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By Zaheer Kachwala
(Reuters) - Shares of Electronic Arts sank 17% on Thursday after the videogame maker cut its annual forecast, sparking fears over the future of its soccer franchise that has been a cornerstone of its gaming empire.
The company is set to lose over $6 billion from its market value of $37.3 billion, based on premarket share movement.
In-game spending on its soccer franchise slowed in the holiday quarter after two years of double-digit growth, EA said on Wednesday, blaming its latest "FC 2025" title that debuted in September.
EA's soccer franchise clinched one of the top selling games of 2023 with "FC 24", according to Circana data, after the end of a three-decade partnership with FIFA in 2022 that led to a rebranding of FIFA games to FC.
But a lack of new features and innovation in the soccer franchise, including in-game physics and goal-scoring mechanisms, according to some videogame players, have slowed the franchise's momentum.
Players were more vocal about issues with FC 25 this year, Jefferies analysts said. The criticism led to a sweeping update in January in the game, and "received overwhelmingly positive player feedback," the analysts said.
Spending on live services - which made up over 70% of EA's revenue in fiscal 2024 - has slowed. The services comprise "Ultimate Team", a mode where people can use in-game currency to purchase players for teams that compete in online matches.
EA now expects annual revenue between $7 billion and $7.15 billion, compared with its prior estimate of $7.50 billion to $7.80 billion. It projected a mid-single-digit decline in annual live-service bookings.
The move marked an about-turn for the company that had raised its annual bookings forecast just in October, banking on the strong performance of its American Football titles -- Madden NFL and College Football.
Weak spending on its "Dragon Age: The Veilguard" role-playing game, launched in October, also contributed to the forecast cut as players stick with proven titles in an uncertain economy.
EA trades at nearly 17 times its 12-month forward earnings estimates, compared with Take Two Interactive's 27.72.
"Ultimate Team has come to be viewed as a near Swiss clock of interactive media bookings growth. If it is stagnant, it puts enormous pressure on EA to fill the void," said MoffettNathanson analysts.
(Reporting by Zaheer Kachwala in Bengaluru; Editing by Shinjini Ganguli)