EA Posts $16 Million Loss, Looks to Next-Gen Games

kukyfrope writes "Electronic Arts recently released its preliminary financial results for the fourth quarter and fiscal year ended March 31, 2006. While net revenue was up 16 percent to $641 million for the fourth quarter, the leading video game publisher suffered a net loss of $16 million. During the same period last year EA posted net income of $8 million. 'We are well into the console transition and now have more than 30 next generation games in development,' said Warren Jenson, Chief Financial and Administrative Officer."

Comments

Contributors

[Kelz]

A couple factors probably contributed to this:

The lack of an established next-gen console: The X360 had shortages across the board from manufacturing, and EA didn't have enough launch titles. People with the system bought a very high percentage of the games that were availible, but EA didn't have enough to really take advantage of that.

The labor lawsuit. The settlement probably put them back quite a bit, as well as hurting their "efficiency" by having to let developers work less hours, and paying for the settlement.

Re:Contributors

[CastrTroy]

I think it has more to do with the quality of games produced. They can't expect to make money year after year releasing Madden, NHL games, and Movie spinoffs which don't really bring anything new to the gaming world.

Re:Contributors

[Anonymous Coward]

Problem is "Madden, NHL games, and Movie spinoffs" have been enormously profitable even up to last year. So you need a better reason than "everyone suddenly and uninmously got sick of them". Especially when there's very obvious external factors like the next-gen consoles.

Sony has basically Osborned themselves with all their BS about the Playstation 3 being out in Spring 06 (and now it might be Spring 07).

Video Games Crash 2.0

[Anonymous Coward]

I predict that we are heading for a crash like the one that occurred in the 1983, and killed off most games publishers.

Back then, games had got too staid and predictable, being nothing but cash-ins on existing IP (E.T. is the prime example). Competition within the business was fierce, with home computers such as the C64 slashing their prices and console prices being slashed to compete.

We are now seeing a similar situation. There is a ridiculous price-war going on, with Microsoft and Sony both selling their next-gen consoles at below-cost. They are predicting to lose $1 Billion each on hardware sales and marketing next year.

Also, games are losing their mass appeal. Surveys show that the number of gamers is no longer increasing, and may actually be decreasing, while the cost of producing games is skyrocketing. Games that are based on original I.P. are rare, with sequels, movie cash-ins and sports games comprising the bulk of products.

Microsoft and Sony can't keep cutting each others' throats forever, and the games industry definitely needs to expand and capture new audiences if it is to survive.

Interestingly, it was Nintendo who saved the industry last time, by coming up with a product that was different, and by conceiving a revolutionary (but controversial) business model. I think it is worth watching them at E3 to see what their plans are for the next console generation.

Re:Video Games Crash 2.0

[badasscat]

I predict that we are heading for a crash like the one that occurred in the 1983, and killed off most games publishers.

Yeah, you and every other naysayer since 1985.

Back then, games had got too staid and predictable, being nothing but cash-ins on existing IP (E.T. is the prime example). Competition within the business was fierce, with home computers such as the C64 slashing their prices and console prices being slashed to compete.

We are now seeing a similar situation.

Huh? So Dell is is slashing their prices and MS and Sony are slashing their console prices to compete?

There is very little going on now that is similar to what was happening in 1983. Back then, there was a mass migration away from game consoles to cheap computer systems to play games. The exact opposite is occurring now.

Interestingly, it was Nintendo who saved the industry last time, by coming up with a product that was different, and by conceiving a revolutionary (but controversial) business model.

What "revolutionary" business model was this? Selling video games and systems?

Nintendo came in and did exactly what Atari, Coleco and Mattel had been doing just 2 years before. They just did it with a new product that hadn't yet become stale, and that had new games on it - including the ace up their sleeve, Super Mario Bros. But there was nothing at all revolutionary about the Famicom or NES. The only innovation Nintendo put into the NES was in realizing that there was still a video game market in the US at all.

Let's not forget that Atari survived the crash of 1983-84 and in fact continued selling the Atari 2600 until 1991, alongside the 7800. It's kind of disengenuous to say the crash "killed off" most game publishers, because there were really only about six or seven at the time. Atari, Coleco, Mattel, Activision, Imagic, Sega, and some other, smaller publishers. Of those, Atari, Activision and Imagic survived, and Activision came out of the crash stronger than it had ever been. They gobbled up Imagic and a few smaller companies, released a little PC game called Mechwarrior and the rest is history.

Which is not to belittle the crash. But there are a lot of misconceptions surrounding it and one of those is that it completely destroyed the game industry. It didn't. Japanese publishers like Sega came out of it basically unscathed, and both the largest first-party and third-party publishers also survived.

These days, the companies involved in the game industry are so large that a downturn like that of 1983-1984 would basically be a blip on the radar. MS has already absorbed losses with their Xbox division that are far larger than anything Atari ever went through during the crash. Atari lost $500 million in 1983 - Microsoft has lost $4 billion so far on Xbox (including $388 million in the last quarter alone - 75% of what Atari lost in the entire first year of the great video game crash). We are dealing now with corporations that are both willing and able to weather these sorts of storms, whereas the industry in the early days was not nearly as hardy.

That's not to say things won't ever be difficult for certain developers or manufacturers. But that's true of any industry. The strong survive; the weak die or get absorbed by larger competitors. This is just the way business works; it is not unique to the game industry.

Good. Fuck 'em.

[Gannoc]

I have nothing really insightful to say. I just hate EA.