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July 16, 2010 6:20 PM EDT
Electronic Arts plans to sell its entire stake in Ubisoft, in a move seen as a shift to the mobile games industry.
The popular Redwood City, Calif. based video game publisher confirmed that it is selling its position in the France-based Ubisoft. It said in a statement the company said, "Our strategic priorities have changed since we first bought into Ubisoft. Recently, the stake had become more of a financial investment than a strategic one."
Electronic Arts owns 14.8 percent of Ubisoft, somewhat less than the 20 percent it purchased in 2004. The move could indicate a shift away from the traditional packaged games to those on mobile phones.
"At some point, Electronic Arts had to decide whether to liquidate the shares of Ubisoft or acquire the company," said Colin Sebastian, video game analyst at Lazard Capital Markets. "By doing this, they are embracing mobile games and making their focus less about packaged goods games. From that point of view, you might start to see Electronic Arts make more acquisitions in that sector."
Sebastian said times have changed since Electronic Arts bought the stake in Ubisoft six years ago. "Packaged games was a high-grossing industry back then. Ubisoft had a lot of popular games on consoles like PS2. Most of the growth today is from emerging platforms," he said.
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Data from the research firm Flurry Analytics showed that measured by revenue from portable game software, nothing grew faster than games on the iPhone OS. In 2009, games on the iPhone represented 19 percent of portable game software revenue, up 14 percent from five percent in 2008.
Research firm NPD Group reported that sales of video game software and hardware retail sales were at $1.1 billion, down six percent in June from the prior year when it was $1.17 billion.
Scott Steinberg, head of video game researching firm TechSavvy Global, said selling its stake in Ubisoft was a smart move for Electronic Arts as acquiring it completely would have made little sense.
"Electronic Arts, like many, is moving away from the boxed product model. Ubisoft is driven by that model. Electronic Arts has their own products in that wheelhouse. They don't need to add more, take on more overhead and potentially face some redundancies. It doesn't make sense to take on a piece of the business that they already have covered," Steinberg said.
Instead, like Sebastian, Steinberg sees more acquisitions from Electronic Arts in the emerging markets such as mobile games and also online web games such as the popular Facebook game, Farmville.
"I suspect they'll look for more nimble start-ups to rapidly expand into new markets like apps for smartphones or social networks," Steinberg said.
Electronic Arts' purchase of Ubisoft, which is known for the "Prince of Persia" and "Assassin's Creed" games, was controversial at the time. Ubisoft claimed it was an unwelcome development and that it would like to have remained independent.
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