EA's Strategic Move: FIFA Video Game and the Intellectual Property Rights
Electronic Arts (EA), the gaming colossus and Mayar portfolio mainstay, recently stirred up the gaming universe with a new approach regarding the hugely popular video game franchise, FIFA. The change had already been anticipated by gaming enthusiasts who were awaiting the 2024 edition with bated breath.
Why the increased focus? Because FIFA the name is no more. Unable to come to an agreement for naming rights with football’s governing body, EA took the decision to rebrand the game to EA Sports FC.
We aim to cast light on the nuances of EA's shift, particularly focusing on the Intellectual Property (IP) rights and the potential investment implications.
The EA-FIFA Divergence: A New Direction
With a legacy of producing acclaimed sports simulation titles such as FIFA, Madden NFL, and NBA Live, EA's decision to part ways with FIFA’s naming rights wasn’t taken lightly. Instead of a linear acquisition, EA is turning a page by establishing agreements with individual football clubs for image rights. This, combined with a redirected budget towards aggressive marketing, demonstrates EA’s commitment to retaining the essence of FIFA, albeit under a new banner: EA Sports FC
Decoding Intellectual Property in Gaming
Intellectual property rights, encompassing trademarks and licenses, play a pivotal role in the video gaming landscape. When a gaming behemoth like EA makes a strategic move in this area, it's vital to comprehend the underlying IP implications.
Branding: With the shift from FIFA, EA now focuses on forging direct relationships with individual clubs, providing more granular control over branding to ensure the gaming experience remains authentic.
Player Representations: Integral to the realism of sports simulation are the player likenesses. By liaising directly with clubs, EA ensures accurate player representations, enhancing the gaming experience.
Club Logos and Authenticity: Direct agreements allow EA to incorporate official club logos and names, imbuing the game with an unfiltered football atmosphere.
Unboxing the Investment Angle
For investors, EA's strategic pivot presents an intriguing scenario. Mayar looks for Great businesses, housed within great companies that represents great value.
Great Business
Sustaining the consumer base: Even without the FIFA name, EA’s commitment to the spirit of football simulation means its foothold in the market remains robust. This holds the potential for growing revenue through game sales, in-game purchases, and esports ventures.
The Economic Moat: By securing bespoke agreements, EA establishes a unique product offering, minimizing direct competition and guarding its market share.
Cultivating Fandom: The FIFA series has cultivated an ardent fan base over the years. This pivot, with a focus on authenticity, is likely to resonate with fans, cementing their loyalty.
Great Company
EA's shift from the FIFA moniker to EA Sports FC underscores a broader narrative beyond game development. It's a strategic manoeuvre to harness intellectual property rights, creating avenues for market leadership, enduring revenue streams, and sustained fan engagement. For stakeholders, this is an affirmation of EA’s adaptive approach. As they continue to explore and optimise these new avenues, the prospect of delivering substantial returns to shareholders remains promising.
Great Value
Trading at 14x, EA Sports, we believe that this undervalues the firm, especially when compared to its historical averages. For a company that, in our assessment, possesses the capability to consistently and sustainably enhance its value, this valuation seems conservative. Past uncertainties surrounding its separation from FIFA and concerns over EAFC's performance have contributed to these dampened multiples. Now, with clarity emerging on these fronts, we anticipate a more favorable revaluation on the horizon.
Disclaimer: Investors should be aware that with investing, capital is at risk. Past performance is not necessarily a guide to the future and that the price of shares and other investments and the income that is derived from them may fall as well as rise and the amount realised may be less than the original sum invested.
The opinions expressed are not personalised advice. If you are uncertain as to the suitability of an investment for you, please consult an independent financial adviser.