EA Lowers Financial Outlook - Jobs/Products To Be Cut

[Shawn Zipay]

According to analyst Colin Sebastian, Electronic Arts may need to cut both staff members and the number of franchises in the upcoming months.

Sebastian's firm, Lazard Capital Markets, also reduced the third quarter estimates for EA. This came about after Mirror's Edge, Need for Speed: Underground, and Rock Band 2 sold less than anticipated. Originally, they predicted EA would easily earn $2.14 billion for the current fiscal year. That figure has now been changed to just $2.07 billion.

"Importantly, we believe EA is continuing to review its cost structure and franchise base, and it is possible that management will announce further cuts in headcount and the development pipeline (including existing franchises) over the coming quarters."

Sebastian said that a handful of EA titles have sold "fairly well" during the quarter, including Dead Space, FIFA 09 and Left4Dead, which has offset the poor performance of other new releases.

"While the videogame industry continues to show some resilience in the face of a very challenging consumer environment, strength does not appear to be across the board, and we believe that several EA titles are under performing expectations at retail.

"Specifically, our checks indicate that sell-through trends of key holiday releases Need for Speed: Undercover, Rock Band 2, and Mirror’s Edge remain mixed, which may reflect some fatigue overall in the music and racing genres," added Sebastian.

Despite the lowered sales predictions and possibility of lay-offs, Sebastian feels as though EA will continue to seek out and acquire publishers and developers with "proven franchise successes." This, in addition to expanding its "geographical diversity" and further utilizing online distribution will help to offset the slight decrease in sales and revenues.

Source

[MrKLM]

Re: EA May Need to Cut Jobs in Upcoming Months

they still have yet to see the influx of Holiday shopping and after xmas sales.

[imported_Whiskey]

Re: EA May Need to Cut Jobs in Upcoming Months

they still have yet to see the influx of Holiday shopping and after xmas sales.

Anything is possible, but these things are usually already factored into the sales projections. Although the gaming industry is holding up better than others, with the economic downturn going on right now sales this Holiday season are likely to be lower than in previous years.

[MrKLM]

Re: EA May Need to Cut Jobs in Upcoming Months

if anything i think that most parent buyers are going to be more selective on what they buy their children. instead of 3 or 4 games probably just one or two bigger ones like rock band 2

[TGL|TXGrunt]

Re: EA May Need to Cut Jobs in Upcoming Months

yea gotta love the current market. just hope it bounce's back soon.

[FPS[SONIC]]

Re: EA May Need to Cut Jobs in Upcoming Months

Who could be surprised by this? IMO EA doesn't make great decisions and their customer "service" is some of the worst I've experienced.

If I never had to purchase another EA title, I'd find a way to live with myself. lol

Hopefully, they'll cut the Battlefield franchise (never will happen) and allow DICE to venture out into new partnerships. I can dream about a DICE+Steam/VALVe marriage all day long.

/slaps self to wake up from daydreaming

[MrKLM]

Re: EA May Need to Cut Jobs in Upcoming Months

DICE is for sure one asset they will not get rid of. If anything I could see EA Montreal going or smaller ventures like EA Mobile. They won't drop any sports studios or the ones that make them the most money which DICE is one of.

[Obsidian Spire]

Re: EA May Need to Cut Jobs in Upcoming Months

I thought EA publishes Madden. Wouldn't that game alone provide for massive yearly profits?

[MrKLM]

Re: EA May Need to Cut Jobs in Upcoming Months

I thought EA publishes Madden. Wouldn't that game alone provide for massive yearly profits?

not when combined with everything else.

[iQue]

Re: EA May Need to Cut Jobs in Upcoming Months

just $2.07 billion.

:shock:

That alone is a lot of money. I hope EA kicks whoever makes the FIFA/NHL/etc games in the butt and makes them release a game every 2 years instead of making us pay loads for basically a patch for an already outdated game each year.

[Jazzman]

Re: EA May Need to Cut Jobs in Upcoming Months

:shock:

That alone is a lot of money. I hope EA kicks whoever makes the FIFA/NHL/etc games in the butt and makes them release a game every 2 years instead of making us pay loads for basically a patch for an already outdated game each year.

shut up (ohno)

[imported_Whiskey]

Re: EA May Need to Cut Jobs in Upcoming Months

I hope EA kicks whoever makes the FIFA/NHL/etc games in the butt and makes them release a game every 2 years instead of making us pay loads for basically a patch for an already outdated game each year.

That makes very little business sense. If they put out a game every 2 yrs, sales would not double to make up for the lost revenue from the current plan of releasing a game every year. They're already making less money than projected, and this would reduce their revenue even further.

What they DO need to do, however, is work harder at coming up with better, more innovative features each year, so that sports games aren't just a "roster update". This is hard to do, however, with only 1 year in between.

So the result is a circular problem...they need more than 1 year in between games to make bigger changes, but they can't skip a year because of the need for revenue. The one way around this that I see, is having 2 separate development teams - each working for 2 yrs on a version, and having the versions offset from each other by 1 year (leap-frogging). Activision seems to be doing this currently with the Call of Duty series. This allows 2 full years of dev time for each game, but also allows EA to publish a game each year.

The question with this is, will the "better" games each year sell enough to offset the costs of paying for the extra development team/time/overhead? The answer might be "no", considering that they still haven't done this.

[MrKLM]

Re: EA May Need to Cut Jobs in Upcoming Months

Im sure its just a continuing process they was probably making things for FIFA09 when FIFA07 was coming out and they knew it wouldnt be ready until FIFA09 was out.

[imported_Whiskey]

Re: EA May Need to Cut Jobs in Upcoming Months

Im sure its just a continuing process they was probably making things for FIFA09 when FIFA07 was coming out and they knew it wouldnt be ready until FIFA09 was out.

Unfortunately, very little of that happens at EA in regards to their sports/driving franchises (basically any game that comes out year-to-year). Most of their focus is on the here-and-now. Once a game reaches the Alpha stage (for EA, that's about 8-10 weeks before Final) then a small group of producers and developers begins the planning for next year, but it's not very in-depth.

Most of the planning for the next version doesn't actually occur until the current game is shipped, everyone gets back from vacation, and competitor games come out (so they can see if there are any features from those games that they should implement). Even then, it's not a full dev team...usually more than half the team is temporarily shipped off to work on other projects while a smaller core team begins work on the upcoming version. Often the ideas at first are good, but once budgets and time constraints are made clear, many of the more ambitious features are cut.

It's a formula that worked in the past, from a financial perspective, but it has been showing weakness for several yrs now.

[MrKLM]

Re: EA May Need to Cut Jobs in Upcoming Months

Well what Ive seen now with the online component playing a bigger part now is for the sports games at least.

After the new version is released they close down online services for the one released two years before so now that 09 series is out they close down the online services for all the 07 games and some even did that when 08 versions were released, so the ones using that online component are pretty much forced to upgrade.