EA share prices have fallen 8.5% month-to-date, wiping out $3.1 billion in shareholder value in the process, all thanks to backlash over Star Wars: Battlefront II loot boxes.
The giant video game publisher is still having a banner year, with shares up 39% year-to-date, but there’s no doubt that the backlash, combined with EA’s decision to remove paid loot boxes from the game just hours before launch, rattled shareholders.
For one thing, it’s unclear where EA goes from here, not just in its re-implementation of loot boxes in Star Wars: Battlefront II, but in terms of its larger micro-transaction strategy across all its games and franchises.
More troubling from an industry standpoint is the new threat of government involvement thanks to gambling concerns. Politicians in Europe and the United States are now paying closer attention to loot boxes than ever before, and the threat of government regulation looms.
“Battlefront II is the pointy tip of the iceberg,” Cowen analyst Doug Creutz wrote in a note to clients Monday. “The biggest recent controversy has centered around EA’s Star Wars Battlefront II, where early evidence suggests player anger over a mishandled loot box economy may in fact be impacting initial sales. We think the time has come for the industry to collectively establish a set of standards for MTX implementation, both to repair damaged player perceptions and avoid the threat of regulation.”
In some ways this could be a watershed moment where we see consumers and consumer advocates actually having a major impact on the video game industry. If so, it’s a welcome development. Nobody begrudges video game developers and publishers need to make profits on the games they make, but there comes a point when you do have to draw a line in the sand. Pay-to-win micro-transactions in a premium AAA video game is a pretty good place to draw that line (though, arguably it should be drawn even closer to the bone.)
Indeed, while both Take-Two and Activision reported gains in the same period of time, and while all these major publishers have been growing at frankly astonishing rates on the promise of lucrative micro-transactions and digital sales, this controversy could spill out across the industry. Destiny 2 developer Bungie, and by extension its publisher, Activision, are facing tough questions from gamers about that game’s loot box system as well. Enough consumer backlash can hurt sales, including micro-transaction and digital sales. When enough people vote with their wallet, real change can happen.
Now EA will face tougher scrutiny not just in Battlefront II, but across its catalog of sports titles, racing games and action/shooter releases.
There’s a flipside to this, of course, and it’s one of context.
EA stock is up from around $14 per share at the beginning of 2013, to nearly $110 a share now, even with the dramatic dip in November. Activision is up from around $11 per share to nearly $66 per share in the same five year period. And Take Two is up from $11 per share to nearly $118 per share. While self-regulation, standards, and an overall rethinking of micro-transactions may be in order for EA and the industry writ large, EA’s current crisis is still little more than a drop in the bucket.
Meanwhile, it’s hard to believe that EA would really walk back its micro-transaction practices all that much. While pay-to-win loot crates may have been a bridge too far, there are still plenty of ways that EA can capitalize on recurrent consumer spending. I would not be at all surprised to see the company regain its lost value in the coming months as this controversy fades and new games fill the horizon, glittering with promise.
Powered by WPeMatico