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EA Is About to Lose Its Sectional FIFA License: Hither’s What Information technology Means for the Stock

The 2 organizations are not happy with each other at the moment.

Key Points

  • Electronic Arts and FIFA are reporting that negotiations for the FIFA license take stalled.
  • FIFA is asking for a substantial raise to EA’due south almanac payment.
  • In the long run, it could be a good thing for Electronic Arts.

Some large rumblings have been circulating in the sports video game globe, with publisher
Electronic Arts
(NASDAQ:EA)
and the international governing trunk of soccer, FIFA, butting heads publicly over the upcoming renewal of their licensing deal.

EA publishes the
FIFA Soccer
video game every year, one of the well-nigh pop games in the world and EA’south biggest franchise. Yet, in society to call the franchise by its current proper name, EA has to license the name from FIFA, which information technology pays a hefty price for every year. With the license coming upward for renewal later the Qatar World Cup side by side yr, reports take come out that the two organizations are at an impasse, and that the exclusive naming license is probable not going to exist renewed.

Here’southward what currently is going on in the dispute between EA and FIFA, and what it could mean for EA stock if it loses this license.

Prototype source: Getty Images.

FIFA is not happy with EA at the moment

This news story started with a press release on Oct. vii from EA that updated its investors about the launch of
FIFA 22, which was released on October. 1. The game has been record-breaking so far, with nine.i million players joining the game and 460 million matches played. At the terminate of the press release, the visitor included a peculiar section on name rights. Here is the exact statement:

As nosotros wait alee, we’re besides exploring the thought of renaming our global EA SPORTS football game games. This means nosotros’re reviewing our naming rights agreement with FIFA, which is separate from all our other official partnerships and licenses across the football world.

This was a chip ambiguous but was cleared up past other news reports on the negotiations. FIFA put out a press release with more specific language, stating that “The future of gaming and eSports for football stakeholders must involve more than one party controlling and exploiting all rights.” The only company this could exist referring to is EA and gives a hint that FIFA is not happy with the company correct now.

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It was unclear exactly what the two organizations were upset about, but then a
New York Times
article was released outlining why the talks have stalled. Co-ordinate to the written report, FIFA is asking for a huge increase in licensing fees to $1 billion in every four-year World Cup cycle. Information technology is as well limiting what EA can do with the exclusive license. EA wants to put highlights of real soccer games into the video game and explore digital products like NFTs, which it apparently is unable to do right now.

How information technology could impact Electronic Arts

With the FIFA license but covering the naming rights for the video game franchise, EA probable thought $250 1000000 a yr was a bit egregious for FIFA to enquire for, and that is why it is walking away from this relationship. It still owns the majority of soccer licenses around the world, with over 300 licenses giving admission to 700 teams, 100 stadiums, and 30 leagues for its games, and then it is not similar the game will be losing the rights to top stars similar Lionel Messi and Cristiano Ronaldo.

What’s more than, EA already filed a trademark for a new franchise proper name chosen
EA Sports FC, indicating the company has decided to movement on from FIFA.

How could this impact Electronic Arts? Honestly, information technology could be a positive for the business concern. It will lose one of its largest annual expenses and will now be able to explore different monetization strategies with more liberty. Yes, the
FIFA Soccer
brand is well known effectually the world, so there’s some gamble of losing brand quality with consumers if the FIFA proper noun gets attached to other franchises. However, with about of the leagues/players still in a relationship with EA, and its only sizable competitor
eFootball 22
getting horrendous reviews, it is tough to imagine players switching over just considering the franchise is now chosen
EA Sports FC.

EA’s soccer franchise is its most important nugget. The visitor doesn’t specifically close how much the franchise brings in each year, but its Ultimate Team feature, which is a part of well-nigh of its sports games, was 29% of the company’s overall acquirement in fiscal twelvemonth 2021, the majority of which is attributed to FIFA Ultimate Team. If EA ends its relationship with FIFA, it will be important for investors to track if this affects sales of its soccer games, which could have an touch on on the stock over the long term.

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This article represents the stance of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — fifty-fifty ane of our own — helps us all think critically about investing and brand decisions that help us become smarter, happier, and richer.


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Source: https://www.fool.com/investing/2021/10/21/ea-is-about-to-lose-its-exclusive-fifa-license/