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EA to Donate SimCity DLC Proceeds

Zacks Equity Research

Gaming company Electronic Arts (EA) seems to have adopted a humanitarian approach. The company recently declared that it will donate up to 80.0% of the proceeds from SimCity's new Red Cross DLC to the Red Cross Society, once it recovers the cost of developing it.

EA partnered with Red Cross to develop this special edition of SimCity DLC, which includes features such as a new Red Cross Relief Center building to send Red Cross tents and vehicles around the city when disaster strikes. The Red Cross theme set will be available for $9.99. EA is expected to make a minimum contribution of $100,000 or approximately 80% of its post tax proceeds from the game.

We believe that apart from being a humanitarian initiative, this is also a new way of marketing its game and making it popular among gaming enthusiasts. This is also expected to be well received by end users, which will ultimately drive sales and improve its bottom line.

EA, being one of the largest video-game developers in the U.S., has always been a trendsetter in the industry. The company is also hopeful about its upcoming shooter game Battlefield 4 and its soccer title FIFA 14, which is scheduled to be released in the quarter ending Dec 31, during the peak holiday season.

We believe that the popularity of these franchises will attract new consumers, which will further boost EA’s top-line in the near term. However, EA faces a number of headwinds that include a soft video game industry performance and competition from other game makers such as Activision Blizzard (ATVI).

Moreover, video game consumers are holding back their purchases due to the upcoming release of new consoles from companies such as Microsoft (MSFT) and Sony (SNE). This is negatively impacting video game retail sales in the near term.

Currently, EA has a Zacks Rank #3 (Hold).

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