It was “game over” for video gaming stocks on Wednesday after two of the biggest industry names reported weak quarterly guidance in the face of intense competition from “free-to-play” games like “Fortnite.”
Both Electronic Arts and Take-Two Interactive — behind the high-profile “Battlefield” and “Red Dead” series, respectively — sank more than 13 percent after spooking Wall Street with underwhelming revenue forecasts.
EA Chief Executive Andrew Wilson explained in a call with analysts that the game-maker faces “significant challenges” during the quarter, and doesn’t expect them to let up anytime soon.
“The video game industry continues to grow through a year of intense competition and transformational change,” Wilson said.
The industry has been hammered by the emergence of so-called free-to-play games, like “Fortnite,” which make money with in-game purchases. “Fortnite” boasts more than 200 million players and raked in upward of $3 billion in profits last year, thanks to users purchasing new skins and outfits for their characters as well as for weapons and celebration dances.
By contrast, EA’s marquee release, a World War II shooter called “Battlefield V,” delivered disappointing sales numbers after hitting stores in November, missing its forecasts by more than a million when it moved just 7.2 million units.
“As our competitors continued to build momentum, whether that was ‘Fortnite’ or ‘Red Dead Redemption 2’ or ‘Call of Duty,’ we continued to stall from where we needed to be,” Wilson said.
EA slashed revenue projections for the year to about $4.7 billion, down from $5.2 billion. Analysts on average were expecting $4.9 billion.
Take-Two also sank more than 13 percent Wednesday on disappointing forecasts, despite having the top-selling video game of the year in “Red Dead Redemption 2,” which sold 23 million units since October.
Take-Two predicted revenue of $450 to $500 million, while the Street was looking for just over $600 million.
CEO Strauss Zelnick defended the company in an earnings call, saying, “We continue to have stellar results despite the fact that there are competitive titles in the market, including ‘Fortnite.’”
The tumult has sent shock waves through the video game universe, with Activision Blizzard down 10 percent ahead of its earnings report next week.
Shares of Nintendo also dipped 6.5 percent Wednesday, while PlayStation maker Sony was down 3.6 percent.
Mobile-game maker Zynga bucked the trend by beating on both profit and revenue, sending shares up as much as 7 percent in extended trading.
Take-Two finished the day down 14 percent, at $92.53, while EA closed down just over 13 percent, at $80.21.
This story originally appeared in the New York Post.
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