Financial markets are giving Electronic Arts Inc (NASDAQ:EA) stocks the cold shoulder after a marketing fiasco revolving around Battlefront II, a videogame developed by the company, resulted in massively diminished sales figures. Battlefront II, a ‘Star Wars’ game with a large audience that was expected to be one of the year’s most successful games, flopped after customers revolted over the company’s development practices.
After some $3 billion in company stock was wiped out in less than a month, EA figured it had best learn a lesson from its customers lest it continue to suffer the consequences. The company has since made changes to the game, trying to placate player demands that in-game microtransactions be curbed if not outright removed, but the move may be too late to salvage EA’s stock.
The gaming industry can be a fickle place; consumers are incredibly tech-savvy, and very vocal about their opinions, meaning digital marketing campaigns that swamp consumers during the holiday season can quickly turn into PR nightmares when they’re hijacked to highlight product deficiencies. EA’s Battlefront II failure will haunt the company for some time, as players on popular sites turned to boycotting the company over its practices and likely won’t forget its behavior anytime soon. Some consumers went so far to send threats to the developers, signaling how quickly things have gotten out of hand.
As EA’s competitors continue to climb in the market amidst the company’s marketing woes, it will have to struggle to catch up. After social media websites and the popular internet message board Reddit were flooded with complaints, customers abandoned the company in droves, something that only the long-winded process of developing a more successful game can reverse.
Physical sales of the game plunged, and the results of holiday shopping from Black Friday and other popular deal days have been less than satisfactory to appease investors. As criticisms grow about the monetization of the gaming industry, which includes controversial practices such as gambling aimed at children, EA will face more headwinds on its route to market success.
Winning back old customers
EA has a long, uphill battle to fight if it intends to get its stocks back into healthy territory. The gaming industry that it relies on is extraordinarily hostile to developers at times, and boycotts and threats to developers themselves aren’t entirely uncommon occurrences. EA’s current market dilemma won’t be solved in a boardroom with company executives; to resolve the media storm engulfing it, EA needs to get back to the drawing board, and produce new and better games to win back over an audience that’s fed up with its practices.
Such things are often easier said than done, however. Videogames centered on microtransactions earned EA over one and a half billion dollars in FY2017 alone, a figure so daunting as to almost alleviate investor concerns entirely. The company will only be seriously compelled to change its business operations if the lack of physical sales of its games continues for some time, and players refuse to give up their boycott as Christmas and more holiday shopping approaches.
While some investors may wish to see the company continue its microtransaction-centered strategy that’s brought in such high revenue figures in the past, savvy investors should understand that a culture change is long overdue at EA if it’s to succeed well into the future. Customers in its industry no longer trust it, and, worse, are entirely fed up with its marketing antics, brutalizing the company in online reviews. Investors should avoid the stock as if its poison until such a time as the company’s leadership turns things around and fosters better practices that win back the community’s support and praise.
If EA wants to avoid a continued clobbering in the digital press that caters to its core audience, it needs to bring about these changes immediately. Done right, a company like EA can churn out multiple big hits in a year, and every day their response is delayed is another missed opportunity for the company. EA doesn’t have to enter a death spiral; by embracing real, honest reform and learning to put its customers’ demands first, the company can avoid future PR disasters that like currently wreaking havoc on its stock, and climb its way back to the top of the market.