Video game developer and publisher, Electronic Arts Inc. ( EA - Analyst Report ) recently announced a new game called JetSet Secrets for the Facebook ( FB - Analyst Report ) platform. The new title promises adventure as gamers play the role of detectives, who travel worldwide to uncover secret plots as well as to search for hidden objects.
In their journey to solve the mysteries, gamers will be able to take the help of their friends. Moreover, gamers can also help their friends to solve their own mysteries, which will earn them social points, much similar to EA’s popular Facebook game SimCity Social. The co-operative feature will further boost the game’s attractiveness in our view.
Over the last couple of years, EA has taken several initiatives to gain traction in the popular segment of social gaming through various games such as The SimCity Social, The Sims Social, Monopoly Millionaires, FIFA Superstars and Scrabble. JetSet Secrets is the latest offering from EA in this space.
According to market research firm eMarketer, there will be approximately 76.5 million social gamers in the U.S. by the end of 2012, of which 48.0% will be social network users. Social networks such as Facebook have become the major destination for social gamers as well as game developers.
Social game makers such as Zynga ( ZNGA - Snapshot Report ) , Rovio and Mensing have successfully utilized the Facebook platform to garner significant customer base and revenue over the last couple of years. However, among all these developers, Zynga has been the most successful to date. As of June 30, 2012, Zynga had developed seven of the top ten games on Facebook, based on daily active users (DAUs).
JetSet Secrets is EA’s first hidden object game, a genre in which Zynga’s Hidden Chronicles holds the leading position. EA believes that the new game will be able to boost its customer base further and provide significant competition to Zynga going forward.
We believe that EA is diversifying its revenue generating base. With rising consumer spending on digital gaming (social, mobile, casual), we remain optimistic on EA’s growth trends over the long term. The company is opening up new fronts in social, mobile and online gaming based on its well known franchises, which is expected to boost its customer base going forward.
We believe that EA’s innovative product pipeline will boost its market share in the online gaming market. Moreover, EA’s strong focus on the digital segment will help it stand out even amid sluggish market conditions going forward.
However, the highly fragmented video game market continues to witness increased competitive pressures, which are hurting its overall profitability. This compels us to remain Neutral on the stock over the long term.
Currently, EA has a Zacks #3 Rank, which implies a Hold rating in the near term.
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