Good afternoon. My name is Erica, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Q3 2018 Earnings Call. Thank you. Mr.
Chris Evenden, VP of Investor Relations, you may begin your conference.
Thank you, Erica. Welcome to EA's Q3 fiscal 2018 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 to accompany our prepared remarks.
Lastly, after the call, we will post our prepared remarks, an audio replay of this call, our financial model and a transcript. With regard to our calendar, our Q4 fiscal 2018 earnings call is currently scheduled for Tuesday, May 8, 2018. 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, January 30, 2018, and disclaims any duty to update them. During this call, the financial metrics with the exception of free cash flow will be presented on a GAAP basis. All comparisons made in the course of this call are against the same period in the prior year unless otherwise stated. On the subject of accounting standards, effective fiscal 2019, we will adopt the new ASC 606 revenue recognition standard for GAAP net revenue. We will continue to provide the GAAP measures that enable investors to derive the management reporting metrics.
We do not expect material impact to net bookings. For more details, please see the brief qualitative overview of the impact of ASC 606 we have posted on our IR website. For additional information also please see our 10 Q for the period ended December 31, 2017. Now I'll turn the call over to Andrew.
Thanks, Chris. Q3 was a quarter defined by strong performances and important learnings for us in Electronic Arts. We love making games. It's a privilege to bring fun and entertainment to people all around the world. As we look across our games and services this quarter, we have a lot to be proud of.
We brought 100 of millions of hours of play to fans during the holiday quarter across console, mobile and PC. We also appreciate that our players have high expectations of us and the games we make, and that passion drives us. As we push the boundaries with every new experience, we are continually listening, learning and taking action to serve our planets. Now let me touch on Star Wars Battlefront 2. This was definitely a learning opportunity.
You remember that we brought 3 of our top studios together on this project, and the result was a massive game with a new Star Wars story, space battles and huge multiplayer variety. We wanted a game that would meet the needs of the vast and passionate Star Wars fan base, so we designed it with the intent of keeping the community together and a commitment to continually add content long after launch. Given the newness of this design, we knew that player feedback during the prelaunch testing period would be key. Having made adjustments based on sentiment and community data coming out of the beta and early trials, we ultimately made the decision to pull in game purchases out of the game prior to launch. We never intended to build an experience that could be seen as unfair or lacking clear progression, so we removed a feature that was taking away from what fans were telling us was otherwise a great game.
We are fortunate to have such passionate players that will tell us when we get it right and when we don't. We're now working hard on more updates that will meet the needs of our players, and we hope to bring these to Battlefront II in the coming months ahead. Having made these changes before launch, Star Wars Battlefront II has been delivering fun to millions of players around the world through the holiday season and beyond. With the breadth and depth of the game, fans spent twice as much time playing Battlefront II over the previous game during the launch quarter. The unique story of Aiden Versio at the center of the game has drawn nearly 7% of players into the single player campaign.
Engagement has been strong in the 1st season of free post launch content from The Last Jedi, and we're excited to bring new seasons to fans in FY 'nineteen. As we grow this game with more content, we believe that Star Wars fans will continue to have fantastic experiences over the long life of Battlefront II. Going forward, we believe that live services that include optional digital monetization, when done right, provide a very important element of choice that can extend and enhance the experience in our games. We're committed to continually working with our players to deliver the right experience in each of our games and live services. Across the company, our fantastic creative teams are constantly pioneering new experiences that expand our reach and add to the unmatched depth and breadth of our portfolio of games.
There were many great examples of this throughout Q3, and I'll touch on a few of them here. FIFA continues to thrive as one of the world's leading entertainment properties. On console alone, our FIFA franchise had nearly 42,000,000 players during the calendar year, and our FIFA 18 unique player base grew 10% year over year from launch through Q3. FIFA Mobile added another 26,000,000 players in the quarter to its total player base, more than any other quarter in the last 12 months and millions more joined our Fit for Experiences in Korea and China this year. Ultimate Team is more popular than ever across our EA SPORTS titles.
And in FIFA Ultimate Team, we had 12% more players year over year from launch through Q3. In other areas of our portfolio, Battlefield 1 now has more than 25,000,000 unique players live to date, putting it on a similar growth trajectory as Battlefield 4's massive community. The Sims 4 had another extraordinary quarter as we launched our highest performing expansion pack to date and brought the game to consoles for the first time. Both of these contributed to player base growth in our Sims 4 community of more than 35% year over year in Q3. Need for Speed Payback also brought new experiences to long time fans this quarter.
On mobile, we're bringing more players into our network from across the world through the unique breadth and depth of our IP. From deeply engaged fans in Star Wars: Guides of Heroes to large long term communities in our EA Sports titles, The Sims FreePlay and more, our mobile games are reaching a wide and diverse audience and delivering years of high value entertainment. Competitive gaming continues to be a major growth opportunity for us. We are bringing some of the biggest sports franchises in the world to the esports stage. And with new league partners, sponsors and broadcasters, our Madden NFL and FIFA competitions are reaching new milestones.
The Madden Challenge special on the CW Network was the number one esports television broadcast in the U. S. For 2017. And our Madden Challenge live finals in December drove our largest digital viewership to date for a Madden tournament. On the FIFA side, we just kicked off the road to the eWorld Cup with the FAK Champions Cup in Barcelona last weekend.
Digital viewership was massive with more than 17,000,000 total views. That's half of last season's total views in just our 1st tournament of the year. We're also partnering with leagues like the MLS, Bundesliga and more to bring competitive FIFA deep into their fan bases, expanding our global opportunity. Next, we're bringing competition to Battlefield with online qualifiers set to begin in Q1 FY 'nineteen. Across FIFA, Madden and Battlefield, this is going to be our biggest competitive season yet for players and spectators.
Looking to the quarter ahead, we're set deliver a mix of amazing new games that will add to the breadth of our portfolio. 1st, later this week, we will launch UFC 3. We have a great partnership with the UFC and have worked hard over a 2 year development cycle to bring innovation across the entire game. With major UFC events coming in the months ahead, we're delivering UFC 3 at a very exciting time for the sport and its fans. During the Q4, we will also launch the first two games for our EA Originals program, Fae and Away Out.
As you remember, we started EA Originals with a commitment to help independent developers bring unique and memorable games to the world. We can't wait to see fans come out and support these deeply talented creators and the ideas they have brought to life in these games. Also in Q4, The Sims Mobile will launch worldwide on iOS and Android. This game is a major leap forward for the franchise, combining unique Sims magic with new dimensions of social play. Sims players are some of our most diverse and committed fans.
And with games like The Sims 4 and The Sims FreePlay, we've shown how we build and deliver for these communities over many years. In FY 2019, we will push the boundaries even further for our players with new experiences and constant innovation. It's a World Cup year, and with the largest sporting event on the planet set to reach billions of soccer fans, our EA SPORTS development teams are packing excitement into our next FIFA. Madden NFL, NHL and NBA Live will all bring new dimensions of gameplay, self expression and social connection. The Battlefield universe will grow this year with our next Battlefield title, captivating longtime fans and new players alike adding to our Battlefield service where players can move seamlessly with their friends.
Our new IP Anthem is a stunning project from BioWare that will blend genres with a shared world experience that evolves around its players. Excitement for Anthem is building, and we're deeply invested in delivering a great new experience with this game when it launches in Q4 FY twenty nineteen. In addition, we plan to launch 2 new mobile games built around fan favorite IP. We'll grow in esports with competitions and broadcast content reaching more players and viewers, and will continue to deliver for players through our live services, including Star Wars Battlefront II with more great content for the games they love. This collection of amazing games and content across more platforms wrapped in live services is at the core of the network we are building for our players, With competition and subscription offerings that we will expand in new and innovative ways, we are reaching new audiences.
Our amazing creative teams, including the addition of the talented group at Respawn Entertainment, our Frostbite engine, our central technology platform and our Labs groups are putting us in position to be disruptive and deliver the unexpected. We're excited to bring many more great experiences to our global network in this quarter and beyond. Now I'll hand the call over to Blake.
Thanks, Andrew. Electronic Arts delivered earnings above our guidance, absent a one time impact from tax reform. Sales of Star Wars Battlefront II underperformed our expectations, but event driven live services significantly exceeded them. This speaks to the stability of a business as diverse as ours with its broad portfolio of titles and mix of business models. I'll report our results on a GAAP basis then use our operational measures of net bookings to discuss the dynamics of our business.
To compare this quarter's results to historically reported non GAAP measures, please refer to the relevant tabs in our downloadable financial model. EA's net revenue was $1,160,000,000 compared to 1,149,000,000 dollars a year ago. Operating expenses were $680,000,000 compared to $637,000,000 a year ago with the year over year increase primarily due to continued investments in existing and new genres and in live services. GAAP operating loss was $21,000,000 compared to an operating loss of $4,000,000 a year ago and together with the charge from tax reform resulted in a loss per share of $0.60 compared with 0 point 0 approximately $0.57 was due to the tax charge. Note that given our GAAP results was a loss, our share count was 308,000,000 shares.
Had we reported a profit, the diluted share count would have been 311,000,000 shares. Operating cash flow for the quarter was $849,000,000 down $288,000,000 from last year. The decrease was driven by the timing of collections and by lower net bookings. Capital expenditures for the quarter were $24,000,000 resulting in a free cash flow of $825,000,000 Operating cash flow for the trailing 12 months was $1,514,000,000 We remain on track to deliver operating cash flow of $1,600,000,000 for the fiscal year, which would be a new record. See our earnings slides for further cash flow information.
During the quarter, we repurchased 1,400,000 shares at a cost of $150,000,000 leaving $778,000,000 in our 2 year 1 point $2,000,000,000 buyback program we began in May. We also paid $151,000,000 in cash to acquire Respawn Entertainment. Our cash and short term investments at the end of the quarter were $4,900,000,000 with 36% of this balance held onshore. Now I'd like to turn to the key drivers of our business in the quarter. Net bookings for the quarter were $1,971,000,000 down $99,000,000 on the prior year, which benefited from a strong Battlefield 1 launch.
Net bookings for the quarter were $29,000,000 below our guidance, driven by lower than expected sales of Star Wars Battlefront II. For Q3, we had expected to sell about 8,000,000 units, but we fell short of that by less than 1,000,000 units. However, this shortfall was significantly offset by excellent performance from our live services. The impact of FX was immaterial on the quarter. Digital net bookings were 1 point percent on a year ago period and a new record for the Q3.
The main driver of this increase was live services offset by lower sales of Star Wars Battlefront II compared to Battlefield I. Digital net bookings now represent 67% of our business on a trailing 12 month basis compared to 60% in the prior year. Looking at each of the components of this quarter's digital net bookings in turn, Live services net bookings were 39% year on year to $787,000,000 The increase was driven by Ultimate Team and The Sims 4. This was a record for the Q3. Mobile delivered net bookings of 183,000,000 dollars up 5% year on year, also a record for the Q3.
Year on year growth was driven by FIFA Mobile. Full game PC and console downloads generated net bookings of $260,000,000 27% lower than last year, driven by Star Wars Battlefront II compared to Battlefield I last year. This was partially offset by the underlying growth in digital downloads. Star Wars Battlefront II units on console were 28% digital, up 12 percentage points over Battlefront I 2 years ago. Across the portfolio, 37% of our full game unit sales were digital, measured on Xbox and PlayStation 4 over the last 12 months.
This compares to 32% a year ago. Before turning to guidance, a brief note on tax reform. The enactment of the Tax Cuts and Jobs Act in December 2017 resulted in a charge of $176,000,000 in the 3rd quarter. The charge is preliminary and includes a tax on accumulated overseas profits and the revaluation of deferred tax assets and liabilities. Also, while we are not changing our management reporting tax rate for fiscal 2018, we're still analyzing whether the new legislation will reduce this rate for fiscal 2019.
In addition, because the new tax legislation and tax treatment for cash earned outside the United States, it provides an opportunity for us to repatriate most of our foreign earnings. During the coming months, we'll reevaluate our capital return and investment strategy, including our stock repurchase program and whether we should consider a dividend. We would like to expect we would expect to announce any changes on our next earnings call. On to guidance, we are raising our full year GAAP revenue guidance from $5,075,000,000 to 5 point $1,000,000,000 on the strength of our live services. Our guidance for full year EPS becomes $3.25 Excluding the impact of $0.48 from tax reform, this represents a $0.10 increase on our previous guidance.
We are reaffirming our operating cash flow guidance of $1,600,000,000 We continue to anticipate capital expenditures of around 100 and $20,000,000 which would deliver free cash flow of about $1,480,000,000 We are reaffirming our guidance for net bookings at 5 $150,000,000 but owing to the strength of our live services, we expect this to skew more digital than originally anticipated increasing our profitability. For the Q4, we expect net revenue of $1,530,000,000 cost of revenue to be $234,000,000 and operating expenses of $619,000,000 Q4 OpEx is up slightly from our previous expectations driven by phasing of investments from Q3 and stock based compensation expenses related to the Respawn acquisition. It is up year on year primarily due to continued in existing and new genres and in live services. This results in an earnings per share of 1.86 dollars for the Q4 using the diluted share count of 311,000,000 shares. We anticipate net bookings for the quarter to be 1 point $225,000,000,000 This is a raise on our previous expectations and up 12% year on year driven by strength in live services.
We continue to be excited about our opportunities for the future. Though the Q4 and fiscal through the Q4 of fiscal 2019, we'll be launching games across 5 different genres: sports, action, shooter, real time strategy and sim. We will launch them across 3 platforms: PC, console and mobile, and we'll reach players in all corners of the world. We expect full game downloads to continue to grow and we see growth in subscriptions, extra content and in our mobile business. We expect eSports will continue to drive growth in Ultimate Team as well as Battlefield and other titles.
This will also grow our broadcast sponsorship and advertising deals associated with our esports activities. This revenue or this diversity in portfolio platforms, geographies and business models is the foundation of a robust business that enables us to deliver dependable cash flow. Now I'll turn the call back to Andrew.
Thanks, Blake. Across the world, more people are playing more games in more geographies through more devices and more ways to connect. It's a vast and growing audience in the billions with increasingly diverse interests and high expectations. Reaching players with the fun and meaningful experience they seek requires the best games and content available across multiple platforms. It requires more ways to engage with that content, including competition.
And it requires a strong connection to the community, the openness and dialogue that make this industry so unique and powerful in the entertainment world. Today, EA has one of the most wide reaching portfolios of top games and franchises in the industry. Through FY 2019 and beyond, we are planning stunning new additions that will continue to grow the depth, breadth and quality of experiences we bring to fans around the world. Our DICE studio will deliver the next Battlefield with innovation at every level, incredible stories at the core, astonishing visuals and gameplay that will captivate every Battlefield fan. Building on one of the strongest years ever for EA SPORTS, we're setting our sights to excite even more players and deliver even more advanced experiences with our next slate of games.
Anthem will bring a rich and dramatic new world to players built from the ground up by BioWare as a new IP that we believe will reach a wide audience and foster our long term community. We'll take major leaps in our mobile portfolio with 2 new titles set for this year and more to follow as we continue to focus on high quality, long lasting games. And there is so much more to come in the years ahead with new projects in development at Motive, Respawn and our other studios as well as all games from the indie developers in our EA Originals program. We're also creating more ways to connect with our franchises, including competitive gaming that reaches tens of millions of players and spectators. With FIFA and Madden, we've broken new ground, bringing global competition to some of the most passionate fan bases in all of sports.
Now with league partnerships, broadcast partners and sponsors on board, we're driving even larger audiences with thrilling high stakes competition. Competitive Battlefield will open up a brand new dimension of our esports programs beginning next fiscal year, and by the end of FY 2019, we will launch competition in a 4th title as well. Esports is also fueling opportunities for us in growth regions of the world, driving excitement with our players across China, Korea, the Middle East and more. In all of this, we are leading in service of our players and strengthening the connections at the heart of our global network. We are constantly listening, learning and working to make every player experience better.
With our subscription services, we're removing friction so players can enjoy more of the games they love. And in FY 'nineteen, we'll be doubling down with new offerings. By leveraging the cloud, we're exploring ways that streaming and other technologies will enable those to be even more seamless. And through our Frostbite technology, we are pushing the boundaries in every aspect of games today. With an amazing collection of games and content, thrilling competitions for a global audience and a network built on the strength of our player connections, EA is uniquely positioned to lead in the expansion and evolution of this industry that we love.
Now Blake and I are here for your questions.
Erica, if you got the first
And your first question comes from Chris Moran from Goldman Sachs. Great.
Thanks for taking my question and congrats on a great quarter. So you called out live service revenue growth of 39% in the quarter and I don't think we've seen that level of growth, quarterly growth since fiscal 2015. So just wondering if you could help us understand the components of that a bit better and in particular what drove such a strong acceleration in growth for Ultimate Team? And then just a second question, when it comes to live services, you mentioned the learning experience that you have with Star Wars. So now when you think about how to build a digital economy for your non sports titles, can you maybe talk a bit about how your philosophy has changed there, if at all?
And are you now more focused on cosmetic items? Or you still think a collection mechanic could work well for a shooter or action title? Thank you very much.
Thanks, Chris. Let me I'll just Blake, I'll start with the digital question and I'll let Andrew answer the second one. So we were very pleased with the live service growth and the strength of it across all of the franchises. I think 1st and foremost, FIFA and Madden had fabulous Ultimate Team experiences during the quarter, great events driving continued deep engagement. The opportunity that we did with last year with FIFA to bring a single player story mode into the game helped drive Ultimate Team last year in FIFA and continued that this year.
The same thing occurred in Madden as it brought more people into Madden and it brought them into Ultimate Team. That in combination with the eSports business that we've been building around Ultimate Team in those two properties has proven to be extremely exciting for the consumer and driving a huge level of interest in Ultimate Team and participation in Ultimate Team. Beyond those two properties as well as hockey, which continues to do well and UFC is starting to grow and basketball is starting to grow around Ultimate Team. The Sims 4 added a substantial amount to extra content live services. The continuation of our successful content packages that we ship with The Sims 4 was very strong during the quarter.
And then as we brought The Sims 4 out on console, that also started that process for the console side of the equation. So we're excited about the continued future of The Sims 4 and clearly that in mobile down the road. Battlefield 1 continued to help monetize live services in their extra content program And the combination of all of that really drove the massive growth in extra content during the quarter and help balance out the business model. So and as I mentioned just a moment ago, competitive gaming, we believe continues to be a big driver there going forward. We'll see that in the Battlefield franchise, I think, as Andrew mentioned.
So that's the extra content piece. Let me let the live services piece. Let me let Andrew address the other question.
Thank you, Anna. Great question. We remain committed to a long term strategy building amazing games that offer compelling event driven live services and believe that digital economy economies can have a place in those live services as we've seen that accepted across the industry in our games and in other games. But I think the greatest learning is there's no single model. And it's more about how we continue to deliver the most engaging experience to players with new content and game updates.
So for some games like The Sims, we continue to find that DLC packs do really well with the community and that works well in that construct. We also know that with larger games like Battlefield and Star Wars Battlefront, premium content after launch is valued by the community, but only where we can offer it in a world where we don't bifurcate the community. And so it comes down to being really careful and considerate in designing models for post launch content that will be authentic and engaging, but most importantly, offer player choice. And as you see us continue to work on Battlefront II, as you can see us continue to evolve this in the broader event driven live services across our portfolio, at the very center of everything we want to offer is choice, player choice, in a world that keeps the communities together. Okay.
Thank you.
And your next question comes from Justin Post from BAML.
Thanks for taking my question. I guess my questions will be on future titles given some of the recent controversies. First, can we talk about Anthem? It seems to be have pushed out to the Q4. What's your confidence in that build in that game?
How do you think it's coming along and maybe a little bit why it was maybe delayed a bit? And then with Star Wars having some issues versus your guidance, how do you think about that as a franchise? Can that come back in 2 years and be really strong again? How are you thinking about that franchise? Thank you.
The first thing on Anthem is regardless of kind of how it's being portrayed, we're not looking at that as a delay in the game. We've chosen to launch Anthem in Q4, and the data is really determined by portfolio balancing and considerations, not for product readiness reasons. It's tracking well on its development milestones. We're really confident of its ship date. We're really excited by the way the next Battlefield is shaping up.
And it makes sense it probably doesn't make sense to launch Anthem right up next to it. And when you think about Anthem as a brand new IP, we also believe it makes sense to give it its own launch window so that we can give it the focus and attention it deserves and give it some free air. In terms of Star Wars ongoing, again, we remain committed to the franchise. We think that Star Wars Battlefront II at its very core is an amazing game. The team is working diligently on update and extra content for the live services around Star Wars: Battlefront II.
We expect to be the response, as I said in the prepared remarks, has been really strong to the content we've released so far. We expect the response to continue to be strong as we bring that content forward. And we're going to really look after that community and support and sustain that community and fulfill the commitment we made to them for a long time to come.
Yes. And Justin, just as a reminder, we have not obviously announced products for our fiscal 2020 yet, but remember that we have a Star Wars action game that the team at Respawn has been working on for the last couple of years. And most likely that would drop in fiscal 2020 versus another battle front. We haven't decided exactly timing for another battle front yet. But clearly, the next big Star Wars game would be the action game in fiscal 2020.
Great. Thank you. Appreciate it.
And your next question comes from Stephen Ju from Credit Suisse.
Thank you. So Andrew or Blake, it seems like to me FIFA Mobile presents 1 of the largest incremental opportunities for you given the installed base of devices and the global popularity of soccer. So I'm wondering what drove the 26,000,000 player increase to the base and what you may be doing in the background to improve the game's performance? I think the dialogue today has been you guys were looking to optimize the game. Just wondering if you guys turned the corner here.
Thank
you. Well, I don't know
if I would say ever say turn the corner because it's a huge long term plan, but we're seeing incredible improvement in the game. We're very excited about what we're seeing, but it's been on the roadmap that we've been talking about, the similar roadmap that Madden followed 2 to 3 year improvement cycle in the game where we're constantly updating and building better and better events around for the players. And that's the same approach that we're taking with FIFA. It is now trending to be either our number 2 or number 3 game depending on where Madden is, and behind Galaxy of Heroes. But, it's really moving in the right direction.
We're very excited and we're continuing to tune it almost daily. The team is incredibly committed to making this one of the largest mobile games in the world and we think it certainly has the potential. And as you can imagine World Cup will be part of that roadmap going forward and some exciting things coming there as well.
Thank you.
And your next question comes from Brian Nowak from Morgan Stanley.
Thanks for taking my questions. I have 2. Just the first one on the strength of the FIFA and the Madden Ultimate team, another very good quarter. Zuri, could you talk to the composition of that Ultimate Team Live service growth between bringing new payers into the ecosystem versus ARPU? And maybe just some of the key that you see to bringing more payers into the ecosystem going forward?
And the second one, kind of a bigger picture. Over the last couple
of years, you've talked a
lot about diversifying away from non sports titles. And unfortunately, some of the non sports titles have performed below expectations. As a postmortem, I guess, can you give us some examples of areas you see for opportunity to improve your ability to execute and consistently kind of deliver the titles and really drive non sports franchises through the company?
Sure. I'll start on the Ultimate team and then I'll let Andrew address the second one with the caveat of saying, last I checked, last year's Battlefield was one of the largest battlefields or was the largest battlefield of all time. So I would probably say that might put a little question in how you phased our success rate in non sports. So but to your point on live services around Ultimate Team, the biggest driver has been to continue to bring new people into the franchise. We grew the FIFA franchise this year in low double digits, which is the largest game in the world, probably one of the most amazing feats that we continue to do year in and year out through amazing innovation in the game and incredible improvement around the consumer experience, the gamer experience with the game.
That plus, bringing more people into Ultimate Team has really been the major driver. It is the single most popular way to play the game. People start to think about FIFA as really ultimate team more than they do the underlying game itself. It's so exciting for people because it's constantly changing and it has new and exciting events every single week to bring people back. So it is truly a live service that's being driven every day and every week versus a single game.
Madden follows that same trail as well as hockey, UFC and basketball and all of those efforts have been on how do you bring more and more people into the ultimate team world versus how do you try to increase the ARPU on the people that are already there. We find that the ARPU increase happens naturally as people spend more time playing. But at the end of the day, our effort is primarily on bringing more people into the franchise through making sure they understand it, making sure they find ways to play it and enjoy it. For example, this year we addressed an issue where people who didn't want to play online, they still wanted to play Ultimate Team, we created a mode so they can do that. So it's ways to continue to bring people into the franchise overall as well as into Ultimate Team versus ARPU.
Yes. And on the second part of the question, I echo Blake's sentiment a little bit. As I look back over the last few years and we think about the Sims, which has continued to perform year over year, Battlefield 1, which in its year, I think was either certainly the biggest Battlefield and maybe the biggest shooter of that year Plants versus Zombies: Garden Warfare, which is a new IP that has done well across 2 iterations, Dragon Age: Inquisition, which in that year was game of the year. Even you look at Mass Effect and while there was some polarizing sentiment in that franchise, it's actually performed really well and player engagement is really strong. And then of course across mobile, SimCity Build It!
The Sims FreePlay and Star Wars: Gout of Heroes, all highly successful in their own market. So as I take a 50,000 foot view and look at the breadth and depth of our portfolio across all of the games we make. And even you look at last in 2017, in aggregate, we were the highest reviewed publisher across our entire portfolio. So there's a lot of real goodness there. With all of that said, that doesn't mean we are perfect and there are always learning opportunities for us.
And we are a learning company. And as you look through our history over the last 3 or 4 years, there have been times we didn't quite get it right. And we have put our player first commitment at the forefront of everything we do, and we have worked tirelessly to ensure that we're able to support and sustain them with the kinds of experiences they expect from us. And so that has meant we have changed some beta process. We have changed some testing process.
We've changed some of the ways we've designed. We've changed some of the ways we go to market. And as a company, we will always be learning and think we've had a really, really strong run on sports and non
sports. Think we've
had a really, really strong run on sports and non sports.
Great. Thanks.
Your next question comes from Eric Sheridan from UBS.
Thanks for
taking the question. Maybe 2. One on the EA Originals, how should we think about the sizing of the opportunities for those sorts of games as well as maybe the marketing support that's needed for those games versus more traditional titles that you've seen that might have had bigger budgets on both the development side and the marketing side? Second question, obviously, we have a World Cup in the calendar 2018. How do you think about a framing of a World Cup?
What it means for FIFA broadly as a franchise both in mobile and in non mobile broadly as you look out over the next 12 months? Thanks guys.
Let me take the first one. I'll let Blake take the second part. Again, a reminder, EA Originals for us is really built on a philosophical belief that we need to encourage all forms of game development to keep the industry healthy over time. We see this in the indie music business. We see it in the indie movie business.
And in a world where today to compete with the likes of us and some of the other players in our development publishing space, need 100 of 1,000,000 of dollars. And that probably means that some of the really interesting different quirky ideas never get to make it into players' hands. And we believe that as a company with the kind of leadership position that we have, that it's our responsibility to help those games get into the players' hands. And through the process, that probably means they're not going to be giant games in the first part of it. And we don't look at it that way.
But we do believe it's our responsibility, and we think there is the chance as we work with these great creative developers who are doing really new and interesting and innovative things that we may find some great new IP for the future. And as we build those relationships with those kind of indie developers, we think it's an opportunity for us to continue to push the entire industry forward and give us access to some ideas that we may not otherwise see, both inside the company or inside the industry.
And just one final point on that from a financial standpoint. You should assume that the financial impact negligible. We would love these titles to become big breakout hits and we're not I'm not saying they won't. But right now in our guidance for the Q4, we're not planning a big revenue component of it and we provide the profitability back to the developers. So it's not really a profit issue.
It's there's some revenue generated, but it won't be very large for the quarter. But we do think there'll be great games that live on for a long, long period of time on multiple platforms. In terms of World Cup and how we think about that, As you know, the World Cup doesn't start until the summer, so it really will fall into next year's fiscal. We'll give you some details when we give guidance around what we think the impact of that will be. But as we have in the past, we've had a long tradition of celebrating the World Cup inside of FIFA and bringing it to life for our fans.
That goes all the way back, I think, to World Cup 90 8, where we really started it going. Man, we've got some exciting and fun things to announce that will come on later this spring, before obviously the World Cup gets going. And since I'm on next year, I might as well talk a little bit about Q1 just to make sure everyone remembers a few facts from last year. We expect net 2019 to be a growth year for EA. We've talked about World Cup continued strength in all of our sports titles, the emergence of the next battlefield, which is extremely exciting as Andrew mentioned, as well as our new IP Anthem.
All of that should turn out to be a fabulous year for EA. The one thing I want to remind people is all of that stuff comes past Q1. So as you're looking at Q1, remember last year we benefited from a $53,000,000 deferral of mass Effect revenue into the quarter. We shipped Mass Effect at the end of Q4, but there was a deferral on the premium revenue, which shipped fairly high profitability revenue into Q1. And we benefited as well from some one time adjustments when we shut down our distribution center in Switzerland.
And so the combination of those 2 is probably worth somewhere between $0.15 $0.20 of EPS. So just remember that as you're thinking about the quarters. We'll obviously give everyone quarterly data, the type of data that we give every year when we give guidance, but I just want to keep people aware of that as you think about next year's quarter. But we're extremely excited for FIFA, for World Cup and for the year to come. It like it's going to be another great year for EA.
Next question.
Your next question comes from Ben Thatcher from Macquarie Research.
Few high level questions. 1, can you just talk about how your view of esports has evolved really over the past couple of years? You used to talk about it as much more of a sort of marketing driver and now that's changed. Second question is just how do you think the success of PUBG has impacted your development and why do you think it's been so successful? And then finally, Blake, any update on potential new streaming models or expectations for new platforms?
Thanks.
So why don't I let Andrew talk about eSports and PUBG and then I'll talk about the last question.
So I think what you're seeing right now is actually our strategy around eSports coming to life. I don't believe there's been a material shift for us. We always believe that it's very core. ESports is going to drive tremendous engagement in our communities and allow us to reach broader communities of viewers who maybe had never played our games before. And in doing so, we would see growth in the core digital businesses of the games that were featuring esports.
And so you're seeing that right now in FIFA and Madden, and we expect to see that in Battlefield also. What's actually happening is we're getting to our milestones quicker than we had planned. And we had always believed that over time as we built greater engagement, as we built greater viewership and as we added more titles to our portfolio of competitive games that new opportunities around media rights, broadcast rights, sponsorship rights would also come into play for us. And we're overjoyed with the performance so far. Our competitive gaming group is doing spectacular work.
The global player base is in FIFA and Madden, and we expect Battlefield viewers. And that just means that we're accelerating in terms of where we think other growth vectors and profitable revenue might come from over time. In terms of PUBG, again, I think what you discover in this industry is that there's a lot of great vectors that drive player engagement. And one of those is just innovation in the core gameplay mechanic. And what the team with PUBG have done is really delivered a new level of innovation that changed the way people were playing 1st person shooter games.
And we're very respectful and complementary of what they've been able to do. We've seen that continue with Fortnite. Again, so it's clearly a mode of play that the global FPS population are interested in. And given that we have some of the best shooters in the marketplace, you might expect that we're also thinking about new and innovative ways to play. That doesn't mean just kind of PUBG replicas inside of the Battlefield universe, but it does mean that our Battlefield teams, and I talked a little bit about this in the prepared remarks, are looking at how they innovate in every aspect of the game, including core gameplay and map design.
On the streaming question, I think as we've talked about before, we see as we look at the media industry, we've seen one of the greatest disruptions has been the combination of streaming plus subscriptions. We think that combination is critical. And we see the ability to have live services, which allows you to monetize on top of subscriptions is also incredibly important. And obviously that plays to our strength. We've built a long history already in the subscription business and we have a long history in live services and we think the combination of that experience plus delivering through streaming may be very important in this industry going forward.
We've been doing some consumer streaming trials. We've done them over both cable and traditional streaming over cable as well as now through the use of local clients to help with streaming through data centers. We're obviously have a very successful subscription experience both on EA Access as well as Origin Access And we've been building actively as part of the investments that we've been making our player network through technology infrastructure internally that helps players transition and connect with friends, experiences, experiencing more content across multiple platforms. We think that's important and also very important in the streaming world. And we've been working with some of the largest partners out there on potential business models streaming.
We'll continue that work and we'll continue work on the technology side ourselves. And I'd say that between in the next 2 to 5 years, you'll see some major movements there with probably some testing that occurs on the shorter side of that versus the longer side, maybe even earlier. More to come, but it's obviously something we've been trying to invest in across many different vectors and we're extremely excited about it. Next question?
Your next question comes from Ryan Gee from Barclays.
Hi, great. Thanks for taking my call. So we really appreciate the color on the unit sales for Star Wars. I was hoping you guys could just clarify what you're doing to restructure the MTX portion of Star Wars? And assuming that you guys are still committed to delivering content for sale, how we should think about the timeline there?
And maybe how meaningful Star Wars could be the top and bottom line in year 2 of its life? Thank you.
Yes. So I think as we talked about in the prepared remarks, we believe that digital economies have a place in event driven live services. And our plan is absolutely to continue to drive and focus and deliver on that. And the teams are working on how that will fit in the context of the Battlefront II universe. And we expect over the next coming months, we'll have more to share on that front.
Yes. And in terms of financials, Ryan, I think as you know, we're inherently conservative in how we try to forecast. And we did not build very much revenue at all into this year's forecast for Star Wars. And while we haven't given guidance yet as doing our budgets for next year internally, we're assuming that until we have a proven model that we are confident of, we're probably not going to build a lot into our budgets either I. E.
Then into our guidance. More to come when we give our guidance, but don't take that as a negative in any way. It's simply conservatism around how we're trying to drive the business. As Andrew said, it's very important to us long term because we think it's very important to how fun the games are and how people will enjoy the games, which makes we just need to make sure we get the model exactly right.
Okay, great. Thank you guys.
Thanks. Next question?
And your next question comes from Andrew Urquowitz from Oppenheimer.
Hey, thanks so much for taking my call. If we remove World Cup out of the equation for a second and just start thinking about FIFA media longer term, where is the opportunity in growing that franchise? Is it kind of increasing the player base, increasing ARPU? And on the gaming side, you've added a lot of new features over the past couple of years. Do you still see room for more features?
Great question. As we think about FIFA, the beauty of FIFA and the greatness of FIFA is that soccer or football in many parts of the world is the world's game and just goes from strength to strength across the globe. And so really, the opportunity with FIFA is really, really strong. We think about that on a few key vectors. And they all involve at first level growing the total addressable market.
So right now, we have tremendous geographic expansion opportunities. And we've talked a little bit about our China presence and how well doing there. The Middle East is opening up. It's a tremendous opportunity for FIFA. The U.
S. Continues to grow. Southeast Asia continues to grow. And the passion quite frankly across Europe continues to grow. Next, we think about this in terms of platform expansion.
And as consoles continue to grow, and again, there are more consoles sold this generation than any generation before on PlayStation and Xbox, PC is kind of is making a resurgence for gamers, and FIFA has a very strong PC presence. We talked in our prepared remarks around mobile, and Blake talked a little bit about how we think about streaming long term to really remove the barriers to entry to bring in more people. And then 2 of the most powerful motivators of human behavior on the planet, competition and social interaction. And so as you think about the types of games and features that we'll continue to build inside of the FIFA universe as we bring this multi billion global community of football fans together are features that actually drive greater social interaction. As a sports fan, the thing I want to do most is interact with the sports fans.
And as a competitor, the thing I want to do most is compete. And you're seeing this now around our competitive modes, but you should also expect as we branch out in geographies and platforms and new access models like streaming and subscription that features around social interaction and competition continue to be at the very core of what we do and we think there's still tremendous opportunity there.
Yes. And I would add to that, one of the things that's made FIFA so successful for us is the deep partnerships that we build with the leagues out there. And today we don't have all the leagues, so we're constantly looking at what leagues are emerging, what leagues are extremely strong and where can we better partner with leagues going forward. And it's been a fabulous way to help grow the business and help grow the support of football around the globe. The league see us as a major way that they can market their product, their players, their teams, their stadiums and we see it obviously as a perfect business combination for us.
And so part of our growth strategy going forward particularly in new geographies is how do you make sure you have the leagues for those geographies. But even in mature geographies where we might not be fully exposed to all the leagues, we're trying to sure that we're driving that. It's an incredible competitive advantage for us to be able to have those deep partnerships and we're going to continue to try to leverage those to help grow the product across all the platforms that Andrew talked about mobile, streaming, PC and the core console business.
Great. Thank you, guys.
Your next question comes from Mike Hickey from Benchmark Company.
Hey, guys. Thanks for taking my questions. I really appreciate it. Congrats on the quarter. 2 on loot boxes, 1 sort of ground level.
I'm curious if Disney has formulated any sort of opinion on whether they're comfortable with that sort of monetization mechanic in Battlefront or feature games? And then maybe from a higher level, how we should think about balance of risk of any sort of constrictive framework emerging around loop boxes and maybe how you think about if you do see that as a risk, how you think about mitigating that as a company or and or as an industry? Thank you.
So first,
I will choose my words carefully. You shouldn't believe everything that you read in the press. We have a tremendous relationship with Disney. We have built some amazing games together, Battlefront, Star Wars: Gatshit Heroes and even and Star Wars: Battlefront 2. And we have been very proactive in that relationship in service of our players.
And so at a point where we make the decision that we believe we have the right model for our players and our global community, I have no doubt that we will get the support of Disney on that. And again, as we look forward, the big learning is there is no one size fits all when it comes to event driven live services. But at the very core, we must always build on a foundation of player choice. And that might be the choice of whether a player engages in a particular mode or not. That might be whether a player decides to grind for something or not.
But in all things, it's around providing a fair playing field where players feel they have choice. And you should expect that we will continue to drive hard against that and ensure that again, we didn't set out, as I said in the prepared remarks, to build a feature set that could be perceived to be anything other than fair. It's clear that we didn't quite get that balance right, but we are doubling down now to ensure that we do.
Yes. And I'll just add, we do not believe that loot boxes and similar mechanics are a form of gambling. I think there are plenty of governments around the world that have agreed with us on that. And it is not just us, it's the entire industry. We work very carefully and closely with all of our industry partners and the ESA, the industry body, to make sure that people understand exactly what loot boxes are, exactly why they're not gambling and we'll continue to engage in that going forward.
We think that's important. And I think there's a lot of consumers that would argue the same thing based on their great experience they've had with fun games that have associated live services with them that some may be misconstruing as they'll do box or a gambling mechanism.
Thanks guys.
Next question?
Your next question comes from Mike Olson from Piper Jaffray.
Hey, good afternoon. Just one question for me. You mentioned full game downloads continue to grow. I guess not a surprise, but what did you say was in December high-30s as a percent of the mix, I think or something like that? And then what's your expectation for calendar 2018?
Will we see like 10 points of growth over the next year? Should we expect more incentives from either console makers or publishers to push that trend? And then also, is it still the case that full game download is 15 to 20 points better gross margin wise? Or has anything changed on that front? Thanks.
Yes. Nothing has changed on the margin front. We finished the year around 37 for the calendar year around 37%. And as you know, we're still a little below the industry. I think the industry is getting closer to 40%.
We skew a little lower due to the global nature of FIFA and then also Battlefront II, while it came up 12 points from Battlefront I, still skewed in the high 20s versus the high 30s primarily due to gift giving and a younger audience base. But we see all of the right trends helping that. We still have our forecast as kind of 5 plus points a year. Obviously, we've been on the low side of that for the last couple of years. But I think at a minimum, we should see 5 points of increase each year and hopefully it's greater than that.
We don't see a cap anytime soon, because we know more and more players are realizing it's a much more convenient, easy and engaging way to play. Many players have been already buying extra content and thus have a way to have digital purchases as part of their overall gameplay. And we believe the consumer will ultimately default towards convenience, however that might be. It might be they still have a store around the corner from them or it might be they don't and it's easy for them to buy digitally. But you'll see us continue to do things to try to encourage people to buy digitally and we think that's still a major key as part of the future of the business.
Thank you. With that,
I think we're out of time. I appreciate everybody's great questions and interest, and we look forward to seeing everyone over the next few months as well as talking again at the end of our Q4 when we'll give guidance for our fiscal 2019 in early May. Thank you. Thank you so much.
Thank you. And this does conclude today's conference call. You may now disconnect.