EA biting off more than it can chew?
 

Just found this under a news service I get. It's probably just a small blip, but a loss of 91% in profit is quite a hit.

Well, their biggest quarter is always the 3rd Quarter, not the 4th Quarter because a couple of their biggest games are seasonal (ie Madden, NCAA). Sure, they missed projected but it was by 10% (598 to 550M) not the precipitous 91% drop they quoted earlier. I'd love to see them choke on their own excess but it's not this easy.

SI

You're confusing sales with profit margin. They did $550M in sales, but how much of that was games $30 and below as opposed to brand new, $50 titles?

Dola,

Additionally, sales reflect what they've sold, while profit reflects what they've spent in relation. The money spent to get the NFL license probably ate into their profit substantially, while the money they received in revenue didn't drop a whole lot.

Well, the article doesn't clearly state that so it's just speculation on your part. But it does state that they did $8M vs $90M in profits the previous year. So, yeah, they still made money, just less. Odds are (also speculation), a lot of this was the result of having to bargain price a couple of games like Madden due to increased competition but that was only a one year blip and probably what drove the exclusivity contracts. But without being able to look at their books, we can't know for sure.

SI

Good points, but what's interesting to me is that while their revenue fell $65 million, their profit fell $81 million. That means that not only were their sales a little flat (-$65 million), but their expenses also increased over last year (+$16 million). You have to wonder if the price decreases their competition forced EA to make might be hitting more of their bottom line.

What's also interesting is that US video game sales rose 32% in March.

If it is indeed true that games like Halo and GTA are taking away sales from EA and the ESPN series was forcing them to charge a lower price (MVP was cheaper - on ave - in March 05 than it was in March 04), then their moves to get exclusive licenses for some of the sports makes more sense.

BTW, the more I look at this the more I think that EA's actions in locking up sporting lines may have been a good move for the company (from a financial standpoint). Being able to go back and charge $49.95 for console games without the fear of an ESPN 2K game coming in at $20 will probably get them back on solid footing in 06 and beyond.

Triple dola, just saw this as well:

http://news.com.com/Overtime+coming+...3-5611293.html
I wonder if this will start impacting their bottom line as well. The last quote was interesting:

A lot of large publishers have looked 'east' for content and development in the past, the problem is that there's a very different look and feel between games developed in different cultures, some translate well - some don't.

I personally think there are some hugely talented dev's in China, however whether their work translates to Western cultures easily is debatable, for instance I've played a lot of 'Sane Sports' (Korean publisher, used to distribute SI's games over there) games - they're of a very high standard and fun to play (despite the problems I have with reading Korean) ... however only 'some' of the ones I've played would imho translate well to the mass market in England & America.

PS> Its interesting that EA are starting to consider this at a time when the 'business' computing industry have started to move away* from out-sourcing development to cheaper countries because of problems with localisation and communication.

*at least in the UK, not sure of the situation elsewhere ..

I agree with your premise here. When I was at Honeywell, we had to recall about 30 positions from overseas because of project management issues. Some of the other issues dealt with the wide gap between how the work translates as well.

Usually when sales get tight in any industry, people look to outsource. But it is interesting given some of the issues many have had to see EA starting to look that way.

Translation: California allows unions, and has stricter rules about overtime pay than other places do, so in order to keep the gaming sweatshop going, EA's looking at places that aren't quite as regulated.

Then maybe we should keep a look out for a EA & Kathie Lee Gifford merger?

EA-Nike. It's only natural :)

SI