Good afternoon. My name is Jennifer, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts 4th Quarter 20 16 Earnings Call. At this time, 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. And I'll now turn the conference over to Chris Evenden, Vice President of Investor Relations. Sir, you may begin.
Thank you, Jennifer. Welcome to EA's fiscal 2016 Q4 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. After the call, we will post our prepared remarks, an audio replay of this call and a transcript. A couple of quick notes on our calendar. We plan to deliver our next earnings report on Tuesday, August 2. At our press conference at EA PLAY will take place at 1 p.
M. Pacific Time on Sunday, June 12. Coming up next week on Tuesday, May 17 is our Investor Day. If you haven't registered already, please contact me so that we can send you an invitation. 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 10, 2016, and disclaims any duty to update them. During this call, unless otherwise stated, the financial metrics will be presented on a non GAAP basis. Our earnings release and the earnings slides provide a reconciliation of our GAAP to non GAAP measures.
These non GAAP measures are not intended to be considered in isolation from, as a substitute for, or superior to our GAAP results. We encourage investors to consider all measures before making an investment decision. All comparisons made in the course of 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.
FY 2016 was a phenomenal year for Elektronika. Our non GAAP revenue, earnings and cash flow for the year were all at record levels and exceeded our guidance. It was a year of growth and milestones demonstrating our unique ability to connect 100 of millions of players across genres, geographies and platforms to the games they love and to each other. To highlight a few examples, we kicked off a new generation of Star Wars games from Electronic Arts with extraordinarily successful games on console, PC and mobile. Nearly 54,000,000 unique players engaged in our EA SPORTS console titles during the year, up 65% from last year.
Across our portfolio of live services, we launched hundreds of content updates throughout the year, bringing players deeper into their favorite games. Our Sims 4 player base grew by almost 2 thirds throughout the year and our Battlefield franchise saw 9,400,000 unique players in Q4 alone. In addition, players are spending more time with our new games and ongoing franchises on mobile. Engagement in Star Wars: Galaxy of Heroes is exceptional, with players spending nearly 2 hours per day on average in the game during Q4. Madden NFL Mobile continues its strong performance, with engagement up more than 30% in Q4 over last year.
And The Sims FreePlay has now reached 200,000,000 installs live to date. With all of our games and live services, our focus continues to be on putting players first and delivering unmatched creativity, depth and value. Engagement is critical in today's world where everyone faces such intense competition for time. Combining great franchises, innovative IP and sophisticated services, we continue to build networked global communities for our games, where players can connect to more great content and to their friends, maximizing the fun every time they play. As we move into FY 2017, we're incredibly excited to launch a slate of groundbreaking new games and add to the breadth of live services available to our players.
Our first new game this fiscal year will be Mirror's Edge: Catalyst launching on June 7 with fluid movement and combat rendered in stunning beauty by our frostbite engine. The first of our EA Sports titles for this year Madden NFL 17, NHL 17 and FIFA 17 arrive in Q2, each taking a major leap forward in personalization, immersion and competition. We are also working on a new and engaging way to bring players into our NBA Live franchise on consoles and we'll share more on that in the quarters ahead. In a global live stream last Friday that was watched by more than 2,000,000 people, Battlefield 1 made its debut. Fans got their first look into the intense visceral combat and epic scale of this groundbreaking new game from DICE and the response was immediate and extraordinary.
The trailer was viewed more than 21,000,000 times in the 1st 4 days, a new record for EA and it's now our most liked trailer in history. With Battlefield 1, we've set out to deliver the biggest and most innovative Battlefield game ever with a deep story and unprecedented variety in the gameplay powered by our frostbite engine. Battlefield 1 is set to launch worldwide on October 21. In partnership with a talented team at Respawn Entertainment, Titanfall 2 will launch in Q3. The first Titanfall delivered a fast fluid experience that invigorated players and ignited the genre.
Titanfall 2 will come to players on PlayStation 4, Xbox 1 and PC. The excitement from fans since our official announcement of the game has been outstanding and we can't wait to debut the first gameplay from Titanfall 2 at EA PLAY on June 12. Late in Q4, Mass Effect: Andromeda will bring an all new story to the critically acclaimed RPG series from BioWare. And throughout the year, mobile players will see launches from some of our biggest brands, Building on the continued success of Madden NFL Mobile, we're excited to bring new EA Sports experiences from our NBA Live and FIFA franchises to players in FY 2017. Fans of our PopCap franchises will have new experiences as well with Bejeweled Stars launching today and Plants versus Zombies Heroes set to arrive later this year.
Our excitement for the year extends well beyond our title slate. The gaming industry continues to rapidly evolve and grow and in each dimension EA is at the leading edge. In addition to being the number one publisher in Western World on Xbox 1 and PlayStation 4 in FY 2016 and the most downloaded mobile game publisher in calendar year 2015, we are investing deeply to pioneer new growth opportunities. Our competitive gaming programs will seek to engage players at all skill levels with competitions like Madden NFL 16 Championship being just the tip of the iceberg. Our unparalleled Frostbite engine will power more of our games this year, including an all new Battlefront experience for PlayStation VR.
In addition to delivering strong and stable service architectures, our technology platform teams continue to implement a cross platform, cross title identity system to help our players stay connected to their games and their friends. Across our studio teams, partners like Respawn Entertainment and Labs Groups, we are working on more new ideas, technologies and IP. And this June in Los Angeles and London, EA PLAY will bring players closer than ever to our games and help them share those experiences with the world. FY 2016 was the strongest year in the history of Electronic Arts, and we are just getting started. Looking to FY 2017 and beyond, we are confident that our trajectory is even stronger.
Now I'll turn the call over to Blake for a deeper look at our financials.
Thanks, Andrew. The end of the year is a good point at which to reflect on the progress we've made, and it has been a great year. Using non GAAP metrics, fiscal 2016 revenue at $4,570,000,000 was an all time record. Our operating margin at just 9.5% 4 years ago was 28.5% this year, its highest ever. Gross margin at 71.4 percent and earnings at over $1,000,000,000 were also all time records as was operating cash flow at $1,200,000,000 We were able to deliver these results despite significant FX headwinds, which impacted our top line by over 300,000,000 Digital revenue is now 55% of our business, up from 52% last year.
Extra content was a record $1,100,000,000 Within that, our Ultima Team business reached $692,000,000 up 18% at actual FX and up 26% at constant currency. Our mobile business delivered another record year at $570,000,000 in revenue. During the year, we returned over $1,000,000,000 to shareholders through repurchasing stock, again, a record. Moving to the specifics of the 4th quarter results, EA's non GAAP net revenue was $924,000,000 which was $49,000,000 above our guidance and $28,000,000 above last year. The quarter's outperformance was driven by digital, particularly Ultimate Team and our mobile live services.
Ultimate Team continues to thrive as do our mobile titles led by Star Wars: Galaxy of Heroes and Madden NFL Mobile. EA's Q4 non GAAP digital net revenue was $712,000,000 This resulted in a full year digital revenue of more than $2,500,000,000 Breaking down Q4's digital revenue into its key components highlights the performance of each of these businesses. First, Extra Content and PC Free to Play contributed $310,000,000 up 26% over the prior year. The key driver was FIFA Ultimate Team, which grew 38% in the face of significant FX headwinds. At constant currency, our FIFA Ultimate Team business would have been up 48% year on year.
2nd, our mobile business generated $173,000,000 for the quarter, up 15% over prior year. Growth was led by Star Wars: Galaxy of Heroes and Madden NFL Mobile. The strength of these mobile live services adds to the broad portfolio of EA mobile games, which deliver a consistent and profitable revenue stream. 3rd, full game downloads added $134,000,000 to the quarter, up 18% year on year. And finally, subscriptions, advertising and other digital revenue totaled $95,000,000 up $4,000,000 over the same period last year.
Moving on to gross margin. Our non GAAP gross margin for the quarter was 76.9%, 90 basis points above our guidance due to the strength of digital, particularly Ultimate Team and our mobile business. It was up from 75.4% in Q4 fiscal 2015. Non GAAP operating expenses for the quarter were $499,000,000 down $14,000,000 from last year and $1,000,000 lower than our guidance. The resulting non GAAP diluted EPS for the quarter was $0.50 per share, dollars 0.10 above our guidance and $0.11 above the prior year.
One note as you review our GAAP operating expenses relative to our guidance. GAAP earnings for fiscal 2016 includes a material income tax credit due to the reversal of the valuation allowance we had against our U. S. Deferred tax assets. This credit was $453,000,000 increased our diluted GAAP EPS for fiscal 2016 by $1.37 per share to a total of $3.50 but it had no effect on non GAAP earnings or on cash flow.
Net cash provided by operating activities for the quarter was $396,000,000 compared to $198,000,000 in prior year, primarily due to Star Wars Battlefront. Operating cash flow for the full fiscal year hit its highest level in company history at $1,220,000,000 a 15% increase over last year's cash flow of $1,070,000,000 and above our raised guidance. We continue to grow cash flow due to the underlying strength of the business and the greater profitability unlocked by our digital transformation. Fiscal 2016 capital expenditures were $93,000,000 resulting in free cash flow of $1,130,000,000 During the quarter, we raised $1,000,000,000 in the form of 5 10 year investment grade senior notes. In connection with this, we also announced a $500,000,000 stock repurchase program over and above the 2 year $1,000,000,000 program we already have in place.
We completed this new program in the quarter and continued our steady progress on the ongoing program, resulting in a total repurchase this quarter of 9,900,000 shares of common stock at an average price of $63.70 per share. This leaves $539,000,000 from the 2 year program available for repurchases. For the fiscal year, we returned over 1,000,000,000 dollars to shareholders through the repurchase of 15,700,000 shares, approximately 5% of shares outstanding. As a result, we estimate that our fiscal non GAAP diluted share count will be 319,000,000 shares. During Q4, we settled $177,000,000 in early conversions of our convertible notes.
Through March 31, we've redeemed $470,000,000 of $633,000,000 total. And as of yesterday, we've received notices for an additional $27,000,000 to settle in Q1. Dilutions from these redemptions, the warrants and future redemptions are already accounted for in our non GAAP diluted share count. Our cash and short term investments at the end of the quarter were $3,830,000,000 or $12.74 per share. Approximately 47 percent of this was held in the U.
S. Now on to fiscal 2017 guidance. With regards to the market, we expect sales of current generation consoles to continue at a rapid pace with another 25,000,000 units to be sold this calendar year, adding to the 55,000,000 units in place at the end of calendar 2015. In addition to the console growth, we expect our mobile franchises to benefit from the continued expansion of iOS and Android, and we're continuing to see strength in PC gaming. We expect non GAAP revenue to increase approximately 7% to $4,900,000,000 The anticipated strength is broad based, primarily driven by the launches of Battlefield 1, Titanfall 2 and Mass Effect: Andromeda.
Other important drivers include the continued growth of our core sports titles and associated live services and the expansion of our mobile business. The expected phasing of our revenue is disclosed in the earnings presentation posted to our website. The non GAAP gross margin is expected to rise 110 basis points to 72.5%, driven by the increase in digital revenue and improved product mix. The margin benefits from the wholly owned IP of Battlefield 1 and Mass Effect: Andromeda are partially offset by the royalty fee associated with Titanfall 2. We expect non GAAP operating expenses of $2,100,000,000 up almost $140,000,000 from fiscal 2016.
The increase is driven by R and D investments in new franchises, particularly in the action genre, an extension of our partnership with Respawn, our digital player platform, competitive gaming and new mobile games. These are offset somewhat by FX. This would deliver an operating margin of 29.7% and non GAAP EPS of $3.50 up 11% year on year. This includes the addition of $41,000,000 in new interest expense on our recent debt offering, but is partially offset by a reduction in our non GAAP tax rate from 22% to 21% and the reduction in our share count to 319,000,000. The change in tax rate is due to the continued growth of our business outside of the United States and the interest on our debt.
The change in share count was driven by the additional $500,000,000 repurchased in the quarter. And with regards to forecasted share count, note that our standard practice is to include an estimate of dilution for our employee equity programs, but not to factor in any potential reduction from our ongoing buyback program. The earnings presentation in our investor website contains more information about our exchange rate assumptions for the year. Segmenting the sales provides further insights to the key drivers of our full year non GAAP revenue guidance. Packaged goods and other revenue was forecasted to be approximately $2,000,000,000 down slightly, driven by the continued shift to digital delivery and offset by growth in sales.
Digital revenue is forecasted to be $2,900,000,000 up 15%. Breaking down our digital revenue into its 4 primary categories, we see the contributions from each group. Our mobile business is expected to grow approximately 15% as we add new titles to our diverse and successful basis of live services. As part of this, we'll leverage the learnings from the success of Madden NFL Mobile to our other sports titles. Revenue from full game downloads is anticipated to grow 25%.
We saw strong growth in digital downloads in fiscal 2016. For example, downloads of Madden for all consoles are up 50% year on year, and we expect this trend to continue. Extra content and free to download is expected to grow approximately 10% this year, driven by premium offerings for Star Wars Battlefront and by the Ultimate team. Battlefront Extra content started to contribute in Q4, and we're expecting an attach rate for season pass of around 10%. Lastly, subscription revenue is expected to grow approximately 10% this year, driven by growth in Origin Access and EA Access and partially offset by the fall off of Battlefield 4 premium revenue.
On a GAAP basis, guidance is for net revenue of 4.7 $5,000,000,000 gross margin of 71 percent and operating expenses around $2,310,000,000 and EPS of 2.5 $3 Finally, cash flow will continue to be a key metric for us going forward. In fiscal 2017, we're forecasting operating cash flow of approximately $1,300,000,000 and capital expenses of approximately $110,000,000 resulting in free cash flow of approximately $1,200,000,000 up from $1,100,000,000 in fiscal 2016. The anticipated increase in CapEx is primarily due to upgrades to our platform infrastructure facilities. Focusing now on Q1. Non GAAP revenue for the quarter is expected to be $640,000,000 an 8% decrease compared to last year's $693,000,000 The year ago quarter benefited from more favorable exchange rates, Battlefield hardline catalog, a one off recognition of revenue from FIFA Online 3 in China and the fact that it was a 14 week quarter versus 13 weeks this year.
Non GAAP gross margin is forecasted to be approximately 74.5%. Non GAAP operating expenses are expected to be $485,000,000 $13,000,000 higher than last year, driven by investments in future products offset by the fact that it's a shorter quarter and by a stronger dollar. For the quarter, we expect a non GAAP loss of $0.05 per share as compared to earnings of $0.15 per diluted share last year. GAAP revenue is expected to be $1,250,000,000 as compared to $1,200,000,000 in the prior year, and GAAP diluted EPS is expected to be 1.30 as compared to $1.32 per share in the prior year. As we look forward towards Q2, please note that FIFA 16 launched 2 weeks ahead of the end of Q2 fiscal 2016 rather than the usual 1 week.
The extra week enabled us to capture an extra week of FIFA sales. This was primarily high margin Ultamateam and digital revenue and boosted the quarter by approximately $75,000,000 This year, we'll see a return to a more typical pattern with a much greater concentration of operating income in Q3 and Q4. In conclusion, it was a great year for EA with financial and engagement records set across the board. Looking forward, we're embracing digital to continue to drive the business. We expect these trends, along with growing sales of our existing titles and new franchises under development to continue to drive strong revenue, EPS and cash flow growth into the future.
Now I'll turn the call back to Andrew. Thanks, Blake.
Our industry continues to grow. Across the world, more players are engaging in more games on more platforms across more geographies and business models. Yet as our audience expands, it is evolving as well. The competition for time means there is no room for transient experiences. Players there expect more from the games they play and in return they will spend more time with the games they love.
In a world where discovery is increasingly difficult and engagement decisions are made every second, connecting players with the right experience when and where they want to play is critical. In this transforming world, our focus continues to be on meeting and exceeding our players' needs through direct relationships that add value at every turn. Today, Electronic Arts engages 100 of millions of players and in the future potentially billions through great games and live services in our powerful brands like Battlefield, FIFA, Star Wars, The Sims, Plants versus Zombies, Mass Effect and more. This portfolio of IP combined with great talent and robust technology in our underlying platform differentiates EA in our ability connect players to more games, to more friends and more ways to engage in a global network of play. It always begins with great games.
And in FY 2017, we will deliver some of the most creative, engaging and biggest experiences to date from Electronic Arts. We also continue to foster and grow thriving communities across our portfolio of live services. Our teams are leveraging technologies like Frostbite to deliver new experiences across more devices. As we evolve our core platform, we are learning more about our players and adding capabilities to unlock greater value for them. New programs, including competitive gaming, will help us reach and connect more players around the world.
These are the dimensions of connected play that today's players seek and that Electronic Arts is positioned to lead. These are foundational times for the future of games and how we play them. We're excited for FY 2017 beyond and look forward to sharing more with you in the quarters ahead. With that, Blake and I are here for your questions.
And our first question comes from the line of Justin Post with Bank of America Merrill Lynch.
Great. Thank you for taking my question. Two questions. Can you talk about your investment this year in your guidance for the action adventure titles? And could we see something as soon as fiscal 2018 on that front?
And then, large competitor, maybe this is for Andrew, who has talked a lot about eSports. And how do you see that opportunity for your first person shooters and also your big sports titles? Thank you.
So Justin, thanks for the question. Why don't I start with the investment piece? We're making broad investments that will fuel the growth of the company well beyond fiscal 2018 2019. Really today, we're building an action genre product that's probably in our fiscal 2020 or 2021 as well as action oriented games around the Star Wars genre. Most of what we're investing in that's incremental now probably comes in fiscal 2019 2020.
But clearly, some of our investment is to grow out the product base for what we're going on as well. We do have a new IP coming next year. We haven't yet announced it, but it's something that you'll see probably coming up soon. And clearly, that's part of our investment for the franchise as well as continuing out building out the Battlefront franchise with Star Wars for fiscal 2018 as well.
Yes. As it relates to competitive gaming, Peter Moore, our Head of our Competitive Gaming Group is going to deliver a lot more in terms of understanding at our upcoming Investor Day. The group overall is focused on enabling global communities through great games. So this absolutely includes the Elite division, but we also believe there is an opportunity to celebrate the talent and skill at every level of gameplay. So for some that will mean elite play.
For others that will just mean the joy of competition with friends. And we believe there is going to be a robust community and result engagement that we can build as a result of that.
Great. Thank you.
And your next question is from Chris Merwin with Barclays.
All right, great. Thank you. Just had a couple of questions. So first of all, an extra content that reaccelerated really nicely in the fiscal Q4. So I was wondering if you could provide a bit more color about what drove the improvement there.
I think you called out mid-twenty percent constant currency growth for Ultimate Team, but I was also sort of curious what lift you got from the Star Wars DLC as well. And then just a second question on non GAAP gross margins. I think you guided to about 100 basis points of margin expansion year on year, which is consistent with the long term guidance, but just was curious what that assumes for digital downloads as a percentage of total for the year and how the download patterns for Battlefield 1 might differ from Star Wars Battlefront? Thanks.
Yes. So extra content obviously was dominated by Ultimate Team, but also FIFA Online 3 in Asia continues to grow, which falls in that. We saw continued growth of our original Star Wars product, Star Wars: The Old Republic, as well as extra content associated with The Sims, with Battlefield or Battlefield 4 and obviously the start of the Battlefront extra content. The bulk of that though is on the components I just mentioned, really drove the outsized performance in the quarter for extra content. In terms of guidance going forward, assumptions around full game downloads, we assume that we're continuing to see growth that we saw like in the past year.
Industry now is above 30%. I think it's reaching 32%. And we're fairly consistent with that with some titles, as we mentioned in the script, that are well north of that. Gen 4 Madden, for example, was well north of 50% when you look at a full year number. So you're starting to see dramatic movements there.
We should see greater improvement next year because we won't have the skewing towards physical that we saw in the Battlefront gift giving that we saw around the holiday and we mentioned in our last quarter. And that forecast has driven what we're seeing in our uptick of about 110% in gross margin growth year over year.
Great. Thank you.
Your next question is from Stephen Ju with Credit Suisse.
Thanks. So Andrew, I'm looking at the proposed release slate for 2017. I think you have Titanfall launching alongside Battlefield and NBA launching during the basketball season. So obviously, this brings up concerns around cannibalization and missed timing. So I'm wondering if you can offer some additional perspective there.
And also, what do you think the underlying factors were that drove success for Madden Mobile and Galaxy of Heroes? And how much of this can be replicated in your other mobile sports or action releases? Thanks.
Yes. So in terms of the Titanfall Battlefield 1 question, this is a giant category in our industry 4.5 gameplay motivations. Some people play, you know, a lot of players who play games in that category, who are looking for to fulfill different gameplay motivations. Some people play very quick play, some people have more strategic play. Some people want both in different contexts.
The result of that is we feel like we actually have a really strong position to deliver the broader set of gameplay mechanics as it relates to 1st person shooter genre across the 2 titles and feel very confident that we are well positioned to do very well in that category in the year. Certainly, as you see the reception around Battlefield 1, we feel very good about that. The energy around Titanfall 2 is also building very nicely and we look forward to showing more of both of those titles at EA PLAY in June. As it relates to Madden Mobile and of Heroes, there's really a couple of things that we believe we are in a place to better understand now. One is how to best manifest sports IP or in fact large scale IP like Star Wars in the mobile space and what that means in terms of screen size, session time, UI and just general gameplay mechanics.
But perhaps the bigger opportunity that we feel like we're capturing now is the opportunity for live service. These are not fire and forget games. The teams launch what is a spectacular game and then work diligently with the community to make that game bigger, better, more dynamic and more diverse on every given day. And we believe we have an industry.
Yes. Stephen, I think the good analogy is the successful formula that drives Ultimate Team is continual events and activities. Team of the week example would be a great example. We're using that same approach in many of our mobile games to drive that same type of engagement where people are continually coming back because we're making the game exciting, fresh, new and competitive. And that's exactly what people want to get out and experience that they've invested time in.
And it's a great formula. And we certainly, as we mentioned on the call, hope to be able to leverage that in our other sports games as well as non sports games.
Thank you.
Our next question comes from Colin Sebastian with Robert W. Baird.
Thanks and congratulations on another good quarter. I have a couple of questions. First, I wanted to ask a follow-up on Battlefield 1 and the selection of World War 1 as the background setting. On one hand, it sounds quite intriguing and we know that the World War II genres in the past did quite well. So notwithstanding that the initial reception sounds very positive here, I wonder what your consumer testing says about the appeal of this historical event in a genre that's been dominated by futuristic backdrops?
And then I have one follow-up.
Yes. I think it's a great question and certainly one that we've been asked a number of times. When the team set out to deliver the next version of Battlefield, they wanted to do a lot
of things with the game. They wanted to be the
biggest Battlefield game. They wanted to be the most diverse Battlefield game. They wanted fundamentally new gameplay mechanics with evolution of story, interwoven character story lines, evolution of machinery, evolution of weaponry, a real opportunity to build and grow inside of a Battlefield universe. And when they took a step back and asked themselves what was the best place to set a game that had that kind of ambition, World War I was really the only place to do it. And what very few people remember from their history classes, I guess, is that people rode into World War I on horses and came out on planes and tanks and submarines.
And we think that level of innovation and evolution of battle in a short period of time gives us a tremendous opportunity to deliver a very epic and full scale experience. And I think what we've shown so far is a small taste of that and we look forward to spending time and giving people even more information and a deeper look at that as we come into EA PLAY in June.
Thanks, Andrew. And then looking ahead in terms of the Star Wars franchise, I wonder if you could update on the progress and the potential timing of the titles from Motive and Respawn and how they fit into the release cadence for that license over the next few years? Thank you.
We'll most likely have at least 1 Star Wars title a year over the next 3 to 4 years. Next year, we will see Star Wars Battlefront back with bigger and better worlds because we now have the new movies to work off of, not just the historical movies that we used before. We also are working on a Star Wars action game that part of the motive team is working on as well as the visceral team. And that's most likely the following year. And as we've announced, we're working with our partners Respawn to work on another Star Wars game.
They're very excited about that. They were asking us to include them in the franchise, and we felt that they could add a huge amount to a new title there. So the cadence should be at least every year along with the cadence of the large and small movies that Disney is doing relative to or side movies that Disney is doing relative to Star Wars. And then obviously, we'll continue to layer in mobile titles where possible as well to try to have a diverse Star Wars activity from shooters all the way through action and strategy, but at the same time, taking advantage of all the new great IP that's being developed by our partners at Disney.
Okay, great. Thanks, Mike.
Your next question is from Brian Pitzer with Jefferies.
Thanks so much. One more on Battlefield. It's getting very positive reception on YouTube and other online forums so far to date. We don't actually recall such strong early interest in the franchise. Are there other internal
Yes. And again, we have been delighted with the reception. It's our most liked trailer to date. And depending on what metrics you look at from YouTube, it may be the most liked trailer ever on YouTube. And we see that as a real positive sign for the franchise.
The community has been asking for innovation. The community has been asking for something different. And our DICE team dare to step out and build something truly epic and respond to the community's demands. And their feedback has been resoundingly positive. As it relates to how the game is tracking, the game is doing really, really well.
We recently had key franchise reviews where more of the game is playable at this stage than has ever been the case in Battlefield before. The Frostbite engine is robust in its foundation, and this is a very tried and true team who build unbelievable experiences. And so we have deep confidence in them to execute against their ambition And we look forward to demonstrating more of that at EA PLAY in June.
And like most of our large titles, you'll tend to see more and more during the summer. Gamescom lay in the summertime, most likely some further game plays are in the form of a beta or something to that extent. So you'll have plenty of ways to better understand the depth of the product and excitement around the product as the next few months come by. And we'll try to keep you informed in our next earnings call on how we see the demand developing for the product. Great.
Thanks.
Your next question is from Arvind Rhatia with Stern and G.
Thank you. Great quarter, guys. I was wondering if you could talk about Titanfall 2 a little bit and how we should think about the title relative to its predecessor in terms of units perhaps. Obviously, the previous one was very successful, but it had some unique circumstances. It wasn't on all platforms.
But I know it had a high attach rate as being one of the key early titles. So if you could just put that in perspective. Thank you.
Yes. Clearly, we're very excited about it. We've seen it a couple of times over the last few months, and it's well along the way. And it's evolved substantially from the 1st Titanfall. 1st Titanfall was fantastic.
This has added a whole new level to the game and the experience. It will be on both platforms, which obviously means a bigger audience for Titanfall, particularly with the Sony platform is the one that hasn't experienced it. So they'll get a chance to experience the game. But at the same time, obviously, the attach won't be anywhere near as high as it was because it was one of the first AAA titles for the new Xbox 1. And so obviously a lower attach.
We think you're going to see numbers clearly larger than our Titanfall 1 franchise. And we've got good expectations for it, but we've tried to be prudent in how we forecast that in our guidance.
Great. Thank you, guys. Good luck.
Your next question is from Michael Olson with Piper Jaffray.
Hey, good afternoon. I had a couple of questions, if I could. First, you might dive into this at the Analyst Day, but in addition to continued mix shift towards full game downloads and digital add on content, How do you think about the evolution of revenue mix over the next few years related to subscription, free to play, etcetera? I guess, should we anticipate much of a change or will be kind of primarily a continuation of growth in full game downloads and add on content that we're seeing today? And then second, regarding past comments that you've made on revenue growth consistency, how disciplined do you plan to be on keeping revenue growth in the single digits?
In other words, if it appears that it could be tracking towards double digits partway through the year, would you push titles into fiscal 2018 in order to manage the growth rate? Thanks.
Yes. So on the first piece, I think we will continue to see subscriptions grow, particularly with EA Access and the strength of that product. And obviously, based on the strength of that, we rolled out Origin Access, which is our origin based PC based gaming with a similar structure as EA Access. We'll continue to push that. We think subscriptions are an important part of the future of this business and you'll see that continue to grow.
In the past, remember, we've had some accounting differences between products where something that looks like DLC might have been booked as a subscription because it was a series of DLCs over time. And that's what made the subscription number go up and down over time. You'll continue to probably see some of that as we have different accounting methods. But I think the combination of extra content and subscriptions should continue to be a larger and larger portion of our business over time. I think that's an important piece of the mix.
I think also as you look at the business, you'll see greater mobile concentration of growth. And the combination of mobile plus extra content subscriptions is now starting to create a very nice foundation for the business. With that, plus full game downloads, we mentioned, worth $2,500,000,000 That's a wonderful foundation to make the revenue much smoother over time. On the revenue growth, let me be clear, it's not our aspirations to have single digit revenue growth. It's our focus to try to maintain discipline on the operating model in the company.
We don't want to over invest and not deliver the revenue. That was the problem we had historically. So we talk about single digit revenue growth simply because that's how we think about our investment, but we're trying to drive higher revenue growth if possible. And we'll do that on a case by case basis and decide if the revenue if we can push the revenue harder or not. And sometimes products get moved based on when those products are ready or timing in the marketplace.
But our goal is to try to drive both revenue top line growth and drive earnings growth. And if we can get both of those in double digits, that would be fantastic. We've been lucky enough to drive double digit bottom line growth, and we'll continue to see that over the next few years, we believe.
Thank you.
Your next question comes from Drew Crum with Stifel Nicolaus.
Okay, thanks. Good afternoon, everyone. So the guidance for OpEx this year is $2,100,000,000 You kind of ran through the details behind that. Is that a new normal or the run rate we should expect beyond fiscal 2017?
It's probably in that zone, could be plus or minus $25,000,000 or $30,000,000 I remind people there's a couple of components to that. One is our marketing and sales, we've tried to target that number between 12% 13% of revenue. So obviously, in a bigger revenue year like this year, we're going to spend more on marketing and sales to support things like Battlefield and Titanfall. So that's going to see a flux up and down based on the revenue component. Our R and D expenses, we've tried to target around 21% to 2% of revenue, and we're tracking around that level now.
And we feel like there's a huge opportunity for us to continue to invest in new areas of the business like the action genre where we haven't competed historically is a very ripe opportunity for us and we've been able to bring great talent in to try to build out that part of the business. Our new mobile area our mobile areas with studios coming on has also been important for us and we'll continue to invest there. And then last but not least, continuing to build out the platform in which we operate all our games on and we're trying to leverage through that network will continue to be a key part of our investment. So you probably see that rough level as a percentage of sales be the focus going forward, which is a combination of the R and D level around 21% to 22%, marketing in the 12% to 13% and G and A in the 7% to 8% range.
Got it. Okay. And then one question for Andrew perhaps. Some of your competitors have talked about plans or initiatives around advertising in their mobile titles. Is that something that's contemplated in your 2017 guidance?
And can you talk about any targeted advertising you're doing or would like to do in some of your sports titles going forward? Thanks.
Yes. It's again a great question. Advertising is certainly an important part of our business both now and going forward. We have been we have had ads in both our console games and our mobile games for some years and that business has continued to grow. We often walk the fine line between maintaining the integrity of the entertainment experience with the provision of advertising inside those experiences.
Right now, we have ad technology that we are implementing in some of our key mobile titles that is very targeted in nature and we believe is additive to the overall experience in the long term and players have been responding positively to that. So there is some advertising in FY 2017 number. I would expect that as our network continues to grow beyond the 100 of millions that we have today, that it will become a more meaningful part of our business in the future.
Yes. One thing to remember there, particularly for us is that there's both the ability to sell advertising, but maybe equally or more important is the ability to cross promote to players to keep them in your network. And as we have a broader and broader portfolio of games, particularly in mobile, that cross promotion advertising is very valuable to us. And holding on to a player in your network is very powerful. And so you'll see that type of advertising, which may be less obvious to the average user than a traditional, advert that you might see in a game.
Operator, next question please.
Your next question is from Ben Shusher with Macquarie Research.
Hey guys, congratulations on a great year. On the full game download, anything you guys are going to do to try to increase it via discounts or other promotions or are you pretty happy to see it grow organically? And then also, if you're already over 30%, where do you think that number will be in FY 2017 in the next few years? And separately on Battlefield 1, any notable increases in in game monetization or will it be continued more maps and those kind of things? Thanks.
So let me take the first one and then I'll have Andrew talk a little bit about Battlefield. It's a difficult prediction, right? We know that PCs took about 8 years to go from 0% to 75% in full game downloads. But there's a lot of differences between the PC business and the console business. We do know that the consumer is very interested in convenience, and we want to have product wherever the consumer wants to shop, be it a retail store or a console.
We obviously have great partners in retail and we want to continue to have great partners over time. And so we'll support them with great in store merchandise and training and support, and at the same time, try to help educate our console partners as well on how to best market the products digitally. Our best guess today is that growth continues at about the pace that it has over the last couple of years since the Gen 4 consoles were rolled out. So could we see another 5% pop meaning going from say the high 20s to the mid-30s? We do think that's possible.
I think the big issues remain bandwidth. They remain cashless transactions. Many of our customers may not have a credit card and they need a cashless transaction method to be able to play digitally as well as obviously the residual value that some game retailers provide. All of those things are changing over time, and we see that will continue to help support the growth of full game downloads. But we want to allow the consumer to decide.
We'll give them opportunities to buy certain things digitally that they may not be able to buy physically special digital only offers. But at the end of the day, we really want to make sure we're allowing the consumer to buy the product wherever the consumer wishes to do that, and we want to make sure we're there.
As it relates to Battlefield 1 and extra monetization opportunity, taking a step back, any time we think about extra monetization inside of MiXperience, we really think about it on 2 vectors. 1, are we able to provide value to the gamer in terms of extending and enhancing their experience? And 2, are we able to do that in a world where we give them choice? We never want to be in a place where there's a belief that we are providing a pay to win inside of one of our games. I think what you've seen from us over the last couple of years is our ability to balance this and deliver tremendous value through choice to our player, which is why our extra content line of business has continued to grow healthily.
As we look at FY 2017, we are forecasting again continued growth in that category. Given that in Battlefield 1, you will see both macro monetization 1, you will see both macro monetization opportunities from us like maps and large scale content as well as micro monetization opportunities, smaller increments of gameplay. And then over time, what you will see from us is elements of gameplay that allow gamers to engage and drive and extend and enhance their experience much the way people do with FIFA Ultimate Team or Madden Ultimate Team today. And we feel very confident in our ability to deliver that in a way that is deemed valuable by our player and drives increased engagement over time with them.
Great. If I could just
add one more in. I don't want to front run the Analyst Day too much, but what are the key areas that you really want to spend more time on with the investors? Thanks.
I think again we have been undergoing a fairly fundamental transformation of our business over the last few years. We feel like we're in a very, very strong place. We feel like we have a strong and predictable revenue source and that the company is operating very well right now and the management team are doing great things in a world where our industry continues to grow. And we want to take the opportunity to share our vision for the future, how we see the industry growing, where we think the vectors for growth exist inside that industry and how we believe Electronic Arts is uniquely well positioned to benefit from those vectors of growth in the years ahead.
And Ben, I think part of that the goal is to make sure we're giving both the sell side and the buy side exposure to broader management team. And the chance to see the depth of what we've developed here as we feel very confident of it and we're excited to make sure we showcase that next week.
Your next question comes from Mike Hickey with The Benchmark Company.
Hey guys, thanks for taking my questions. Great quarter. The Blake, you gave the 25,000,000 units growth for I think calendar year 2016. The I'm curious, if your assumptions, if you are expecting any sort of new consoles this year, any price cuts to existing hardware or maybe any other sort of key considerations to that estimate? And then I realize obviously you can't announce any new hardware plans from your partners, but there's been sort of wide speculation that you could have a mid cycle upgrade coming.
And I was curious if you could sort of shape for us why a sort of a mid cycle upgrade could be positive for the industry. And also if there's any potential development expense to developing games in 4 ks? Thanks guys.
Yes. I mean, I can't tell you a lot about what Microsoft or Sony's or other console makers plans are. I think we've all seen some of the discounting that's been going on in the industry both through the across the industry. And I think all of that acts to across the industry. And I think all of that acts to continue to drive people into consoles.
I think the other thing that's important to remember is there are very few Gen 3 titles being still made. Most of the new titles that we're talking about as well as the industry is talking about are Gen 4 only. And that is a will clearly start to push people to ultimately buy a new console if they've resisted, because they've had a choice to play a game on either Gen 3 or Gen 4. In terms of any mid cycle upgrades, once again, I can't predict. But what I can tell you is that what was heard, I think, publicly from the console makers is they're realizing that the compatibility issue across consoles is an important consumer issue.
And as Microsoft shown, they've tried to do with some backward compatibility on older titles and new titles. And I think that's going to be an important part of what a mid cycle might look like if there is one, which removes a lot of the risk associated with what we've seen historically with console cycles. We don't spend a lot of time worrying about it because we feel like our ability to develop for whatever new technology comes, the risk of that has been minimized because we've moved towards 1 single engine frostbite and we're able to port that to whatever platform or point that to whatever platform is evolving or is upgraded. In addition, our business model is so much more diverse now than it has been historically that the notion of a console cycle becomes somewhat irrelevant in our ability to generate strong earnings and cash flow. So we'll all be interested to see where Microsoft and Sony come out if they do something at E3 or sometime in the year to come.
But we're excited about the continued growth in the business and not afraid of a cycle change if that was to occur.
All right. Thanks Blake. Best of luck guys. Thanks.
Your next question is from Neil Doshi with Mizuho Securities.
Great. Thanks for taking the questions. First on mobile, we've seen couple of quarters of very strong mid teens year over year growth. Is the plan there really to focus around the core AAA titles ecosystem around those games? Or can we see some original IP on the mobile front?
And then secondly, with the fairly healthy cash balance, Blake, how do you think about M and A as another way of kind of putting that cash to use? Thanks.
Yes. As it relates to mobile, again, when you have the benefit of the depth and breadth of our portfolio of great brands and IP, In a world where discovery is becoming challenged and the mobile market is increasingly fought with competition. Utilization of those brands is certainly a great strength for us. And as you heard us in our prepared comments, we had the most installs of any publisher in calendar year 2015. And a lot of that is driven around the recognition of our brands and our IP and the quality of the experiences that come as part of those brands.
As we look forward, certainly, you will see more great experience from us that are based around the depth and breadth of our IP portfolio. But at the same time, like in our console business and our PC business, we also look at opportunities to develop new IP in the space. And so you would expect from us in the future a balanced approach to the marketplace. But certainly, we're not turning our back on our existing portfolio.
Yes. In terms of M and A, I think over the last 3 years, we've gone through quite a transformation as a company. And 3 years ago, we could not have talked about M and A without having most of you throw something at us. And we feel like we've now at least earned the right to talk about it. The reality is there's not a lot of things out there to buy.
This is an industry fairly consolidated already. We look at everything that is that's being considered to be sold out there or shopped. Most of them either we're not interested in or at a price that doesn't make sense to us to create value for shareholders. But we'll continue to do that and we'll continue to look for ways to bring in new talent, and new properties over time if those are an opportunity. But we're certainly listening probably more than we did 3 years ago, and we're well aware of the opportunities out there and we'll continue to look at them.
With that, I think we're wrapped up. So I want to thank everyone and we'll see people here next week for earnings or for Analyst Day. And if not, we hope to see you at EA PLAY in June. Thanks for your time. Thank you.
Thank you for your participation. This does conclude today's conference call and you may now disconnect.