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Piracy Haunts EA in the Interactive Entertainment Market

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Pirated versions of paid games impact revenue growth

Piracy offers licensed and fee-based games for free. It creates a dent in game publishing companies’ revenue—like Electronic Arts (EA). EA mainly generates revenue from licensed and subscription games. Due to fewer strict laws and intellectual property rights not being enforced, piracy became a global concern. As the video gaming industry developed and evolved, piracy continued to grow.

You can consider investing in the PowerShares QQQ Trust (QQQ) and the Technology Select SPDR (XLK) to gain exposure to EA. It accounts for about 0.35% and 0.47% of these ETFs, respectively.

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Piracy is a global concern

Various factors led to the emergence and popularity of piracy. The factors include:

  • increased generation of technology – allows users to bypass the protection measures that companies used for their products
  • increased broadband access and available options to download pirated copies of games from the Internet
  • widespread generation of Internet cafes that provide pirated copies of well-known games

Although it’s dated, the above chart shows that the pirated versions of the games are available at much cheaper rates in the local market. As a result, piracy influenced this market significantly in the way games are perceived, played, made, and sold all over the world. It impacted not only game publishing companies, like EA, but also console manufacturers.

Microsoft’s (MSFT) Xbox One and Sony’s (SNE) PlayStation are the dominant players in the console space. As a result, if EA and these console manufacturers don’t control the piracy of their products, it would be negative for their growth and profitability in the future.

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