it temporarily turned off all in-game purchases in "Star Wars Battlefront II" in response to the negative sentiment from the gaming community.
The initial uproar centered on in-game purchases in "Star Wars Battlefront II." They allowed players to save time by paying extra money to accelerate the "unlock" of major characters like Darth Vader.
The gaming community flooded social media and Reddit with thousands of negative posts, saying the company is unfairly compelling consumers to spend more money for content that should be part of the initial $60 game price.
"Star Wars Battlefront II" officially launched on Friday, but portions of the game went live on Nov. 9 for the company's EA Access and Origin Access subscribers.
"Despite its inconvenience to the popular press narrative, if you like Star Wars and play video games at an average rate, you're far better off skipping the movie and playing the game to get the most bang for your buck," Wingren added.
Activision Blizzard and Electronic Arts did not immediately respond to requests for comment. Take-Two declined to comment.
Activision Blizzard shares dropped 0.3 percent Monday, while Electronic Arts declined 1.1 percent, and Take-Two fell 0.3 percent.