EA lockbox debacle wipes out billions in stock as SuperData forecasts regulation

    
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Proud?

It looks as though the rebels may have defeated the empire — or at least struck a mighty blow to give the latter pause.

CNBC is reporting that the fallout from EA’s Star Wars Battlefront II and its lockboxes has done serious damage to the company’s bottom line. EA’s stock price dove 8.5% following the uproar over Battlefront’s egregious lockboxes, the resulting decision to (temporarily) remove them from the business model, and weaker than expected sales. This means that $3.1 billion of shareholder value has now vanished. That’s no small potatoes.

Wall Street Analyst Doug Creutz said that this may be the catalyst that sets some serious changes in motion for the video game industry: “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.”

This line of thinking is being echoed at SuperData, which wrote an analysis op-ed in which the author saw the potential for industry or government regulation over this technique. “China’s drop rate model, where governments regulate loot boxes but stop short of a ban, is a likely future scenario. Publishers could voluntarily self-police loot boxes to avoid binding government rules,” the author said.

However, EA might not be fully willing to reform, as players are currently spending more money than ever on additional content and microtransactions past the box price of a game.

Source: CNBC, SuperData. Thanks Winterskorn!
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daicon

Online games and digital ownership need consumer rights. I don’t think self-regulation will cut it…

We’re at a point where shallow games can come out, exploit expectations and hype through blatant lying, collect money (and time) from players then pull the rug out from under everyone without consequences. This practice ruined the free-to-play model, will ruin mobile gaming, and now the only way they can hit up core gamers is through monetizing boxed $60 games.

And what do gamers get in return? Servers that, at EA’s earliest convenience, will be shut down, rendering the game null. It’s a lose-lose for all gamers to really sit down and take it.

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Andy McAdams

Consumer rights for games is … an interesting and messy concept for us. It’s definitely a challenge that we are going to have to tackle at some-point as digital / virtual items and spaces become more important and prevalent in our lives.

But I wonder what that means for games. While there are definitely cases for the NCSofts and EAs of the world who close down games and basically tell gamers to not let the door hit their ass on the way out and also play this other completely unrelated game because we still realllly want your money we just don’t want to have to work as hard for it, there are other games like Glitch that closed down because the game literally couldn’t support itself.

So I wonder how consumer protections would work. I think it’s a solid idea, but its also much more nebulous, legislatively speaking and highly context-dependent. I can see things like forced publications of drop rates and some sort of verification that the studio isn’t outright lying about it (which is sad we have to do that, but Bungie proved that even the ‘good’ developers will lie if they think they can get away with it).

Regulating from a consumer protection perspective instead of a gambling perspective might actually make more sense in the long run. Gambling-related legislation has pretty cut and dry requirements that EA can push right up to the line on. Consumer protections are more fuzzy — which could give courts more room for interpretation to counter EA’s future shenanigans.

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draugris

I am curious what will happen maybe in january or february when the dust has settled. Imo the rippoff is not over, they will try it again and i hope that the community is alarmed enough to not let them do it.

Ocho
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Ocho

EA’s stock Nov 30th, 2016: $79.23
EA’s stock Nov 30th, 2017: $105.49

Yeah, I think they’ll be just fine.

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Armsbend

EA’s stock Oct 31st 2017: $119.60
EA’s stock Nov 30th, 2017: $105.49

Not a small fall. We’ll see.

Andy McAdams
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Andy McAdams

A man in possession of a lot of money will always be in want of more money. Take away some of that money, and his greedy rage will billow forth.

It’s not how much it’s worth now – it’s how much it could be worth tomorrow. Free Market Capitalism is like cancer, it has keep growing or it dies. EA is no different in this.

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CubAvenger

While I hope sweeping change happens in the industry, I don’t see anything of consequence happening as a result of the lockbox debacle.

The least I can hope for is that Disney takes the Star Wars IP away from EA and gives it to someone else focused on a challenging, but enjoyable gaming experience. Every new Star Wars game has been either mobile or Battlefront with PVP and/or microtransactions. EA killed the only single-player Star Wars game they had in development (for reasons still unclear) and the new games are atrocious.

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Sally Bowls

We just got come info on Visceral

https://www.gamasutra.com/view/news/310630/EA_Viscerals_canned_Star_Wars_project_too_linear_for_modern_tastes.php

“We were trying to build a game that really pushed gameplay to the next level, and as we kept reviewing the game, it continued to look like a style of gaming, a much more linear game, that people don’t like as much today as they did five years ago or 10 years ago.”

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Sorenthaz

Of course regulation is coming now, because companies aren’t freaking deciding on standards themselves since they’ve just been exploiting/abusing this gray space for as much $$$ as possible.

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Sally Bowls

I think this is bad news for EA, stock is off a billion dollars today. I think it is bad news for EA, lockboxes and probably gaming stocks in general and like SuperData and CNBC, my guess is something is going to happen.

However, I would like to point out some numbers.

If you put $1,000 in a savings account on Dec first of last year, then you would have made $15.

If you were smart enough to buy $1,000 of EA stock on Dec first of last year, then after the billions of stock drop in the headlines, and reflecting the billion the market cap dropped today, you would have made $396. It would take over 22 years of compounding in a savings account to make that $396.

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rafael12104

That is a fair assessment Sally, and their YoY numbers are still going to be well beyond expectations.

But, the sudden loss and continuing decline of the price of their common stock is trending down in a steep slope. And suddenly the preception has moved aways from their gains for this year to their gains for this quarter and the quarters yet to come.

It will be interesting to see how this shakes out because the market is booming and there are plenty of other stock offerings to choose from that are sure winners, at least right now.

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Sally Bowls

plenty of other stock offerings to choose from that are sure winners

In spite of what some salespeople may try to tell you, there are exactly zero stocks one can legally buy that are sure winners.

But you are correct this is not good for EA. And it has gone from doing great to a big question mark. I bet the Q4 earnings call in Feb will get a lot of scrutiny.

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rafael12104

A bad turn of phrase on my part. There are plenty of other stock offerings that are good investments at this time.

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Sally Bowls

That is true. However, there are financial theories, not held by people who sell financial advice, that is not possible or at least not profitable enough to know in advance which of the stocks are good investments.

https://en.wikipedia.org/wiki/Efficient-market_hypothesis
https://en.wikipedia.org/wiki/Random_walk_hypothesis

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NeoWolf

Lets be crystal CLEAR here.. the fallout did not hurt EA’s bottom line, their greed and blatant disregard for their customers hurt their bottom line.

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Dug From The Earth

And yet, EA is still insistent on putting MTX back into the game:

“We’re really watching how people are playing the game. We’re trying to understand are there certain modes where MTX may be more interesting than not? What are the consumers saying about it? How are the consumers playing the game? What do the metrics look like? We’re learning and listening to the community to decide how best to roll that out in the future.”

link
http://www.eurogamer.net/articles/2017-11-29-ea-not-giving-up-on-microtransactions-in-star-wars-battlefront-2

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Goronmon

Of course they are. The stock dropped not because investors are anti-microtransaction. The stock dropped because investors are pro-microtransaction and with EA removing them temporarily, the game is going to make less money.

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Paragon Lost

My feels…

Do you know what this is.gif
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Michael18

… both to repair damaged player perceptions and avoid the threat of regulation.

Yeah “both”, right.

yeah-right.gif