Electronic Arts Strengthens Its Sports Franchise With UFC Brand

| About: Electronic Arts (EA)

Electronic Arts (NASDAQ:EA) took hold of another sports franchise with its announcement of the Ultimate Fighting Championship license yesterday.

Previously held by THQ Inc. (THQI), the UFC brand now comes into the experienced hands of Electronic Arts. THQ will continue to make UFC games through March of 2013 and will receive a cash payment from Electronic Arts. THQ shares traded up 11% yesterday after the announcement was made. Clearly THQ is going a different direction and being in the highly competitive sports video game market was not in its best interests.

Electronic Arts now takes over the fastest growing sport in the World with a new video game line. Ultimate Fighting Championship is the biggest league in the sport of mixed martial arts. The league has millions of fans around the world, selling out every city it enters for live events. Several video game makers have created UFC games since 2002. None of the games made by the likes of THQ, Capcom, Crave, or Ubisoft has sold more than 2 million copies. Electronic Arts has the potential to outsell all the previous UFC licensed games.

EA Sports put out a MMA game in 2010, but the game had no UFC fighters due to licensing issues. Essentially EA Sports put out a game featuring minor leaguers and still sold over a half million copies. The current UFC Undisputed 3 game put out by THQ has sold over one million copies. I am predicting the first UFC game put out by Electronic Arts to sell over three million copies.

Electronic Arts now has major franchises across these sports:

  • Soccer - FIFA video games, FIFA Street, EURO 12
  • Football - Madden video games
  • Hockey - NHL video games
  • Mixed Martial Arts - UFC video games
  • College Football - NCAA College Football video games
  • Golf - Tiger Woods PGA Golf video games
  • Boxing - EA Fight Night Champion game

FIFA Soccer has sold over 9.5 million copies across the XBOX 360 and Playstation 3 platforms. Over two-thirds of the game's sales have come in Europe as soccer remains the dominant sport away from the United States. New announcements by Electronic Arts show the future plans to make FIFA 2013 more social with online rewards.

Madden 2011 did not have the strong sales that Electronic Arts is used to. The game sold almost 5 million copies, which is less than the 2004 and 2006 games sold for Playstation 2 alone. The benefit of no NFL lockout this year will hopefully help sales of the Madden game. A full preseason schedule and training camp coverage should generate interest in the game up until its release.

Electronic Arts continues to diversify its lineup with games centered around sports, shooting, social, and games based off of movies. Electronic Arts has tried to attack the growing social gaming market and MMORPG with its recent "Star Wars: The Old Republic" game. Electronic Arts earns a lot of free cash flow from its annual sports titles. The sporting segment of Electronic Arts remains strong. Shares of EA are close to a 52-week low. The company reports earnings on July 29, and looks to continue its streak of beating analysts' earnings estimates.

Disclosure: I am long THQI.

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