Electronic Arts (EA - Analyst Report) announced that its latest expansion pack, The Sims 3 Island Paradise, is available for PC and Apple’s (AAPL - Analyst Report) Mac in North America. The game is currently available in retail stores and can also be downloaded from Origin.
The expansion pack enables players to explore and venture into the aquatic world. The Sims 3 Island Paradise allows gamers to set sail in search of uncharted islands. The game offers tools, which players can use to build their own resorts.
EA has been releasing expansion packs to boost The Sims 3 sales. The eighth stuff pack for The Sims 3, The Sims 3 70s, 80s & 90s, was released on Jan 22 in the U.S. and on Jan 24 in Europe. The pack offered accessories with which the players could decorate their characters. Later, EA released The Sims 3 University Life in March.
Moreover, EA had announced another untitled stuff pack, set to release in the fall of 2013, which will offer accessories used in various movie sets. Additionally, the company expects to release another untitled expansion pack around the same time that will enable The Sims characters to travel to the future.
The Sims franchise was released in 2000, and ever since, EA has sold more than 150 million copies of the game and its sequels in 22 languages across 60 countries. To date, the game has generated more than $3 billion in revenues. We believe that the new expansion packs will boost revenue growth, going forward.
Of late, the frequent release of expansion packs and downloadable contents (DLC) have been the lifeline for aging game franchises. The regular updates not only keep the customer’s interest in the games alive, but also contribute significantly to the publishers’ and developers’ top-line growth.
We believe that EA is diversifying its revenue generating base. With rising consumer spending on digital gaming (social, mobile and casual), we remain optimistic regarding 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.
However, the highly-fragmented video game market continues to witness increased competition from Activision (ATVI) and Zynga (ZNGA - Snapshot Report) . We believe that soft video game industry performance, particularly due to weakness in retail sales remains a concern in the near term.
Moreover, EA recently announced its intention to introduce micro-transactions in all games including packaged goods. However, packaged games cost much more than mobile and free-to-play games and the added cost will aggravate customer dissent toward packaged titles. We believe that this will hurt EA’s customer base, going forward.
Currently, EA has a Zacks Rank #2 (Buy).