Electronic Arts' "FIFA" is the leading soccer-themed video-game franchise, selling over 24 million copies annually.

FIFA benefits from over 400 exclusive licenses signed with federations, leagues, and players.

In addition, the video-game franchise benefits from an established community of over 20 million players.

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Electronic Arts' "FIFA" video-game franchise is leaving its competition in the dust because of two key advantages, writes Bernstein research analyst Todd Juenger.

The leading sports-video-game franchises gain a major advantage by licensing teams and players. Of the major sports (soccer, American football, and basketball), the most challenging franchise model is soccer, for which EA Sports has signed over 400 agreements with federations, teams, leagues, and players.

The Bernstein report argues this bundle of agreements is hard to replicate and points to rival Konami's game "Pro Evolution Soccer" as evidence.

While FIFA has full access to the English Premier League teams, Pro Evolution has access to only two. Additionally, Pro Evolution lacks access to Italian Serie A team Juventus and its star Cristiano Ronaldo, perhaps the most famous player in the world.

Bernstein

These factors have played out in games sales. While the rivals had similar sales a decade ago, "FIFA" now has a commanding lead of 24 million unit sales to "Pro Evolution Soccer's" 1 million. This strategy also extends to Electronic Arts' American football video-game franchise, "Madden NFL," where it has similarly obtained an exclusive licensing arrangement with the National Football League.

Given the high cost of game development and network effect of an established player community, Bernstein argues that significant advantages accrue to the leading incumbents of video-game sport franchises. For example, TakeTwo Interactive's "NBA2K" franchise has come to dominate the category due to its established player community despite the NBA not offering exclusive agreements.

"FIFA" enjoys both of these advantages with exclusive licenses and the largest established incumbent player community in its category. Bernstein argues significant upside due to these advantages and predicts the FIFA soccer franchise will remain dominant, despite challenges in other parts of Electronic Arts' business as reflected by a fall of 23% of EA's stock price over the past year.

"FIFA stands out as a robust franchise through a tumultuous year in the video game industry," said Electronic Arts COO and CFO Blake Jorgensen in the company's most recent earnings release. "Elsewhere in the business, we’re making adjustments to improve execution and we’re refocusing R&D."

Juenger has a target price of $120 for the stock, an upside of more than 26% from current levels.

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