Electronic Arts sees resilient market demand

Retail

Top video game publisher Electronic Arts Inc said the market for its products remains recession-proof, and expects Asian online gaming industry revenues to grow 20%-30% annually in the next three years.

On a global basis, EA expects video game industry sales to hit $48 billion in three years, from $28 billion last year, Chris Thompson, EA's Asia vice president, told Reuters in an interview on Thursday.

“The growth is mainly coming from online and mobile gaming - users in Asia are not as exposed to console games as those in the US, instead, they tend to access PCs more,” Thompson said.

“Also, due to the high piracy rates in Asia where people download movies and music over the Internet, users prefer to download the games, play for free on a trial basis, and then move to a subscription-based model later.”

The company estimates that the online gaming market in China and South Korea stood at about $1.6 billion and just under $1.5 billion, respectively, last year.

Together with Taiwan, these countries are expected to see growth rates of 30% annually for the next three years.

Demand in India will expand faster - at about 60%-80% for both online and traditional packaged games - over the next 2-3 years, Thompson said.

“Apart from its population size, India is also a very entertainment-oriented country - the people love cricket, music and all kinds of mobile entertainment.”

Other markets with strong growth potential include Thailand, Vietnam and the Philippines, thanks to rising mobile phone and broadband penetration rates.

Asia, which accounted for about 5% of EA's $1.13 billion in net revenue for the fiscal fourth quarter ended March 31, is expected to make up 15%-20% of the company's total turnover by 2012.

California-based EA, which publishes blockbuster games such as “The Sims” and “Need For Speed,” is battling Activision Blizzard Inc for the title of the world's biggest video game maker.

The company, which has traditionally sold video games for consoles such as Microsoft Corp's Xbox and Sony Corp's PlayStation, is looking to online games to drive growth by riding on the surging number of Internet users in the region.

Meanwhile, gaming demand remains resilient in the face of escalating inflation, slowing global economic growth, and rising food and oil prices, Thompson said.

“Despite economic pressures happening in the West right now, our industry is growing hand-over-fist - we've been pretty immune to the economic downturn,” he added.

“People cut back on spending and stay at home. Just for $50, the whole family can take the PS3 (PlayStation 3) and play FIFA soccer online - this is arguably the most affordable entertainment that is in the market right now.”

Thompson said EA was exploring partnerships with gaming developers and looking to buy suitable companies focused on online and mobile gaming. It has spent about $350 million in the last two years on acquisitions in the region.

The company is in the midst of a $2 billion takeover of smaller rival Take-Two Interactive Software Inc, and extended its offer for the latter's shares for the fifth time earlier this week.

Take-Two's board has rejected the bid as too low and said it is evaluating other alternatives.

Electronics Arts is expected to post nearly 30% growth in global revenue to $5.1 billion in the year ending March 2009, according to Reuters Estimates, propelled by new titles and an aggressive marketing campaign. (Reuters)

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