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. After the speakers' remarks, there will be a question and answer session. Thank you.
I will now turn the call over to our host, Chris Evident, VP of Investor Relations. Sir, please go ahead.
Thank you, Doris. Welcome to EA's 4th 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 our prepared remarks.
After the call, we will post our prepared remarks and 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've included tabs for 4th 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.
Thanks, Chris.
Our Q4 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 19,000,000 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 21,000,000 players jumping into 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 12,000,000 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 10,000,000 players participated in competitive matches in the 1st year of our tournaments and our global spectator audience continues to grow. On mobile, Star Wars: Guides of Heroes continues to tap into the passionate Star Wars fan base, maintaining one of the most engaged player communities across our entire network.
With a constant cadence of in game events and new content drops, including new Rogue One characters, the average time played per day increased to a record 162 minutes in Q4 and player satisfaction levels are reaching new heights. Across our top mobile titles, we are driving thousands of live events per quarter, deepening the experiences and connecting players through guilds, challenges and content to fuel their passions. Our Sims franchise continued to expand one of the broadest and most demographically diverse player bases in our portfolio. The Sims 4, now 2.5 years since launch, saw monthly active players increase 33% year over year in Q4. With a total of 7 downloadable content packs delivered throughout the year as well as game updates that offered more choice and fan requested features, The Sims 4 community is thriving.
Games as a service are reshaping our industry and EA is positioned to lead. Our investment in EA digital platform that connects players across games, franchise and devices also provides more data from our games than ever before. With the data and capabilities of our platform, we're able to do things differently, move faster and innovate for our player communities. Amazingly creative games combined with services like Ultimate Team, our Battlefield network, multi platform experiences and subscription programs like EA Access are the future of this industry. With every player that joins our games, every game session and every engagement in our live services, FY 2018, we'll deliver more thrilling experiences that broaden the reach of our major franchises and drive deeper engagement through more ways to play.
Our EA SPORTS portfolio continues to have the biggest player community in sports games and this year will add new experiences to grow that audience. Madden NFL 18 is set to be the most innovative Madden title in more than a decade using the full Frostbite stack to deliver new modes that bring the sport to life in unprecedented ways. FIFA 18 will expand on the Journey and Ultimate Team and will connect more to more soccer fans with FIFA as our first title on Nintendo Switch. With new NHL, NBA Live and UFC console games, as well as more live events in contact for our growing EA SPORTS player base on mobile, a multiplatform EA SPORTS portfolio is set to reach more fans around the world in FY 2018. We're also incredibly excited to bring Star Wars Battlefront II to the massive Star Wars community later this year.
This game is made possible by the collaboration of 3 incredibly talented studios: Dice, Motive and Criterion bringing together their individual strength and building on the feedback from our passionate fans. Star Wars Battlefront II will have more than 3 times the content of the previous game at launch with a brand new story, a new single player campaign, new modes, characters, vehicles and planets from all areas in the Star Wars universe as well as a live service plan that will continue to add even more fun for the global community. Our Star Wars Battlefront Front 2 debut trailer has generated more than 16,000,000 views across YouTube and other social platforms and we'll have much more to share about this game in the weeks months to come. This will be a year of pioneering creativity across many of EA's top franchises. Every Battlefield 1 player will have more ways to play throughout the year with continual game updates, new maps and 3 more expansion packs arriving adding new armies, regions and battlegrounds available to the whole community.
We're just getting started with our live service plans for this massive game. And later this year, we'll introduce new ways for players to get an even bigger Battlefield 1 experience. 2 of our other genre leading franchises will also see new titles this year. The industry's biggest multiplatform racing franchise Need for Speed returns to console and PC with a brand new title that will give racers vast customization and more freedom to race wherever they want. And on mobile, our Sims franchise has been a genre leader since launch And this year, we're going to deliver a brand new deeply social experience for this wide reaching global community.
Competitive gaming and esports will be a key growth factor for us throughout FY 2018 as we expand the ways that fans can play and watch. Year 2 of our FIFA and Madden NFL championships will kick off this fall featuring millions of competitive games through Ultimate Team, deeper partnerships with leagues and teams that add new dimensions to the tournaments and new venues for our major global championships. Later this year, we'll launch our 1st Battlefield 1 competition, unlocking the competitive spirit that runs deep in our Battlefield community. We're also continuing to expand our broadcast reach and content portfolio for our growing spectator audience. There is global excitement for our competitions.
And this year, we'll introduce our tournaments and add additional programming through more major network partnerships, including ESPN, BT Sport, Univision and more. Looking forward, we'll continue our aggressive pace of innovation through experiences that capitalize on our technology, network and creativity. We are very pleased with the progress of our new Action IP from BioWare. The design is stunning. Gameplay mechanics are excellent and the action will be exhilarating.
The game is built around a live service. And through our creative process, we've decided to add more to the disruptive new social designs for our players. To accommodate that, we are moving the launch date for this project into fiscal year 2019. Through FY 2019 and beyond, our portfolio will continue to grow. There will be more new experiences for our Battlefield fans.
Our Star Wars action adventure IP from Visceral will make its debut and farther out we'll have a new Star Wars title from our partners at Respawn. We continue to invest deeply in new IP, including the new game from BioWare and another project from our Mobyb studio. With Frostbite powering more of our EA SPORTS games, we'll continue to break barriers and lead sports across all platforms. And on mobile, we have titles from more of our major IP in development. Electronic Arts is leading the industry with some of the most creative, sophisticated and engaging entertainment available anywhere in the world.
Yet we are building towards a far more powerful and connected future. As engagement and consumption patterns across platforms and business models continue to evolve, we are investing in our network to keep players connected to each other and the games they love. Our focus on esports continue to draw more players and spectators to the excitement of competition in our games. Our subscription services like EA Access are providing more fun and tremendous value. And with the unification of our engine and our platform as well as major advancements in deep learning, AI and social layers, we are unlocking new ways to connect players and personalize their experiences at scale.
This is the future of play that we see in Electronic Arts and that we are ready to lead. Now I'll hand the call over to Blake.
Thanks, Andrew. I'll start by reporting our results on a GAAP basis, then use our operating 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 $4,800,000,000 cost of revenue $1,300,000,000 and operating income of $1,200,000,000 Most importantly, these results enabled us to deliver record operating cash flow of almost $1,400,000,000 We also returned over $500,000,000 to shareholders through our repurchase program in fiscal 2017. Total net sales for the year were $4,900,000,000 a record. Digital net sales accounted for 61% of this, up 6 percentage points year on year. Extra content was a record $1,300,000,000 with Ultimate Team contributing $832,000,000 Moving on to the details of our 4th quarter. GAAP net revenue was $1,500,000,000 compared to $1,300,000,000 a year ago.
Cost of revenue was $202,000,000 down from $226,000,000 last year, a significant improvement on our guidance of $242,000,000 Operating expenses were $608,000,000 $17,000,000 above our expectation, driven by an advanced write off of a licensing agreement. This resulted in an earnings per share of $1.81 As Chris mentioned, to compare this year's results to historically reported non GAAP measures, please see the new tabs in the downloadable model. Net cash provided by operating activities was $407,000,000 Operating cash flow for the full fiscal year was $1,380,000,000 the highest in company history and 13% greater than last year's. Fiscal year 2017 capital expenditures were $123,000,000 resulting in free cash flow of $1,260,000,000 Please see our earnings slides for further cash flow information. Our cash and short term investments at the end of the quarter were $4,530,000,000 with 37% of this balance held onshore.
During the quarter, we repurchased 1,500,000 shares at a cost of $125,000,000 Subsequent to quarter end, we completed the $1,000,000,000 2 year buyback program we began in May 2015 with an additional $30,800,000 of repurchases. Average cost per share over the 2 years of the program was $72.66 Looking forward, we announced today a new $1,200,000,000 2 year stock repurchase program. Now turning to net sales to discuss our business drivers for the quarter. Net sales were $1,090,000,000 above our guidance of 1.075 and 18% higher than last year. This excludes $53,000,000 of net sales related to premium additions of Mass Effect Andromeda that we had originally expected to capture be captured in Q4.
They will now be captured in Q1. Digital delivered $885,000,000 of the $1,090,000,000 in net sales, up from $712,000,000 last year. This growth is driven by the ongoing digital transition as more players choose digital purchases over physical as well as by our ongoing success with event driven live services such as FIFA Ultimate Team. Diving into digital net sales. Extra content and PC free to play contributed $405,000,000 up 31% over the prior year.
The key element remains Ultimate Team, which grew 23% year on year or 29% at constant currency. Expansion packs for The Sims 4 also made a strong contribution. Our ability to engage players through live services and events continue to drive strong growth and deliver dependable ongoing sales. Our mobile business delivered $175,000,000 in net sales, flat year on year. Key mobile games driving the sales in the quarter were Star Wars: Galaxy of Heroes, FIFA Online 3 Mobile, NBA Live Mobile and FIFA Mobile.
The growth in these games was offset by a slowdown in some of our legacy titles. We're doubling down on live services and events across the mobile portfolio, and the strategy is paying off. For example, FIFA Mobile just had its best ever month since launch in October. Full game downloads added $192,000,000 in net sales for the quarter, up 43% year on year. For fiscal 2017, for the current generation of consoles, full game downloads accounted for 33% of unit sales to consumers, considerably ahead of the 29% we had forecast and 9 percentage points up year on year.
The chief driver was the continuing evolution of consumer behavior, but some of the outperformance was driven by the shift from Star Wars Battlefront to Battlefield 1 as well as the digital performance of our catalog. As a result, we continue to believe the underlying trend is closer to 5 percentage points per year. Finally, subscription advertising and other digital net sales totaled 113 $1,000,000 up 19% over the same period last year. EA access and origin access continue to grow strongly. In conclusion for Q4, we were able to exceed our expectations for revenue, earnings and cash flow demonstrating the power of multiple live service revenue streams.
Now turning to our expectations for fiscal 2018. We expect sales of current generation consoles to continue to be strong, with the installed base growing to 105,000,000 consoles by the end of calendar 2017, up from 79,000,000 the prior year. We expect PC gaming to decline slightly and the mobile market to grow in the high teens in calendar 2017. Guidance for fiscal 2018 is for GAAP net revenue of $5,100,000,000 cost of revenue of $1,300,000,000 in our statement of cash flow. They do not impact our total cash and cash flow, but they do increase our operating cash flow and decrease our cash flow from financing activities.
For fiscal 2017, applying the new rules would increase reported operating cash flow by $195,000,000 and decrease financing cash flow by the same amount. A table presenting the impact is included in our earnings release. For fiscal 2018, applying the new rules, we expect operating cash flow to be approximately $1,600,000,000 We anticipate capital expenditures to be around $120,000,000 which would deliver free cash flow of about $1,500,000,000 Turning to business drivers, we anticipate net sales for the year to be $5,100,000,000 up 3% year on year. This is driven by growth in Ultimate Team, Mobile and Star Wars Battlefront II. It is offset by the success of Battlefield 1 last year and by FX.
The stronger dollar represents a headwind of around $110,000,000 to fiscal year end net sales. Our currency assumptions are disclosed in our earnings presentation on our website. Segmenting the sales provides further insight into key drivers of our full year net sales guidance. Net sales of packaged goods and other is forecasted to be approximately $1,700,000,000 down 10% year on year, driven by the shift to digital. Digital net sales are expected to contribute 3 point $4,000,000,000 up 11% year on year.
Breaking down digital sales further, our mobile business is expected to grow between 5% 10% led by the new Sims experience and continued growth from FIFA Mobile, NBA Live Mobile and Star Wars: Galaxy of Heroes. Net sales from full game downloads are expected to grow 10% to 15%, driven by the underlying change in consumer behavior, offset by the fact that Star Wars Battlefront may skew slightly less digitally services are in a given franchise. In fiscal 2018, we expect to see net sales of live services to grow between 10% to 15% led by Ultimate Team and Battlefield 1. As Andrew mentioned, we have made the decision to move our new BioWare action title out of fiscal 2018 and into fiscal 2019. We're very excited about this opportunity for a new franchise and we want to further develop the live service component.
Focusing on Q1, we're expecting GAAP net revenue of $1,425,000,000 GAAP cost of revenue of $157,000,000 and GAAP EPS of 1.9 $3 We expect Q1 net sales to be $750,000,000 up 10% year on year, driven by Mass Effect: Andromeda, Battlefield 1 and Ultimate Team. At the beginning of our year, at our Investor Day, we shared our long term vision for the company. It provided context and framework for a very specific set of near term goals we gave you in our annual guidance. Our fiscal 20 17 performance demonstrated how our vision generates excellent financial results and supports growing our cash return to investors. But we are only just beginning to leverage the potential of our player network and event driven live services.
As we continue to do so, we will build a deeper player base and engagement, grow digital revenue and deliver a more profitable and stable business. Now I'll turn the call back to Andrew. Thanks, Blake.
We're 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 services. And streaming in the future. With every experience, we are working to bring our players even closer. Constant community input is part of our creative process today. From developer feedback sessions and continued dialogue with community influences to the gameplay data that helps us tune and optimize to community test environments where we can share our latest innovation.
Putting our games into the hands of our players, like we will at EA PLAY and Hollywood in June, helps to keep us moving, evolving and constantly pushing for more breakthroughs. We're continually engaging, expanding and strengthening our network by keeping players at the center of everything we do in Electronic Arts. As we deliver more groundbreaking experiences and deepen the engagement of our global player base, the EA player network is how we create greater value through a connected world of play. Every day, the global community of gaming is expanding through more devices, more games and more ways to play. Our EA player network will enable players to navigate, to find their friends and engage in more of the experiences that matter to them most.
Through persistent experiences and user interfaces like our Battlefield network, to playing and viewing esports competitions, to discovery of new content that adds to the fun, the EA PLAYER network is already helping to deliver a more personal and connected gaming world for our players. And we're just getting started. We're looking forward to another year of growth and leadership for Electronic Arts. Now Blake and I are here for your questions.
Operator, if we can open for questions now, please.
Our first question is from the line of Justin Post of Bank of America.
Blake, in your guidance, you talked about gross margins, it 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 2 inputs this year into the gross margin outlook. Thank you.
Yes, 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 3 years and is moving to our corporate FP and A team, which is a great move for her. And we thank Carolyn for an amazing 3 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 1st Star Wars, fiscal 2015 and then fiscal 2016, you saw a fairly muted growth in gross margin, up about half of or fifty 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 less a little less than 100 basis points or around 50 basis points because of that primarily impact on Star Wars Battlefront 2.
Our next question is from the line of Brian Nowak with Morgan Stanley.
Thanks for taking my questions. I have 2. 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 that are going on. 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.
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 a little bit about that. I'll come back on the Ultimate Team question.
Yes. We're very excited about our esports strategy and what we're doing. And what we saw this year in both FIFA and Madden was 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's 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's 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.
And in terms of guidance relative to Ultimate Team, the thing to remember that was a major draw 2 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 in the around tournaments and around practicing for tournaments. Both of those styles of change we're going to try to adapt in to Madden in one way or another.
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 it 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.
Next question?
Our next question is from the line of Stephen Ju with Credit Suisse.
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 in the 1st iteration of Battlefront that you will be looking to add to Battlefront II? And Blake, would 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.
Yes. So thank you. As we as you know Battlefront 1 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 will be doing that. And I'm very excited by what we're seeing there. The Motive Studio, who has a is a collection of developers who have a tremendous track record in building action, adventure and single player campaigns is putting that 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 3 times the size in terms of content, we're very serious about that. And our expectation is that the fans the large engaged passionate fan base of Star Wars fans around the world are going to love everything that we're doing.
In terms of mobile, our net sales for the year were up 10 percent 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 or NBA Mobile or FIFO 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 always I mean, we've had some amazing performers like the Simpsons Tapped Out or Real Racing or Sims FreePlay that are in year 4 or year 5 of their lives. And the fact that they're still going is pretty impressive relative to many mobile games. But we will see a natural decline in some of those as we add less content and move to players to new or exciting games or new versions of those games. And so I don't know when you're going to see a more dramatic growth level.
We've guided to around 5% to 10% of growth for the year, but we certainly are focused on trying to drive the new Sims title, as Andrew mentioned, as well as the sports titles, because we feel that those are fabulous formula that we've been able to develop and leverage both on the console and PC world as well as now on the mobile world. Next question?
Our next question is from the line of Tom O'Shea with Jefferies.
Yes. Hi. Thank you for taking
my question. Just a few more on Star Wars Battlefront II. So the first installment sold around 13,000,000 units in its launch window, obviously a very big 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. Then just broadly speaking at a higher level, how is anticipation for that game shaping up? What's the feedback you're seeing around the announcement of the single player campaign in the trailer? Thank you.
So again, in terms of we'll start from the back. The fan anticipation has been very, very strong 16,000,000 organic views. So that's not us kind of paying to get viewers that is fans kind of 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 heroine in Iden, space battles, new content, new heroes, new worlds, new planets.
I think the feedback of that is very, very strong. As we think about the live services, nothing not talking in great deal about it now other than the game is going to be 3x the size of the original game at launch. And we also have a very, very robust live services plan that we're going to be talking about in the coming weeks months, particularly around EA PLAY and E3 in just a few weeks' time. And Blake will Yes.
I think on the unit forecast, we sold 14,000,000 units Field for Battlefront 1 in the year. It was shipped and built into our guidance is 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 game that will help that. Next question?
Our next question is from the line of Eric Sheridan with UBS.
Thanks for taking the question. Maybe 2 on mobile. I wanted to know if you 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 could 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 leaning in against some of the key titles on the mobile engagement front? Thanks guys.
Yes. Thanks, Eric. The core product portfolio that's been there for 4 or 5 years like The Simpsons, as I mentioned, have actually shrunk. Games like Sims FreePlay have stayed fairly consistent, but not grown dramatically. And then things like FIFA, NBA and most particularly Galaxy of Heroes have grown dramatically.
And so I think what you'll see is 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 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 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 our 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. Next question?
Our next question is from the line of Drew Crum with Stifel.
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 have 4 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.
Yes. So thanks, Drew. The first question on Battlefield 1, we're not going to disclose the attach rates because they're becoming more and more or 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 DLCs 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 number surprised us because we had thought that it'd be around the 5% year over year growth. Some of that may and maybe we're starting to see that overall shift. And some of that may 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. Next question?
Our next question is from the line of Andrew Urquowitz with Oppenheimer and Company.
Yes. Hey, thanks taking my question. I just got 2 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?
I would say it hasn't really changed our overall approach for this coming or 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 the 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.
On that particular comment, if I may, are you kind of leaning towards kind of
Doris, why don't we go on to the next question and we'll come back to Andrew.
Our next question is from the line of Doug Creutz with Cowen and Company.
Yes, thanks. I think your revenue deferred gross adjusted gross margin Obviously, you had a big digital mix this quarter, but there's been other quarters in the last couple of years that you've had similar digital mix and the gross margins have been in the kind of mid-seventy percent range. So wondered if you could talk about was there anything kind of special in this quarter that drove that gross margin so high, a mix of business or anything like that? Thanks.
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.
Doris, next question please.
Our next question is from the line of Sam Sam with Mizuho.
Hi, it's Saan. 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 and D expenses over the next few 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 and A?
So what was I'm sorry, Stan, I didn't catch the first part of your first question. Can you repeat the question?
Sure. It's just how far along are you in building out and staffing out the motive studio in Canada and basically what the impact to the trajectory in R and D?
Yes, 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 is just 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 Montreal team in that same office. We still have some hiring to go, but I think for now, it will 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 and 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 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 could 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, there's a it's not a long list of companies that are out there of scale that we can go after. Next question?
Our next question is from the line of Mike Olson with Piper Jaffray.
Hey, good afternoon. A couple of quick ones here. Despite moving out an entire title guidance is quite solid and 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 the result of strength of Battlefield 1 live services or would you attribute it to something else?
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 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, it's coming out during the year on mobile. We don't know exactly what time of year that will come out, but we've so we don't have a giant expectation in the guidance, but that's clearly in there as well.
Our next question is from the line of Mike Hickey with Benchmark.
Hey guys, thanks for taking my questions. Just 2 for me as well. Curious if you could give us a deeper perspective, I guess, on what's happening within BioWare. A mass effect, I think, from a quality perspective, didn't exactly 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 or what sort of happen internally within BioWare? And then second question, PopCap, it looks like you have some layoffs in that studio. Obviously, a studio has good IP used to, as well as talent. Sort of curious, how you see the future of Bobcat? And also if you're tinkering with headcount over on the overall firm or any trends there we should think about through fiscal 2018?
Thanks guys.
So let me just make sure that was only 2 questions and not 3 or 4. 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 collection of questions. The second one was what's going on at Pop cap and should we read anything in there? Was there a third question about headcount overall?
Or is that just headcount related to POP cap?
We lost Mike now. Mike?
Mike, press star 1.
Okay. Well, I'll answer the first two and we'll go from there. The first thing 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: story, size, depth, breadth, imagination. And while overall the aggregate review scores were lower than we would have liked, we did have over 100 reviewers scored the game at 80 or higher.
So it represents a fan base that's very passionate looking for very particular things and many players found exactly what they're looking for and some players did not. With that said, we believe Mass Effect and Drop to Deliver is a rich deep experience, which celebrates what makes the franchise great. Wonderful, beautiful, deep, rich world, amazing combat and engaging fast paced multiplayer. New multiplayer content is continuing to be released and new content kind of arriving overall more regularly. So we're very happy with kind of how BioWare is doing, how BioWare is treating Mass Effect.
And our expectations for Mass Effect are still strong for the future and the franchise overall. In terms of the new IP, the choice to move the new IP and what happened with Mass Effect are completely unrelated. The reality is, is we have a creative process. As a company, creativity and pioneering is really important for us. Now innovation in games is important more now than ever.
And as a leader in the industry, we see it as our responsibility to innovate. And as part of our creative process, and I get to be involved in that creative process, we recognize that there was so much more opportunity in a connected networked social world to do some things in the new BioWare game that had never been done before and we don't think anyone is going to do anytime soon. But by virtue of our network, our cross platform presence and our scale, we think we can do that. And we chose to give the team some more time to deliver against that innovation, because we believe players are looking for the kinds of things that we plan to put into that game. And so we're very happy with BioWare.
BioWare is continuing to support Mass Effect and the new team is doing some amazing things and you'll hear more about that in the months to come. In terms of POPCAP, again, I think there's a couple of different presence for PopCap. We have an amazing PopCap team in Vancouver that built Garden Warfare 2 1 and 2 on console. That game continues to do extremely well, high critical acclaim, strong engagement and strong sales over its life. So we're very happy with that team.
The team's building against mobile games out of Seattle recognize that the market continues to change that brands are really important in the mobile space, but so is Focus. And the notion of building lots of small things really doesn't pay out the way it does in mobile like it did just a few years ago. And their decision was to refocus and really energize around a few core PopCap IP and that drove a slight change in structure there. But you shouldn't read into anything other than we are very, very committed to PopCap and very committed to the PopCap IP and very committed to bringing that wonderful IP to players across devices in the future.
Next question?
Our next question is from the line of Evan Reingen with Pacific Crest Securities.
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?
What Frostbite allows us to do, as you can see what is allowed on FIFA, is to have a much deeper experience, much better graphics, doing things inside the game that you couldn't do on the sports engine. So if you were to look at FIFA and say, how did FIFA change year over year, you probably see similar aspects of that in Madden. And we're pretty excited about it. It looks fantastic so far.
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?
We see kind of on 3 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. 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 parving and difficulty inside of our games.
So with a 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 in 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 as 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 3rd vector, of course, is just how we think about recommendations and presentation of content and merchandising 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. So one last question.
Our last question is from the line of Ray Stochel with Consumer Edge Research.
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.
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. The our console number that we quoted does not include the Switch at this point.
So anything that Nintendo does is additive to that number.
Great. Thank you, everyone. We'll see you in the coming months and talk to you next quarter. Appreciate the intention and help.
Ladies and gentlemen, this does conclude today's conference call. You may now