EA Stock is Down More Than $3 Billion in Shareholder Value After Battlefront II Controversy
As the battle between gamers and exploitative practices by publishers continues, we’re seeing a clear indication that voting with your wallet indeed has ramifications for the company in question. After Star Wars Battlefront II’s loot box controversy hit the mainstream, sales of the title took quite a hit, with UK physical sales during the first week reportedly down 61% versus sales of the first game. A financial analyst noted that they were disappointed by the sell-through of Battlefront II through the Black Friday weekend.
Previously touted as a profitable business model, EA’s microtransactions now have investors worried. Month to date through Tuesday, EA stock is down 8.5%, which has evaporated $3.1 billion in shareholder value. Comparatively, Activision Blizzard and Take-Two stocks are up 0.7% and 5% respectively, so it’s clear that the controversy surrounding Star Wars Battlefront II is to blame for the loss in value.
Analyst Doug Creutz wrote a note to his clients saying to while initial sales of Battlefront II may be a concern for investors, it is only the tip of the iceberg as the industry’s stance on microtransactions shifts in a different direction.
Battlefront II is the pointy tip of the iceberg. … The biggest recent controversy has centered around EA’s Star Wars Battlefront II, where early evidence suggests player anger over a mishandled loot box economy may in fact be impacting initial sales. We think the time has come for the industry to collectively establish a set of standards for MTX implementation, both to repair damaged player perceptions and avoid the threat of regulation.
With share value so low, you can be sure that EA is quickly assessing this huge loss. It’s likely that EA’s monetization strategies will need to change, and the industry will need to focus on setting guidelines for microtransactions and loot boxes to avoid the threat of government regulation.
Overall, EA shares are up year 39% year to date through Tuesday, with projections prior to the Star Wars Battlefront II controversy being high due to reports of microtransaction profitability. EA CFO Blake Jorgensen reported in February that Ultimate Teams microtransactions in EA Sports titles had generated $800 million in high-profit margin sales during 2016.
Publishers may not seem to care about the gamers, but they do care about their shareholders. With stock values down, EA will be seeking to regain the favor of gaming audiences to please those that invest in their company.