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The 'Fortnite' Impact: Gaming Companies Lose To Popular Battle Royale Title

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The 'Fortnite' Impact: Gaming Companies Lose To Popular Battle Royale Title
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Game makers are in a battle royale for players’ time — and while the well-known traditional companies are still in the fight, they’re having trouble competing against "Fortnite."

Two big game companies this week reported soft earnings and tepid expectations for what’s to come, with Electronic Arts Inc. (NASDAQ: EA) and Take-Two Interactive Software, Inc (NASDAQ: TTWO) both putting out disappointing numbers.

Analysts and industry watchers were pointing to Epic Games' "Fortnite" after the quarterly prints. 

'Fortnite' Dominates Battle Royale Segment 

“Blame Fortnite,” said the Wall Street Journal.

Electronic Arts got “Fortnited, worse than expected,” Buckingham Research Group’s Matthew Harrigan in a note to investors.

Several analysts said the weak results for traditional game makers like EA and Take-Two were due to increased competition from online “battle royale” multiplayer format games, which allow several players to battle to the death. "Fortnite," which is free to play, has been the most popular of those for more than a year.

Morgan Stanley Sees Tailwind For Legacy Studios 

Fortnite has found a format gamers like, and traditional game makers haven't responded well to the free online gaming threat, said Morgan Stanley's Brian Nowak.

That shift to digital is a tailwind for legacy game makers, he said.

"We see EA’s missteps as further confirmation of our view that the growth of digital gaming and more free-to-play options (like 'Fortnite') are causing gamers to play their favorite games for longer," Nowak said in a research report.

"They have more options … and only the best content (at launch and throughout the life of the games through engaging in-game content) will be successful." 

Stocks Suffer Post-Earnings Dip 

Fortnite company Epic Games is privately held, but Chinese investment company Tencent Holding (OTC: TCEHY) has about a 40-percent stake. 

Game-makers have tried to emulate "Fortnite" and other battle royale style games: EA planned to include a battle royale feature on its "Battlefield V" game, but it launched the title in November without the mode, which won't be available until this spring. 

Without it, "the shooter game's single player rather than battle royale format also hurt its appeal," Buckingham's Harrigan said of "Battlefield V." 

EA is, however, counting on a new free-to-play, battle royale shooter game, "Apex Legends," developed by Respawn Entertainment, which has shown quick success, garnering more than 2.5 million unique users in its first day. 

EA was getting killed in the market Wednesday, with shares down nearly 13 percent at the time of publication. Take-Two was losing too, to the tune of almost 14 percent. 

Another major gaming industry player, Activision Blizzard, Inc. (NASDAQ: ATVI) reports fourth-quarter earnings Tuesday. 

Related Links:

Is It Time To Hit Restart On EA's Stock After Tough Quarter? The Street Debates What's Next

Electronic Arts May Have Lost Its Creative Way, Jefferies Says In Downgrade

Screenshot courtesy of Epic Games.

Latest Ratings for EA

DateFirmActionFromTo
Feb 2019Bank of AmericaMaintainsBuyBuy
Feb 2019BMO CapitalMaintainsOutperformOutperform
Feb 2019BuckinghamDowngradesBuyNeutral

View More Analyst Ratings for EA
View the Latest Analyst Ratings

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