Pros
Pioneer. EA got its start back in 1982. While it has had some tough times, the company has shown that it can find ways to keep up with the fickle tastes of gamers. First EA made the transition from the PC to consoles, and now the company is doing the same with social games and mobile. Diverse Platform. Gamers expect a high-quality experience, which means a title can cost millions. In fact, the games are often on par with new feature films. EA has the advantage of multiple channels to help reduce risk. Besides having games for the top consoles — such as Sony’s (NYSE:SNE) PlayStation 3, Microsoft’s (NASDAQ:MSFT) Xbox 360 and Nintendo’s Wii — the company has also built strong positions on Facebook (NASDAQ:FB), on smartphones and even on Apple’s (NASDAQ:AAPL) iPad. Content. Here, EA is king. EA understands how to develop titles that engage gamers. A big part of its strategy is to leverage well-known brands, such as Madden NFL, FIFA and Harry Potter. But EA has also been smart in acquiring hot startups, especially in the social and mobile sectors.
Cons
Volatility. Take a glance at EA’s stock chart — you’ll notice that it looks like a roller coaster. Then again, gaming is a hits-driven business. Even with lots of research — and relying on top brands — a title can easily turn out to be a dud. New Models. The console business is fairly mature, with much of the growth these days coming in mobile and social platforms. The transition has not been easy for EA. Let’s face it, the revenue models are different. They require getting huge numbers of users and getting only a small number to pay a fee for in-app purchases. Macro Economy. Unfortunately, the U.S. economy is showing more signs of a slowdown. No doubt, this will likely be a drag on sales of video games, which are a discretionary item.
