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EA's 'Apex Legends' Could Expand To China With Tencent

EA's 'Apex Legends' Could Expand To China With Tencent

Tencent Holdings (OTC: TCEHY) is in talks to bring Electronic Arts Inc. (NASDAQ: EA)’s new U.S. hit "Apex Legends" to China, the South China Morning Post reported Friday.

Apex Legends has debuted with huge numbers of players and considerable fanfare in the gaming world and is seen as a possible challenger to the massively successful "Fortnite" title. 

The move would give Tencent a video game distribution trifecta in China: the company already distributes "Fortnite" and PUBG Corp.’s "PlayerUnknown’s Battlegrounds." All three are “battle royale” games, which are the type of multiplayer online environments that are seen by observers as central to the future of the industry.

Tencent, which now is the world’s biggest video game company by revenue, also owns a roughly 40-percent stake in "Fortnite" developer Epic Games. 

The phenomenal early success of "Apex Legends" — it drew 25 million players its first week — has bolstered EA’s stock in recent days, bucking difficulties for the industry, which has seen stock volatility amid lackluster earnings reports.

Venture capital firm Loup Ventures recently said the market may be overreacting to "Apex Legends," in part because it isn’t yet clear what staying power the game will have, despite the early interest. 

Monetizing Free Games 

"Apex Legends," like "Fortnite," is a free-to-play game, meaning that monetization remains a question mark.

"Fortnite" brings in revenue by charging players in-game for items that enhance their experience — the so-called microtransaction model for generating revenue from games that aren’t sold to players. For example, "Fortnite" players pay up to $20 each for a “skin," which is essentially a cosmetic enhancement to the player’s character or costumes. 

One problem for a game like "Apex Legends," in Loup Ventures opinion, is that the point-of-view is first-person. Players don’t see their own character much from this perspective, so skins aren’t a big draw.

"Apex" does offer weapons skins and some paid character options, but they’re not as integral as those in "Fortnite," according to the venture capital firm. 

Apex Legends As An Esport

Another phenomenon that holds promise for "Apex Legends" may be in its appeal as a game for spectators to watch

The Esports Observer reported Thursday that "Apex Legends" had more than 8.2 million hours of viewing on Twitch earlier this week, a single-day record.

The popularity of the game as a spectator endeavor comes as a new report from research firm Newzoo said the esports market could eclipse $1 billion in revenue in 2019. 

Price Action

EA shares have been pushed up by the success of "Apex Legends," and the stock was up again on Friday, closing 1.51 percent higher at $106.84. 

Related Links:

'Apex Legends' Hits 25 Million Players, Giving EA's Stock Another Boost

Strong 'Apex' Release Continues To Boost EA Shares, Sell-Side Has Mixed Reaction

Photo courtesy of Electronic Arts. 

Latest Ratings for EA

Mar 2019Morgan StanleyMaintainsEqual-WeightEqual-Weight
Feb 2019Bank of AmericaMaintainsBuyBuy
Feb 2019BMO CapitalMaintainsOutperformOutperform

View More Analyst Ratings for EA
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