Electronic Arts Inc.
Q4 2017 Earnings Call Transcript

Published: 10 May 2017

[Operator:]

Good afternoon. My name is Doris and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Q4 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Thank you. I will now turn the call over to our host, Chris Evenden, VP of Investor Relations. Sir, please go ahead.

[Chris Evenden:]

Thank you, Doris. Welcome to EA's fourth quarter Fiscal 2017 earnings call. With me on the call today are Andrew Wilson, our CEO, and Blake Jorgensen, our CFO. Please note that our SEC filings and our earnings release are available at ir.ea.com. In addition, we have posted earnings slides and our financial model to accompany our prepared remarks. After the call, we will post our prepared remarks, an audio replay of this call and a transcript. Note that this quarter we have added new tabs to our financial model that list the GAAP results and the GAAP adjustments that can be used to compare them with our historical non-GAAP results. We have included tabs for fourth quarter and fiscal year results, and for the guidance quarter and fiscal year. With regards to our calendar, Q1 fiscal 2018 earnings call is scheduled for Thursday, July 27, 2017. This presentation and our comments include forward-looking statements regarding future events and the future financial performance of the company. Actual events and results may differ materially from our expectations. We refer you to our most recent Form 10-Q for a discussion of risks that could cause actual results to differ materially from those discussed today. Electronic Arts makes these statements as of today, May 9, 2017 and disclaims any duty to update them. During this call, the financial metrics, except for free cash flow, will be presented on a GAAP basis. All comparisons made during this call are against the same period in the prior year unless otherwise stated. Now, I'll turn the call over to Andrew.

[Andrew P. Wilson:]

Thanks, Chris. Our fourth quarter of FY 2017 was an excellent finish to a record-breaking year for Electronic Arts. Revenue, gross margin, earnings and cash flow were all above our guidance for the fiscal year, driven by strong and continuing player engagement across our portfolio of top-quality titles for console, mobile and PC. EA's games today are live services – amazing experiences that we update and evolve to deliver ongoing fun that keeps players engaged, connects them to their friends, brings them more content and grows our network. This strategy has been at the core of our digital transformation, and today our live services are some of the strongest and most vibrant in the industry. Battlefield 1 continued its outstanding start, with more than 19 million players joining the game through the end of FY 2017, a 50% increase over Battlefield 4 in the same period from launch. Our community of Battlefield fans is growing as new players join loyal franchise fans, driving engagement and player satisfaction levels to be among the highest in our portfolio. Our in-game Battlefield network now helps players move seamlessly from game to game in the franchise, finding their friends and connecting with the content to maximize the experience every time they play. FIFA 17 expanded the reach of the world's biggest sports gaming franchise, with more than 21 million players jumping in to the game through the end of FY 2017. Our creative teams, with the benefit of data and analytics from our network, delivered The Journey – our new story mode in FIFA 17 that has engaged more than 12 million players to date. With story mode having brought in many new players, we also saw more of our players go deeper. Our FIFA Ultimate Team player base grew 13% year-over-year through the end of Q4. Ultimate Team is also the gateway to our esports competitions for both Madden NFL and FIFA. Within the broader Ultimate Team communities, more than 10 million players participated in competitive matches in the first year of our tournaments, and our global spectator audience continues to grow. On mobile, Star Wars

[Blake J. Jorgensen:]

Thanks, Andrew. I'll start by reporting our results on a GAAP basis, then use our operational measure of net sales to discuss the dynamics of our business. At the beginning of fiscal 2017, at our Investor Day, we outlined to you the long-term trajectory of our business. We said we would invest in our player network, advance our live services, grow our digital revenue and deliver a more profitable and stable business than ever before. I'm delighted to say we're delivering on all of those commitments, and we are making the right investments to continue along this trajectory. Net revenue for the year was $4.8 billion, cost of revenue $1.3 billion, and operating income of $1.2 billion. Most importantly, these results enabled us to deliver record operating cash flow of almost $1.4 billion. We also returned over half a billion dollars to shareholders through our repurchase program in fiscal 2017. Total net sales for the year were $4.9 billion, a record. Digital net sales accounted for 61% of this, up 6 percentage points year on year. Extra content was a record $1.3 billion, with Ultimate Team contributing $832 million. Moving on to the details of our fourth quarter

[Andrew P. Wilson:]

Thanks, Blake. We are at a powerful point in EA's journey. The investments we've made in our IP, our technology platform, and our live service strategy uniquely position EA to lead in a networked world that spans more players, platforms, and geographies than ever before. At our core, we are a creative company. We are game makers that love to capture the imagination and make extraordinary entertainment possible for our players. We're also unique in that we have a unified, world-class technology platform and engine that provide the backbone of our network. Our studio teams are leveraging more sophisticated data and insights, secure and scalable infrastructure, and new game (23

[Chris Evenden:]

Operator, if we could open for questions now, please.

[Operator:]

Certainly. We'll pause for just a brief moment while we compile the Q&A roster. Our first question is from the line of Justin Post of Bank of America.

[Justin Post:]

Blake, in your guidance you talk about gross margins, looks like being up. Can you talk about the Star Wars impact there? And then maybe also how the other digital content is kind of helping the margins in the year. So kind of frame those two inputs this year into the gross margin outlook. Thank you.

[Blake J. Jorgensen:]

Yeah. Sure, Justin. Before I do that I wanted to make just a quick announcement about our IR team. Carolyn, who almost all of you, I think, have met or know, has been with us for three years and is moving to our corporate FP&A team, which is a great move for her, and we thank Carolyn for an amazing three years of support to all of the investors and sell-side analysts. We have a new person joining the team, Erin. You'll get a chance to meet her in the coming months and we look forward to having her on our team. But thanks to Carolyn. So to your question, Justin, first, if you look back to the difference between the year before the first Star Wars, fiscal 2015 and then fiscal 2016, you saw a fairly muted growth in gross margin, up about 50 basis points roughly. We expect a similar effect this year because of the impact of the royalty on a very large title as we saw last time. And the comparison was, remember this year a pretty tough comp because our gross margin was actually higher than we had originally anticipated because we sold more Battlefield than we anticipated and less Titanfall than we anticipated. Titanfall obviously has a royalty to Respawn and we expected that, but we got a little bit more bump in gross margin We will see gross improvement as we continue to grow the live service part of our business, Ultimate Team and other similar live services on top of existing games. But for now we're only expecting a little less than 100 basis points or around 50 basis points because of that, primarily of that impact on Star Wars Battlefront II.

[Chris Evenden:]

Next question, operator.

[Operator:]

Our next question is from the line of Brian Nowak with Morgan Stanley.

[Brian Nowak:]

Thanks for taking my questions. I have two. The first one, Blake, can you just talk a little bit about your view on esports and kind of your esports strategy? There's some people regarding going – and how do you think about monetizing esports the next couple of years? And then secondly, can you just talk a little bit about your expectations and guidance for FIFA Ultimate Team off of the pretty tough comps and the great performance from last year? Thanks.

[Blake J. Jorgensen:]

Sure. I'll let Andrew address the broader esports strategy. I think the thing to remember is it's built around Ultimate Team for our core sports games and we'll most likely build it around in a similar style live service for non-sports games in the future. But I'll let Andrew talk little bit about that. I'll come back on the Ultimate Team question.

[Andrew P. Wilson:]

Yeah. We're very excited about our esports strategy and what we're doing, and what we saw this year in both FIFA and Madden were significantly higher engagement and monetization inside of Ultimate Team for those competing in esports tournaments. And again, this isn't just about the big championship tournaments. We run a whole series of events at a grassroots level all the way up to the elite level of tournaments. And so we think about this in a similar way that we think about all sports, which is we want to make stars of all of our players, the novice player as well as the professional player. And while there will almost certainly be solid revenue generation from broadcast rights, from sponsorship, from advertising, from players and teams and the monetization of those things, the lion share of the revenue will always be the digital transactions that exist in the ecosystem. We see that in leading esports tournaments and leading esports games already. And what we have seen in FIFA Ultimate Team and Madden Ultimate Team over the past 12 months confirms what our original strategy was, which was we will drive those other things. We will benefit from those other things. The lion share of return will come from the ongoing engagement and live service component that is things like Ultimate Team. And you should expect as we launch other esports games that they will also revolve around a very robust and rich digital ecosystem similar to Ultimate Team.

[Blake J. Jorgensen:]

And in terms of guidance relative to Ultimate Team, the thing to remember that was – two major drivers in FIFA this year were, first, the addition of a story mode in the game. The Journey brought new people into the game and brought those people from the game into Ultimate Team. So it grew the overall base of people playing in Ultimate Team. The second is the addition of the competitive gaming mode inside of FIFA which, as Andrew mentioned, drove massive engagement around tournaments and around practicing for tournaments. Both of those styles of change we're going to try to adapt into Madden in one way or another, and you'll see more of that coming in the coming months. But you can assume we've learned a lot of great lessons from FIFA. We'll try to drive Madden Ultimate Team and Madden Competitive Gaming off of similar modes. But FIFA doesn't sit still. It continues to find new ways to engage people in new modes and new excitement, and as Andrew said, we'll be evolving The Journey in FIFA, which will continue to bring new people into the game, we believe. That's the core. Now our guidance doesn't anticipate anywhere near the level of growth that we actually achieved this year. We tend to do that each year with FIFA because while it's very predictable based around events, we've continued to surprise ourselves on the upside. So you should trust that it's a rational number in terms of our guidance, but there is growth in there.

[Chris Evenden:]

Next question?

[Operator:]

Our next question is from the line of Stephen Ju with Credit Suisse. Stephen Ju - Credit Suisse Securities (USA) LLC So, Andrew, I think the decision to add The Journey to FIFA was based on user feedback, and that seems to be yielding dividends. So what kind of user feedback have you gathered from the first iteration of Battlefront that you will be looking to add to Battlefront II. And, Blake, will you give us a sense of what percent of your mobile bookings are growing with the new games? And what percent of your bookings are from the legacy games that are now in decline? So wondering when we'll mathematically see a change in the growth trajectory as the mix changes. Thanks

[Andrew P. Wilson:]

Yeah. So, thank you. As you know, Battlefront I was a great game, and widely regarded as the best way to fulfill your Star Wars fantasies. Frostbite really brought the Star Wars universe to life, but there were some things that a number of players asked for. A single player campaign was probably the number one thing that players asked for, and you heard that we'll be doing that. And I'm very excited by what we're seeing there. The Motive Studios who is a collection of developers who have a tremendous track record in building action-adventure and single player campaigns is putting that together. They wanted things like space battles and more vehicles and more heroes and more eras and more planets, and what you heard from us is that it will have all of those things. We took the feedback very, very seriously. We've invested in a very meaningful way, and when we say we believe the game is three times the size in terms of content, we're very serious about that. And our expectation is that the large, engaged passionate fan base of Star Wars fans around the world are going to love everything that we're doing.

[Blake J. Jorgensen:]

In terms of mobile, our net sales for the year were up 10% year-on-year. We're not happy with that. We think we can continue to grow that more, but I remind people that we didn't bring out NBA mobile and FIFA mobile until the back half of the year in October, essentially, and we've continued to learn and tune those games around the world. So we should continue to see more growth out of those. We've had some amazing performers like the Simpsons

[Chris Evenden:]

Next question.

[Operator:]

Our next question is from the line of Tim O'shea with Jefferies.

[Timothy Larkin O'shea:]

Yes. Hi. Thank you for taking my questions. Just a few more on Star Wars Battlefront II. So the first installment sold around 13 million units in its launch window. Obviously, a very number. Is this the right framework to use as we think about how to model Battlefront II? And then, there's been a bit of confusion on how you intend to support the game post-launch and I just was hoping you might clarify what we should expect in terms of season pass or DLC. And then, just broadly speaking at a higher level, how is the anticipation for that game shaping up? What's the feedback you're seeing around the announcement of the single-player campaign and the trailer? Thank you.

[Andrew P. Wilson:]

So again, in terms of, we'll start from the back. The fan anticipation has been very, very strong; 16 million organic views. That's not us paying the viewers. That is fans seeking out the content. I would say the feedback has been almost entirely positive. The inclusion of a single-player campaign, the inclusion of a new heroine in Iden, space battles, new content, new heroes, new world, new planets. I think the feedback of that is very, very strong. As we think about the live services, nothing – I'm not talking in great deal about it now other than, the game is going to be three times the size of the original game at launch and we also have a very, very robust live services plan that we're going to talk about in the coming weeks and months, particularly around EA PLAY and E3 in just a few weeks' time.

[Blake J. Jorgensen:]

Yes. And I think on the unit forecast, we sold 14 million units of Battlefront I in the year it was shipped and built into our guidance as essentially the same number. Our aspirations are clearly to sell more. We think this will appeal to not just the broad Star Wars fan base, but also to the deep, heavily-engaged Battlefield fan base and Battlefront fan base. And we see that as a critical part of the success of this game going forward and as Andrew mentioned, we've got the depth and the breadth in the games that will help that.

[Chris Evenden:]

Next question?

[Operator:]

Our next question's from the line of Eric Sheridan with UBS.

[Eric J. Sheridan:]

Thanks for taking the question. Maybe two on mobile. I wanted to know if we could tease-out a little bit about where you saw strength in mobile versus some of the legacy titles that might have been a drag on mobile just so we can tease-out some of the headwinds and tailwinds in the Mobile business. And then second, any sense of marketing and how it's being impacted in terms of trying to drive mobile engagement? Is there any change there, or you're actually leaning in against some of the key titles on the mobile engagement front? Thanks, guys.

[Blake J. Jorgensen:]

Yes. Thanks, Eric. The core product portfolio that's been there for four or five years like the Simpsons I mentioned, have actually shrunk. Games like Sims FreePlay have stayed fairly consistent but not grown dramatically. And then things like FIFA, NBA, and particularly Galaxy of Heroes have grown dramatically. And so, I think what you'll see as we layer in games like the new Sims game and the sports games continue to grow, you'll continue to see that hopefully offset any of the shrinkage in the older portfolio. Those numbers for the older portfolio are starting to get fairly small and stable, and so I don't think you'll see a lot of headwind from that. In terms of marketing. We're continuing a very ROI-driven marketing approach that's got a lot of discipline around it. We have a whole team led by our Chief Marketing Officer that focuses not just on our console and PC marketing, but very much on the mobile marketing. And they're driving decisions almost daily as to how to support the products. That's the beauty of the business is, when something's working well you can tune up the daily marketing. When it's not, you can tune it down. I would say, though, that we remain very focused on leveraging known IP that we own or license to try to offset some of the costs of marketing and has allowed us to run our mobile business at a level of profitability we believe higher than most, as well as, driven by the fact we're spending less on ROI-driven marketing.

[Chris Evenden:]

Next question?

[Operator:]

Our next question is from the line of Drew Crum with Stifel.

[Drew Crum:]

Okay. Thanks. Good afternoon, everyone. So I wonder if you guys could comment on your experience with Battlefield 1 DLC. What the conversion rate was in the March quarter and what your expectations are for fiscal 2018? I believe you guys had four maps launching this fiscal period. And then second question is more a clarification. Your commentary on full-game downloads being 9% last year, but moving back to 5%, is that a number for the company or something you expect the industry to trend at? And if it's not for you, where would you expect it to be given the Star Wars versus Battlefield dynamic? Thanks.

[Blake J. Jorgensen:]

Yeah. So thanks, Drew. The first question on Battlefield 1. We're not going to disclose attach rates because they're becoming less and less meaningful, particularly in a world of live services. And you'll see some changes to our approach, particularly with Battlefield and Battlefront over time that makes those DLC less important because it's ongoing content that's being delivered. I will say, you'll also see a lot of content delivered to the broad community for Battlefield, not just for the DLC owners going forward, which I think will continue to make those numbers a little less meaningful. We're very pleased with the engagement levels on Battlefield, as well as the ongoing sales of Battlefield 1, and we think that will continue on. And I guess what I would say is, based on having seen some of the DLCs, I would never refer to them as a map. We've got a lot of exciting stuff coming and a lot of interesting things about World War I that have yet to be even seen. In terms of full-game downloads. The number surprised us because we had thought that it'd be around the 5% year-over-year growth. Some of that may simply be the consumer is shifting faster than we know or we expected. The trends can sometimes jump in dramatic ways and maybe we're starting to see that overall shift. And some of it could be product-related. We do think the industry will end calendar year 2017 probably above 40%. We will most likely lag that as we have historically because FIFA is such a large product and it is so global that we are operating in markets where either the ability to purchase digitally, or the ability to download based on bandwidth speeds, are compromised and thus we tend to skew a little lower on FIFA than we do on the rest of our portfolio. So we've always lagged the industry slightly, but we are excited about the potential that you're seeing the consumer possibly shift quicker to digital than we'd originally anticipated.

[Chris Evenden:]

Next question?

[Operator:]

Our next question's from the line of Andrew Uerkwitz with Oppenheimer & Company.

[Andrew Uerkwitz:]

Yeah. Hey. Thanks for taking my question. I've just got two quick ones. Around Battlefield 1, it seems like the excitement around the game is a little bit better than you expected. Has that changed your view on the intensity or the strategy around extra content for this fiscal year? And then, could we see more in the following fiscal year to support Battlefield 1?

[Blake J. Jorgensen:]

I would say it hasn't really changed our overall approach for this fiscal year. You may see some things you didn't actually anticipate as it evolves, but the general strategy is still based around quarterly or monthly DLCs that we put out. I do think you'll start to see that evolve next year as we get into more competitive gaming and it will clearly evolve, as Andrew mentioned, around Battlefront II property that we start to evolve the services associated with DLC to make them more live service, event-driven style gameplay versus purely an additional piece of content.

[Andrew Uerkwitz:]

On that particular comment, if I may, are you kind of leaning towards kind of (44

[Blake J. Jorgensen:]

You cut out.

[Andrew P. Wilson:]

Doris, why don't go onto the next question? We'll come back to Andrew.

[Operator:]

Our next question is from the line of Doug Creutz with Cowen & Co.

[Doug Creutz:]

Yes. Thanks. I think your revenue-deferred adjusted gross margin this quarter was a bit over 81%, which is I think more than 400 basis points higher than your previous high in any quarter you've reported. Obviously, you had a big digital mix this quarter. But there's been other quarters in the last couple of years where you've had similar digital mix, and the gross margins have been in the mid-70%. So wondered if you could talk about – was there anything special in this quarter that drove the gross margin so high? Mix of business, or anything like that? Thanks.

[Blake J. Jorgensen:]

Yes. I think primarily the biggest driver I would say is the mix, lower royalty-bearing titles this year versus last year – Battlefield catalog, for example, versus Battlefront catalog last year. There was also – the one thing to remember is our technology team, led by Ken Moss, has done an amazing job making our back office ability to deliver digital much more efficient. We don't talk about it a lot, but it's become a continued help in our gross margin as we expand. And we'll continue to drive that. That's lower cost storage, lower cost delivery, more efficient network and platform that we've built it on. It's all pretty powerful, and that continues to help us as well. And then obviously continued digital, as we said, is also a major driver in the business which has helped us in the quarter.

[Andrew P. Wilson:]

Doris, next question, please?

[Operator:]

Our next question is from the line of San Phan with Mizuho.

[San Q. Phan:]

Hi. It's San. Two questions on my end. How far along are you in building and staffing out Motive Studio in Canada? And how should we think about that impact to the trajectory in R&D expenses over the next two years? And then secondly, can we just get your current thoughts on what areas are most interesting to you in the industry in regards to potential M&A?

[Blake J. Jorgensen:]

So I'm sorry, San. I didn't catch the first part of your first question. Can you repeat the question?

[San Q. Phan:]

Oh. Sure. It's just how far along are you in building out and staffing out the Motive Studio in Canada? And basically, what's the impact to the trajectory in R&D?

[Blake J. Jorgensen:]

Yeah. It's a good question. Thanks. We're well along the way. We've hired close to 100 people for that studio – some of the most fabulous talent I've met in many, many years. It's very exciting for us to assemble a brand new team. We're finalizing our new office space there, which will have both Motive people as well as the BioWare Montréal team in that same office. We still have some hiring to go, but I think for now it'll be at a more gradual pace over the next couple of years as we move probably from, say, 100 to 150 or so as we go forward, so. But it's been exciting to be able to build such a great new team. And in terms of the second piece on M&A, I think there are few large companies out there, and most of the companies are small. Many of the companies we've looked at we've passed on because the valuations have been so high, but we're continuing to keep our eyes and ears open, particularly for things that could add to either games that don't have live services and we can layer live services into them or games that could leverage our network and our scale that we don't have. And those will be big themes for us, but unfortunately, it's not a long list of companies that are out there of scale that we can go after.

[Chris Evenden:]

Next question?

[Operator:]

Our next question is the line of Mike Olson with Piper Jaffray.

[Michael Olson:]

Hey. Good afternoon. Couple quick ones here. Despite moving out an entire title, guidance is quite solid on a tough comp, and then your digital guidance is up nicely, even with Star Wars, which last time was a bit of a drag on digital. So would you say that the biggest component of the favorable overall guide and digital guide is mostly the result of strength of Battlefield 1 live services? Or would you attribute it to something else?

[Blake J. Jorgensen:]

I would probably attribute it to live services in general, so not just Battlefield, but the overall portfolio, both mobile and non-mobile where we're trying to layer more live services and are seeing success. We're seeing obviously – we have expectations for growth across the sports portfolio, both in HD and in mobile. We do have a new UFC game, I think as everyone knows, next spring and we have the Need for Speed game coming in. So all of those add to the growth in the year, despite the fact that we have a tough comp to try to beat between Battlefield, Titanfall and the strength of FIFA this past year. So we see it as kind of growth across the whole portfolio versus dominated by one product or one new product. And we do have the new Sims game that Andrew mentioned that's coming out during the year on mobile. We don't know exactly what time of year that will come out, so we don't have a giant expectation in the guidance, but that's clearly in there as well.

[Operator:]

Our next question's from the line of Mike Hickey with Benchmark.

[Mike Hickey:]

Hey, guys. Thanks for taking my questions. Just two for me as well. Curious if you could give us a deeper perspective, I guess on what's happening within BioWare. Mass Effect I think from a quality perspective didn't exactly hit the mark and it looks like we've now delayed the anticipated new IP which sometimes is also tied to quality. So curious if there's any change in leadership or developer turnover. What sort of cap internally within BioWare? And then second question's PopCap. It looks like you have some layoffs in that studio. Obviously, that studio has good IP, used to, as well as [talent]. I'm sort of curious how you see the future of PopCap. And also with tinkering with head count on the overall firm or any trends there we should think about through fiscal 2018. Thanks, guys.

[Andrew P. Wilson:]

So let me just make sure that was only two questions and not three or four. The first one is what's going on with BioWare; and should we read anything in from Mass Effect to the new title? So that's that collection of questions. And the question was what's going on at PopCap and should we read anything in there? Was there a third question about head count overall? Or was that just head count related to PopCap?

[Chris Evenden:]

We lost Mike now.

[Andrew P. Wilson:]

Mike?

[Andrew P. Wilson:]

Okay. Well, I'll answer...

[Chris Evenden:]

Only the first two.

[Andrew P. Wilson:]

And we'll go from there. The first thing is, is Mass Effect is an interesting title. It was in development for a really long time and represented a lot of the great things that BioWare is known for

[Chris Evenden:]

Next question?

[Operator:]

Our last question is from the line of Evan Wingren with Pacific Crest Securities.

[Evan Wingren:]

Thanks. So what are your expectations for this next edition of Madden as it moves to Frostbite? And are there any potential synergies that you guys are thinking about for moving the game to that engine?

[Blake J. Jorgensen:]

What Frostbite allows us to do, as you can see what it allowed on FIFA is to have a much deeper experience, much better graphics, doing things inside the game that you couldn't do on a sports engine. So if you were to look at FIFA and say, how did FIFA change year-over-year, you'll probably see similar aspects of that in Madden. And we're pretty excited about it. It looks fantastic so far.

[Evan Wingren:]

Okay. And then, Andrew, in your remarks you called out AI and I'm just wondering how are you utilizing it now. And I use that term broadly. And how do you see it evolving over the next couple of years?

[Andrew P. Wilson:]

We see kind of on three core vectors. Again, we make artificial humans inside of video games and have been doing that for many decades, and the sophistication of those human beings inside of our games continues to grow. And so we have a lot of energy about how do we improve the AI of our characters inside games so that their performance is far more believable and far more human. A second vector is just how we think about pathing and difficulty inside of our games, so with the growing population of players across devices, the notion that one size fits all with respect to experience is no longer relevant. And so we have a lot of work going into how we think about a dynamic experience, a dynamic and personalized experience for every single player in our network, even as they play the same games with their friends on similar devices. And it's really about how do we change difficulty level, how do we change pathing, how do we provide the tools and feedback that those players need so that they can get the single best experience and ultimately engage with the game longer. And then the third vector, of course, is just how we think about recommendations and presentation of content and merchandising of content and marketing of the content that we produce to a global player base. We have deep investment going on in all three vectors. We think we're leading in a number of categories. A lot of that will start to manifest itself inside of our EA Player Network. You're already seeing some of that in Ultimate Team, in our Sims games, in our Battlefield network that moves you amongst experiences. And we believe that in the not-too-distant future that's going to be a meaningful vector of growth for our business.

[Chris Evenden:]

So one last question.

[Operator:]

Our last question is from the line of Ray Stochel with Consumer Edge Research.

[Raymond L. Stochel:]

Great. Thanks for taking the question. How are you guys thinking now about the Nintendo Switch post launch? And is this in your new Gen console installed base forecast? Thanks.

[Andrew P. Wilson:]

So we feel really good about it. Again, we came out early and said that we'll be supporting the Nintendo Switch with our biggest title in FIFA. We have a tremendous relationship with Nintendo and have done for many, many years and are excited by the fact that they have come out very strong and are bringing in a whole new player base into the ecosystem. We continue to be bullish on it and are looking at other titles that we might bring to the Switch. Our console number that we quoted does not include the Switch at this point, so anything that Nintendo does is additive to that number.

[Chris Evenden:]

Great. Thank you, everyone. We'll see you in the coming months, and talk to you next quarter. Appreciate the interest. Thank you.

[Operator:]

Ladies and gentlemen, this does conclude today's conference call. You may now disconnect.