Electronic Arts wants investors to know the video game industry is healthier than they thought.
The video game giant exceeded Wall Street expectations Tuesday after reporting fiscal second-quarter earnings, with profits jumping nearly 50 percent. Its sports franchises, including its popular Madden football franchise and FIFA soccer titles, lifted the company's sales by 17 percent ahead of the holiday shopping season.
To EA, this is the latest signal that the video game industry, nearly one year after the release of new Xbox and PlayStation game consoles from Microsoft and Sony, may be shedding its new-hardware growing pains.
"A year ago, there were only a handful of titles. We had five of them, so we benefited from that," Blake Jorgensen, EA's chief financial officer, said in an interview. But there's "new software coming into the marketplace -- our software, as well as competitors' software," he said. "I think the trend is positive." Jorgensen said that EA is now seeing higher sales for FIFA 15 on new Xbox One and PS4 consoles than on last-generation hardware.
Video game software sales, according to industry watcher NPD Group, as sales of games for older consoles declined faster than sales of games for newer hardware could fill the gap. NPD does not tally games and add-ons sold over the Internet in its sales figures, however, giving only a partial picture of the industry as large game publishers like EA increasingly focus on Internet play as a way to keep gamers engaged longer.
Sales generated from EA's Ultimate Team services -- which let customers play a form of fantasy football, soccer and hockey -- rose 96 percent from the same time last year. Mobile companion apps for those services have now reached 40 million monthly active users, up 250 percent year over year.
"We sold more new units of Madden this year than we have in the past and we sold Madden longer during last season than we would normally sell," Jorgensen said. "Because of Ultimate Team, people want to continue to engage."
That's good news for EA Access, athat charges $5 a month, or $30 a year, for access to old EA games downloaded from the Xbox Live marketplace. In lieu of nabbing sales for those games outright -- or losing the used-game sales to retailers like GameStop -- EA gives those players discounts on online add-ons like Ultimate Team to wring extra revenue from older titles.
The program has exceeded expectations, said Jorgensen, who declined to disclose specifics. "We're very excited about it as a great way to really test opportunities for the digital live services business," he said.
EA is also preparing for the Christmas shopping season as competitors release some of the year's biggest games, including new titles from Activision Blizzard's Call of Duty wartime shooter series and Ubisoft's stealth action series Assassin's Creed.
EA delayed its own Call of Duty competitor -- a cops-and-robbers take on the typically military-themed Battlefield series called Battlefield Hardline -- until spring 2015. The move, EA says, is intended to polish the title and ensure a smooth launch. Gamers have criticized EA after last year's installments of Battlefield and SimCity were plagued by bugs.
EA does have one high-profile game planned for the holiday shopping season. Next month, the company is set to release Dragon Age: Inquisition, a much-anticipated medieval fantasy adventure title. The company expects Dragon Age to bolster holidays sales, ahead of a March 17 release of Battlefield Hardline.
When adjusted for items like stock-based compensation and deferred revenue, EA reported profit of 73 cents a share on sales of $1.22 billion. That beat analysts' estimates of 53 cents a share on sales of $1.16 billion.
Investors responded favorably, sending EA's stock up 4 percent to an annual high of $39 a share in after-hours trading after closing up 1.7 percent at $37.48 a share. The company's shares have risen this year, peaking at $38.42 in July.
For the third fiscal quarter ending December 30, EA anticipates profit of 90 cents a share on sales of $1.28 billion, after adjusting for items such as deferred revenue. Analysts on average estimate 86 cents a share on $1.3 billion, according to surveys by Thomson Reuters.
EA has raised its fiscal year sales guidance by $75 million to $4.18 billion and increased its annual earnings forecast per share by 20 cents to $2.05.