EA reports $81 million quarterly loss--but beats expectations

Megapublisher's 13 percent increase in revenue can't offset next-gen transition costs, but shortfall comes in much less than expected.

Hamlet may have suffered the slings and arrows of outrageous fortune, but few companies have been the subject of as much verbal sniping as Electronic Arts. The biggest third-party publisher in the world is a preferred punching bag for many gamers, who take potshots at it for everything from its movie-license tie-ins to its monopoly on NFL, NCAA, and Arena football games.

Today, the company took a hit of a more substantial nature--that is, financial. For the first quarter of its fiscal year, which ended June 30, 2006, the company reported an $81 million loss. That was $23 million more than the $58 million the company lost during the same period in 2005.

The primary reason for the shortfall was "the expensing of stock-based compensation," according to EA. It also hinted that it was spending a good amount of money preparing for the transition to next-generation consoles.

"We're pleased to be the leading publisher on the Xbox 360," said EA CEO and chairman Larry Probst. "We are on schedule with strong support for the launch of PlayStation 3, and we have increased our development efforts for the Nintendo DS and Wii."

But while Probst was confident, EA CFO Warren Jenson was more cautious. "While the risks of this technology transition remain very real--our franchises are well-positioned for the opportunities ahead," he said in a statement.

EA's losses came in spite of a 13 percent increase in overall revenue. The company took in $413 million during the April-June 2006 quarter, compared with $365 million the year before. Though still in the red, EA's earnings were better than anticipated. According to a "consensus" of analysts cited by industry-research group Thomson First Call, the company was expected to report $335 million in earnings--$78 million less than its reported revenue.

[UPDATE] In its earning statement, EA singled out five titles--2006 FIFA World Cup, Battlefield 2: Modern Combat, Need for Speed Most Wanted, The Sims 2, and Fight Night Round 3---as being bestsellers. In a conference call with analysts after its report was issued, Jenson shoveled praise on 2006 FIFA World Cup. The game exploited massive interest in the quadrennial event, selling more than 2.8 million units worldwide prior to June 30.

On the PC front, the content expansion The Sims 2 Family Fun Stuff sold over 700,000 copies during the quarter. However, strong sales of that and other Sims 2 games couldn't stop EA's PC revenue from dropping precipitously. Compared to the same period the year prior, the company's PC sales slid 11 percent to $66 million. However, Jenson said the year-on-year comparison was skewed by the success of Battlefield 2, which was released in late 2004 and was a top seller for much of 2005.

On the console tip, EA took in $194 million, a 6 percent increase from the same quarter the year before. Jenson credited the Xbox 360 for the increase, saying it "more than offset the decline in all current generation revenue." The exec boasted that three of the top 10 titles for Microsoft's next-gen console in North America and Europe were from EA, though it did not name any titles other than Battlefield 2: Modern Combat.

On the portable front, EA's revenue was "flat year over year." The four products, or SKUs, the company launched during the quarter--two less than the year before--took in $52 million during the three-month period.

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Discussion

46 comments
SimsLoveforeva
SimsLoveforeva

I think the Sims 2: Pets will help the sims franchise ALOT!!!! Just sayin though... lol!

nicolewukber12
nicolewukber12

I think EA will recover the lost money with some sweet games that are gonna come out!

CAPITANMORGAN
CAPITANMORGAN

You lose some...you win some.... lose it here...gain it here.. no matter what they lose.. they always make up......im still buying EA games.

faridmon
faridmon

i shouldn't but Fifa Street, SSX on tour, CL 04-05 and fifa 06. die EA.

DarthChristian
DarthChristian

good i hope by some maricle EA goes under just because they released marvel nemesis just pisses me off thinkin bout it >.

chikahiro94
chikahiro94

Meh - no big deal. The money lost to next-generation development should be made back several times over (after all, once they get all the ground work laid, that investment will keep producing for them). Besides, generational shifts tend to do this - the older system are less attractive because they're about to be replaced, the newer systems don't have the installed base or aren't out yet, etc. EA isn't the first company less earnings right now (look at Sega) compared to last year (both had some big sellers last year that make the numbers look worse this year), and they won't be the last. Interesting bit of news, but not that important. Not for or against EA - just calling what I see.

Mr_1234Anderson
Mr_1234Anderson

seriously stop talking about EA sports. they make more than just sports games. they are also making 3 huge series games: Command and Conquer 3, Medal of Honor, and Battlefield 2142. All three of these series are huge money makers. also havent you been reading how EA and its affiliates are doing more beta testing so their games wont have so many flaws? they are improving. maybe not on sports though.

hiraku97
hiraku97

This is chump change to EA, but it does serve them right. I refuse to buy ANY EA game after EA sports bought up the football exclusive licenses.

XSAVAGE
XSAVAGE

die EA die! you ruined my NFL!

VolcanoMan001
VolcanoMan001

Hmm lets see.... perhaps they should not have purchased all those "exclusive licenses"! The fact is the gamers are doing the talking. I personally do not purchase an EA game unless it is used just to protest their harsh business tactics of buying everything out. Competition is good and I dont want to live in a future where we are are forced to play EA's "vanilla" games.

DJSimo
DJSimo

One of EA's main goal this year is to develop new IP (intelectual properties) such as Army Of Two which is by the way totally amazing. EA has so many different games to offer, you're bound to hate some of them. So just stop complaining about the games you don't like from EA and instead look at all the great games coming up from them.

moepain4u
moepain4u

That's what happens when you blow the NFL and ESPN AND give them a billion dollars to do it!!! I wish I could get blown by a stripper and she pay me for it :)

SunnySimantov
SunnySimantov

Thats what you get when you sell you soul to the devil...I mean the Sims... " OMG OMG!! I call The Sims - the devil, too!!! (It spoiled my lil sister, 8 years old and can't read english, yet she can maintain 8 men families!). Well, "poor" EA... I don't hate them and noone should do so- I really don't care much about publishing companies etc cause its always the same- 50$ a game, and I get to hear about games from GS and not from the publisher.. "ts all catwoman's fault! " So true..... :P :P

KINGWOODY
KINGWOODY

Maybe if EA games weren't so glitchy and they'd focus on the gameplay instead of graphics people would buy thier games.

MZ-NF520D
MZ-NF520D

i love ea games, nhl is always amazing, the first medal of honor was amazing, the medal of honor AA for pc was amazing, and i think all the madden games are extremly amazing,

gozalo
gozalo

Burn EA, burn... your pact with satan must have expired

veracity024
veracity024

hahahahahahahahaha NEXT QUARTER IF YA WANT ME TO BUY ANY GAME FROM YOU MAKE MUTANT LEAGUE ANYTHING, HOCKEY BBASEBALL I DONTT CARE I JUST WANT A MUTANT LEAGUE GAME ON 360

shag2sheeps
shag2sheeps

yay EA loses money! .... i hate EA those b******s churn out crappy sequel after crappy sequel not to mention dozens of sub standard sports games and movie tie-ins They are spamming the games market with crap and consuming small but promising games developers! For shame EA for shame....

LosDaddie
LosDaddie

EA will bounce back this Fall.

elythemonkey
elythemonkey

That's what happens when you make to many weak ports. PC to console ports. Franchise ports (Madden). Not to mention bad game based on movie lisences, Batman, Catwonman. EA can you say ORIGINALITY!!

osxgp
osxgp

Most game companies for the PC make updates to their games to polish glitches or make it better. EA, however, makes updates and calls it next years new and improved game and charge $50 to $60. Quit sand bagging us by charging that much for updated player rosters. EA could update rosters with a patch, but why save consumers money? Since many are becoming wise to this type of game EA plays, it might be why they have lost so much money. Consumers aren't complete idiots.

pungaboy
pungaboy

Three words: ARMY OF TWO. EA is eating a lot of crow right now but you have to believe that if the biggest, most successful game publisher in the biz is spending this much money developing for next-gen, there are some pretty amazing things in the pipeline. Pick up this month's EGM to see why it's their most anticipated next gen game yet. Oh, and pick it up again next month for a preview of the completely revamped and reimagined NBA Street V4. Trust me when I say that it will redefine the way you play basketball videogames. BTW those two games are developed INTERNALLY at EA.

jeebs213
jeebs213

I was being fair. Even though I agree the current EA sucks, I'm hoping that they will step away from generic racing games and stuck-in-a-rut sports games. The fact that they're publishing games such as Crysis and HL2, and improving on the MOH series shows that they might be getting more serious about the true future of gaming (rather than concentrating all their power on milking money from whoever these idiots are that buy Madden every year)

sarges24
sarges24

lol, maybe if they learned how to develop a new game engine for their sports franchises once in a while gamers would find a reason and need to continue supporting them... I've played EA Sports titles since their inception and these past two years I refuse to support them. Why? Because their games are always the same ole. Not to mention their games feel more like an Arcade/Sim than a Sim... I mean sure they get some tweaks, change a few things, add some gimmick wich makes the gameplay a little different (QB Vision) and sometimes good (ie hitstick, Playmaker...)... but the bottomline is EA needs to learn how to develop new gameplay engines, something unique, new, different, etc. Not to even mention their half rear end, crappy ports they keep flooding the PSP market with... Madden 06, NCAA 07, yeah, great job at knowingly sending out a bunk copy to consumers. The journalists got a glitch free copy of both games yet consumers get this crappy version... You're the leading developer on the 360. Gosh I wonder why, you ship out 20+ crappy games each year!!!!!! Of course you're the leading publisher/developer, you probably are for all consoles... Madden, NCAA, Arena Football (yeah good one), NFL Head Coach (great, I can play that on Madden, good enough for 99% of us), NBA, NCAA, College Baseball? another great one, can't make a baseball game so you produce this crap. Instead of making this why not refine and make a baseball engine worth releasing so when the time comes to make another MLB title you have a new engine.... Street Series, yeah one might be cool but annually? Come on give us a break, you're games are'nt that good!! Until EA gets it's head out of it's pie hole Im not buying their games and it's as simple as that!!!!!!

Mr_1234Anderson
Mr_1234Anderson

EA is the biggest game publisher around. most gamers own an EA title. yeah they have problems but ive noticed that they are attempting to improve and not make as many mistakes. by the way EA makes craploads of money. this wont hurt them, but a trend of losing 81mil will. (sry for stating the obvious) also i dont think EA deserves the excessive garbage they recieve from gamers (although a little is good)

nramsey34
nramsey34

I don't know what I feel about EA, but in my opinion one of two things happens if EA goes under...1) more, smaller publishers end up producing fewer, better games or 2) no one takes risks with publishing marginal games and we get more of the same crap...let's hope for number 1!

Carpe_Noctum
Carpe_Noctum

I was part of that loss. I rented a couple of EA games because I give things a chance and try to stay open-minded. I hate beans but every year I eat them at least once just to see if they still suck.

dutchXcon
dutchXcon

if the lose that kind of mony this year and last year also how they do make profit???? if i lose money like that i go broke??

sundown70
sundown70

EA controls too many games....some are good and others are crap....i fear for the future of games thanks to EA

picklepik
picklepik

EA will BOOOOOM (in a good way) when Spore comes out.

zoo3
zoo3

to those who are hating EA or are fearful of their future, maybe army of two will help them out. but then again, they'll probably milk it into a series... army of two+1, army of two "2010," army of two "army under fire," army of two men and a baby, army of two "limited edition," army of two "too hot 2 handle," ........

ogrenator
ogrenator

EA loosing money make me happy and pants :)

gamer_10001
gamer_10001

Well if they made more original games, or at least did something other than all the sports franchises every year, they wouldn't have as many "pot shots" directed at them.

tribe81
tribe81

to be honest im a fan of EA until i looked at my games collection 32 xbox games and 4 xbox360 games NOT one are from EA maybe im not the fan i once way i sure hope madden 07 is good.... for there sake......

jobe13
jobe13

Be fair,jeebs213. Crytech is developing Crysis,not EA. They are only publishing the title. Same as EA's deal with Valve. EA will publish Half-Life 2,Episode 2,Team Fortress 2,etc. but Valve is developing the game. I'll admit I have a rather strong dislike for EA,bgut if they will publish great games I won't bash them. Too severely.

mariomaniac92
mariomaniac92

That's terrible. EA and E3 are loosing publicity bad.

Charlie2688
Charlie2688

Thats what you get when you sell you soul to the devil...I mean the Sims...

bobstos
bobstos

this is chump change for EA... nothing is going to change, they are still going to keep making crappy games to milk their older, more decent franchises (cough cough MoH, NFS) until there is nothing left... then they will do it some more.

chazzx21
chazzx21

I can't wait for the next popular movie and terrible game to be made for the 360 with ps2 graphics

frankeyser
frankeyser

and they deserve the pot shots... even this one... stupid ea...

jeebs213
jeebs213

lol, the gamers have spoken! to be fair though EA does have some promising games on the horizon (see Crysis and MOH: Airborne) and it looks like it's finally learning from its mistakes. here's hoping that the "New EA" will once again regain its throne through creativity and innovation!