EA just finished their quarterly update for investors, focusing on the rest of fiscal year 2009 and 2010. Without spoiling too much…things don’t look too good for EA.
EA’s John Riccitiello pretty much summed up EA’s entire presentation with part of his opening remarks: “While we saw significant improvement in our quality of products this year, that quality has not translated into increased sales.” Indeed, while EA has seen a resurgence in unique IPs and innovative games this year, that change hasn’t led to the success the video game giant is used to.
“Quality is a prerequisite for a great selling game,” said John, “but it is not the entire equation.” Due to the low sales (caused largely by the change in retail policies this quarter, according to Eric Brown and John) EA is going to significantly miss their target numbers they previously established for this quarter. “Major retailers are reducing their year-end inventories for titles not in the top 5 sale group for November and December,” John stated. “This will sharply reduce our December revenue.”
With the change in the retail environment and the struggling economy, what’s EA going to do to start seeing more profit? Two things: cut costs, and advertise more for games with the best market potential.
EA plans to reduce titles and SKUs when it comes to their underperformers, and put that money toward the games they know can sell. In addition, they’re going to reduce expenses “beyond cutting SKUs and titles.” In other words, expect more stories about EA cutting jobs and studios in the future, and a "year over year reduction in R&D spending."
Even if reducing the number of titles causes lower overall numbers for EA, John didn’t really seem to care. Before, EA cared more about remaining the highest-selling third party publisher; now, they just want to increase margins even at the cost of total revenue.
So what will be cut? They weren’t too vocal with that information, but we did get some idea. One thing John and Eric did share is that of the games cut, almost all are going to be between the “core gamer” group and the “family games” group, with the EA Sports division suffering the least. Games like Spore (which John called the great beginnings of a new franchise) and Warhammer Online were cited as some of their recent new IPs with the best potential for future profit. At the same time, while they weren’t happy with Mirror's Edge’s numbers, they did note that the first game in a new series often struggles with sales, and they were sure that second releases in certain IPs would perform much better. (Which IPs? No idea. Mirror's Edge and Dead Space? Hopefully.)
The biggest roadblock to EA’s success, though, will remain the Wii. While they are the most successful third party publisher on Nintendo’s platform, EA just hasn’t been equipped to deal with the radically new gaming environment it spawned. “No question that having the Wii platform be a platform with 2/3rds of unit sales occurring to the first party owner is a really unusual thing,” John said. (Which, according to the NPD, isn't quite true.) “We haven’t seen that since prior to PlayStation 1, and in terms of console game sales that’s a challenge and something we have to contend with.”
Eric added in his two cents. “We would be doing better if Nintendo didn’t have such a stronghold on their own platform.”
December 9th, 2008 at 3:36 pm
One thing I found a little funny: John (or Eric?) was talking about Rock Band and how it wasn't underperforming at all, and then went on to urge everyone who doesn't have it to go buy it and try it themselves.
January 21st, 2009 at 6:59 pm
I'm glad EA is suffering. EA treats their customers like potential thieves. I hope their shares in PC market go down even more because they really deserve that for adding SecuROM, a malicious method to protect their digital rights at the expense of buyers' rights, in all their PC games.
February 13th, 2009 at 2:39 pm
“While we saw significant improvement in our quality of products this year, that quality has not translated into increased sales.”
Course they are losing they didn't add quality...they added cheap graphics and removed gameplay from 99% of their titles.
DRM
False Advertising
Console Ports to PC
Poor Customer Service
Buggy Releases
Ads in Games
Misleading their customers
The list goes on and on. They can blame economy and pirates all they want the error is on their end.
They lost what made them good and I refuse to waste my money on their titles anymore.
If I ever must buy a game from them I will wait 6 months buy it USED on Ebay JUST to avoid giving them sales.
Suffer more EA we are sick of your crap. The sales are proving it as well.