EA Unveils New Free Tetris Game - Analyst Blog

By Zacks | February 15, 2013 AAA

Electronic Arts (EA) is expanding its free-to-play gaming portfolio. EA recently announced that its new puzzle game Tetris Blitz will be available for free on both Apple's (AAPL) iOS and Google's (GOOG) Android based smartphones and tablets. Tetris Blitz will also be available on Google Play and Amazon's (AMZN) App store. Tetris Blitz is set to release later this spring and gamers will be able to download it for free. The game challenges players to gather maximum points in a race against time. Players can buy new power-ups (which will be updated every week) in order to boost their scores.

Tetris Blitz not only features advanced graphics but also innovative new controls, such as "Drag and Place" option, in addition to the conventional "Swipe" option for the players who prefer the classic mode. The new game has a social gaming mode through Facebook Connect integration, which allows players to compete with friends in a weekly competition.

Tetris Blitz is the first freemium game of the Tetris franchise. Free-to-play games, popularly known as freemium games, have become a rage among gamers. Although gamers access the game for free, developers and publishers earn revenues through the sales of in-game items and advertisement. The freemium model has gained further momentum with the increasing popularity of social games, co-operative games and mobile games.

The freemium model has garnered significant attention from established game developers such as EA for their ability to attract new gamers. The addictive nature of the games is one of the primary reasons behind this increasing customer base. We believe that the popularity of the Tetris brand coupled with its availability on all leading mobile and tablet platforms will benefit the new game going forward.

EA has been focusing on building its social free-to-play portfolio to counter strong competition and also to offset declining sales of its core packaging division. EA continues to bring its well known franchises such as Star Wars, FIFA, The Sims, Warhammer, Command & Conquer, Battlefield and Need for Speed in the freemium mode in order to gain significant customer base going forward.

In the recently concluded third quarter, revenues from mobile and other handheld devices increased 18.0% year over year to $99.0 million. Smartphones and tablets revenues were up 36% year over year to $79.0 million. Moreover, extra content and free to play revenues jumped 50.0% year over year to $185.0 million, while publishing and other (62% of total revenue) segment revenues plunged 39.0% year over year in the quarter to $742.0 million.

EA expects contribution from free-to-play, casual and social games to increase to approximately 35.0% of worldwide digital revenues by calendar year 2013. We believe that EA's strong digital portfolio and continuing growth in the free-to-play and online segment will drive top-line growth going forward.

However, we believe that soft video game industry performance, particularly due to weakness in retail sales amid an aging console system lifecycle, remains a concern in the near term. Although we believe that the ongoing transition from the physical to the digital platform will ultimately benefit the video game industry (due to the cost effectiveness), low priced digital games have failed to offset the rapid decline of high-priced retail sales in recent times.

Currently, EA has a Zacks Rank #4 (Sell).

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