EA Drops the Layoff Hammer

[VanCitySportsGuy]

Re: EA Drops the Layoff Hammer

I'm not sure what the point of the ESPN deal was considering they don't even use it in their biggest North American game.

I'm sure most people don't care about the streaming ESPN Radio updates or the sports ticker that have been featured in certain EA games.

In the past couple of years, EA has been more active in interacting with the community and creating more original IP's. I'm sure the lack of success on the Wii has really hurt the company. The Wii has the biggest install base and EA has only had 2 successful games/franchises (EA Sports Active and Tiger Woods) on the console.

EA also doesn't have mega hit shooter in their catalogue.

With the way the industry is going, it probably makes more financial sense to develop cheap mass market games. Spending 15+ million on an original IP is too risky these days.

[dave374]

Re: EA Drops the Layoff Hammer

The silver lining in this could be that we could see the exclusive contracts go away.

There's no silver lining to people losing their jobs.

[Knight165]

Re: EA Drops the Layoff Hammer

Sources for the $400M+ figure? I worked at EA at the time, and the number I consistently heard was the same as the article ($300M for 5 years). No idea about subsequent deals.

Difficult for me to say if the exclusivity deal has been a net plus or minus for EA. Regardless, I don't think it's played a significant role in EA's financial woes. Personally, I believe the market for North American sports games has reached a saturation point. The cost of making games gets more expensive every year (there's a vast jump for every console change), while retail prices have pretty much stayed the same, and sales are flat.

Almost impossible to track down.
It was quite some time ago that I was researching some investments.....that I came across the numbers.
I know....I don't like posting something like that without sources...but I truly doubt it was the bottom number of 300 million.
Even in the article...it says "north of 300 million but well south of 500 million". What the heck does that mean?
EA has done a phenomenal job of keeping investors in the dark about this very subject.
One of the prospectus actually had to break down the expenditures to try and root out the amount.
Neither here nor there.
It's not even a question of the worth/determent of the deal that I'm focusing on......it's the idea that the license has "made EA more money than it payed out". I've seen nothing to support that. No way, no how.
(unless you are going by the unreasonable(IMO) case that had they not payed....they would be making nothing on Madden)
....and there is a reason that EA is in the red for almost every year since the deal...and I'm sure it's had something to do with it.
There are probably 1500 people right now who might agree with me.

M.K.
Knight165

[Pokes]

Re: EA Drops the Layoff Hammer

I don't get this, if this is the case why does EA keep swallowing up different game studios then?

[bkfount]

Re: EA Drops the Layoff Hammer

....and there is a reason that EA is in the red for almost every year since the deal...and I'm sure it's had something to do with it.

One reason doesn't properly explain why, especially when they got the license right as this generation started. Massive spending on R&D, new IPs, and acquisitions that haven't made back the investment cause a lot of pain. Their lineup of internally developed new IP's under performed, and some of their best sellers like Left 4 Dead and Rock Band are owned by other companies. Madden does fine, but has the exclusive NFL license around its neck. Don't forget how the 360 and ps3 install bases combined still don't equal what the ps2 had, and there was a global recession that has already put other companies out of business.

They spent almost a billion dollars for bioware and pandemic, which is probably never going to be worth it, even with Bioware's Dragon Age, Mass Effect 2, and that Star Wars "TOR" MMO coming out. Pandemic is like EA's Rare, utterly disappointing.

[DrJones]

Re: EA Drops the Layoff Hammer

....and there is a reason that EA is in the red for almost every year since the deal...and I'm sure it's had something to do with it.
There are probably 1500 people right now who might agree with me.

M.K.
Knight165

Doubtful. I was there for over seven years and was one of the hundreds that was let go in EA's 2006 purge, and I don't agree with you. I don't for a second believe any layoffs would've been prevented by not getting the NFL exclusive. EA's problems go much deeper than that, I'm afraid.

[DrJones]

Re: EA Drops the Layoff Hammer

I'm not sure what the point of the ESPN deal was considering they don't even use it in their biggest North American game.

Corporate synergy mumbo jumbo, nothing more. When we first heard about it, we said, "Awesome! When can we expect ESPN assets?" and were answered with shrugs. I don't believe EA or ESPN had any intention of fully integrating ESPN assets into EA games. EA wants to be their own brand and not seen as an offshoot of ESPN.

In the past couple of years, EA has been more active in interacting with the community and creating more original IP's.

Unfortunately, many new IP's probably took a major hit this week.

[rudyjuly2]

Re: EA Drops the Layoff Hammer

"But that's the thing, the exclusive license brings in more money than it costs."
How does anything that rudy brought up(even if it is 100% correct) relate to the license bringing in more money than going out?
To see that you would need to see a SUBSTANTIAL increase in sales due to the license.

It depends on the way you look at it. The exclusive deal did not mean many additional sales for Madden. The fact that they didn't increase the sales much AND had to pay an extra $60+ million per year for the licenses could lead one to say this deal costs them money and was bad. But that's very short sighted. 2K5 (at a discounted rate simply to create market share) sold about 2.5 million copies. Many people bought both games and the real battle for market share was the following year. If 2K6 had been allowed to battle evenly against Madden 06, how many sales could that have cost Madden? The potential loss in future revenue was huge. $60 million was basically an insurance policy to prevent that.

Don't you think if GM had the option of paying a large sum of money 50 years ago to keep the Japanese car makers out of North America, they would have done it? They were the dominant car maker but any time you can eliminate competition you do it. It creates secured future income. EA was not going to gamble by letting a rival get too big and risk their cash cow which is Madden. If that means Madden only makes 90% of what it made so be it. It's still 90% of a lot of money with no risk.

[grunt]

Re: EA Drops the Layoff Hammer

It depends on the way you look at it. The exclusive deal did not mean many additional sales for Madden. The fact that they didn't increase the sales much AND had to pay an extra $60+ million per year for the licenses could lead one to say this deal costs them money and was bad. But that's very short sighted. 2K5 (at a discounted rate simply to create market share) sold about 2.5 million copies. Many people bought both games and the real battle for market share was the following year. If 2K6 had been allowed to battle evenly against Madden 06, how many sales could that have cost Madden? The potential loss in future revenue was huge. $60 million was basically an insurance policy to prevent that.

Don't you think if GM had the option of paying a large sum of money 50 years ago to keep the Japanese car makers out of North America, they would have done it? They were the dominant car maker but any time you can eliminate competition you do it. It creates secured future income. EA was not going to gamble by letting a rival get too big and risk their cash cow which is Madden. If that means Madden only makes 90% of what it made so be it. It's still 90% of a lot of money with no risk.

I agree with you on EA splurge on exclusive agreements on their bottom line. I don't blame EA but the NFL business model of tying their vendors into exclusive contracts. A 5 year deal that is worth 300 mil is nothing to sneeze at while adding 0 value to the existing product. EA didn't realize that the same people that purchased 2k football also picked up the Madden series.

I do blame EA for the ESPN deal. EA just wanted to bury 2k by breaking the partnership between 2k sports and the ESPN brand. EA could have buried 2k the old fashion way, making a better a game.

So, in less than five years EA turned their cash cow into a product that may not even break even. The 60 million over head is a gigantic weight for any product and that is not including the ESPN deal.

[grunt]

Re: EA Drops the Layoff Hammer

It depends on the way you look at it. The exclusive deal did not mean many additional sales for Madden. The fact that they didn't increase the sales much AND had to pay an extra $60+ million per year for the licenses could lead one to say this deal costs them money and was bad. But that's very short sighted. 2K5 (at a discounted rate simply to create market share) sold about 2.5 million copies. Many people bought both games and the real battle for market share was the following year. If 2K6 had been allowed to battle evenly against Madden 06, how many sales could that have cost Madden? The potential loss in future revenue was huge. $60 million was basically an insurance policy to prevent that.

Don't you think if GM had the option of paying a large sum of money 50 years ago to keep the Japanese car makers out of North America, they would have done it? They were the dominant car maker but any time you can eliminate competition you do it. It creates secured future income. EA was not going to gamble by letting a rival get too big and risk their cash cow which is Madden. If that means Madden only makes 90% of what it made so be it. It's still 90% of a lot of money with no risk.

The cost of a monopoly is a greater cost than competition. The fall of GM wasn't because of Japanese automakers but GM making really bad cars. EA could have killed 2k football in the crib if they would have made a better game and making better games would have cost less than using exclusive licenses.

EA use to have exclusive license for NASCAR and we see what happen to the NASCAR series.

In the last few years I like the direction of EA but the combination of a bad economy and the reputation of not putting out quality products could hurt EA in the near future.

[Cebby]

Re: EA Drops the Layoff Hammer

The cost of a monopoly is a greater cost than competition. The fall of GM wasn't because of Japanese automakers but GM making really bad cars.

It was actually due to their insane union payments.

GM never fell lower than #2 in worldwide sales.

[grunt]

Re: EA Drops the Layoff Hammer

It was actually due to their insane union payments.

GM never fell lower than #2 in worldwide sales.

Well, I should have said that I knew of many that wouldn't touch a GM car because of the quality.

[Cebby]

Re: EA Drops the Layoff Hammer

Well, I should have said that I knew of many that wouldn't touch a GM car because of the quality.

So?

GM was the #1 seller for about 70 years and fell to #2 in 2008.

[Knight165]

Re: EA Drops the Layoff Hammer

Doubtful. I was there for over seven years and was one of the hundreds that was let go in EA's 2006 purge, and I don't agree with you. I don't for a second believe any layoffs would've been prevented by not getting the NFL exclusive. EA's problems go much deeper than that, I'm afraid.

....I was half kidding about the layoffs(not a "joking" matter by any stretch).

Look.....the exclusive should they/shouldn't they point is getting too much attention IMO(especially in regards to my point in this thread).

EA had absolutely no choice but to secure the license.
I don't think any one can rationally say otherwise.
However, from a business standpoint it was a horrible financial situation for them.(notice I didn't say decision, but I'll bet there were those who thought it was a great move....that they would crush T2 by doing so....hence the buying of other exclusives)

M.K.
Knight165

[luv_mist]

Re: EA Drops the Layoff Hammer

I can't see how people think that the licenses made them more money than they would lose. They paid out for the licenses while at the same time loss more sales. In all honesty, it's amazing because it's another year for Madden fans and they're still falling off of the bandwagon. They even created the Head Coach franchise which I'm sure didn't get enough sales to offset what they loss with the Madden fans. Don't forget the advertising that they had to put in for Madden each year. EA needs to cut some of the suits that are costing them their creativity and continue to push the "freedom" aspect of their game making.

They also need to stop getting caught in the yearly releases. It's going to seriously be the downfall of them. They need to got to the drawing board and look long & hard at what is missing. Honestly, there are still games that they are releasing that are coming out. Anything Bioware touches will be solid. Remember Mass Effect is coming. Maybe they should have tried harder to gain Take2........