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 Inc. (EA - Analyst Report) has sued Zynga Inc. (ZNGA - Snapshot Report), alleging that some characteristics of Zynga’s popular The Ville had unmistakable similarities with the former’s The Sims Social. EA complained that Zynga had not only copied the basic structure of the game, but also that some of the characteristics of the game had been replicated.

This allegation by EA comes on the heels of launching the The Sims Social’s latest version SimCity Social on Facebook Inc. (FB - Analyst Report), where The Ville is already available. Since the launch of SimCity Social, the game has garnered 10 million monthly active users (MAU), while the The Ville, which was launched last quarter, already has over 6 million daily active users (DAU). Thus, EA’s lawsuit comes at an opportune moment with the intention to dent The Ville’s popularity and establish its own game on Facebook.

This is not the first time that Zynga has been accused of copying games from other publishers. Earlier, Nimblebit had accused Zynga’s Dream Heights of being a copy of the formers’ Tiny Tower, which had won Apple Inc.’s (AAPL - Analyst Report) iTunes Rewind iPhone Game of the Year award in January. Also, Digital Chocolate had accused Zynga’s Mafia Wars of being a rip off of the former’s Mob Wars.

However, most of these cases against Zynga came from small developers and were subsequently settled out of court. This time around things may not be so easy, since Zynga is now up against EA, which has the financial muscle to pursue a lawsuit. The Sims has been one of the most popular franchises for EA and it was one of the major contributors to EA’s robust digital revenue growth in the last quarter. Thus, the stakes are quite high for EA.

On the other hand, Zynga’s future growth prospects will suffer a heavy blow if it fails to defend the lawsuit. Moreover, a ban on its The Ville game would have a negative impact on its top line. Legal costs would be another factor that the company would have to deal with.

Our Take

However, both parties could prefer to settle out of court, as legal battles are not only time consuming but also expensive. With the lingering macroeconomic sluggishness taking a toll on the overall video game industry, both parties would rather concentrate on their core operations to improve their company’s fundamentals than get into a legal tussle.

We have a Neutral recommendation for both Electronic Arts and Zynga in the long term. Currently, both Electronic Arts and Zynga have a Zacks #3 Rank, which implies a Hold rating in the short term.

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%