Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Electronic Arts (EA - Analyst Report) is facing a fresh lawsuit from National Collegiate Athletic Association (NCAA). NCAA has sued the video game maker, stating that EA did not agree to compensate NCAA, although it agreed to compensate the college athletes for the legal claims made by them.

Electronic Arts previously cited uncertainty about the future of the franchise due to the ongoing legal dispute between the NCAA and student players. Although Electronic Arts agreed to settle the claims of student players in Sep 2013 worth$40.0 million, NCAA was never a part of it.

Per the complaint filed on Nov. 4 in Fulton County, the settlement fees paid by Electronic Arts would have relieved the company from the contractual duty to indemnify NCAA for any liability, which includes attorney fees, arising from the NCAA-themed football and basketball video games.

The dispute between NCAA and students started when the latter asked for a share of NCAA revenues for the use of their images and likenesses. Student athletes also sued NCAA’s business partner EA for illegally using their likenesses in its popular NCAA Football video game.

Electronic Arts developed a NCAA-branded game each year and recently released NCAA Football 14 in Jul 2013. The practice is more or less similar to the games made under other popular banners such as the National Football League (NFL) and FIFA.

Electronic Arts made it obvious that there is growing risk faced by game developers in trying to profit from the likeness of the student athletes with that of video game characters. We believe that the cancellation of NCAA Football 2015 will have a significant effect on EA’s top-line over the long term.

Nevertheless, we believe that EA has a strong product portfolio that includes popular games such as Madden NFL and FIFA 14. We believe that the strong revenue contribution from these games will offset the loss of NCAA and the monetary compensation to be paid (if any) in the near term.

We believe that traditional gaming companies, such as EA and Activision (ATVI - Snapshot Report) have substantial growth opportunities due to the launch of new consoles by Microsoft (MSFT - Analyst Report) and Sony (SNE - Snapshot Report) and strong spending expected in the holiday season.

We also believe that Electronic Arts continues to hold a competitive edge due to strong digital distribution and leadership position in the free-to-play games category.

However, a fragmented video gaming market and stiff competition are the major concerns.

Currently, EA has a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%