EA lowers outlook, confirms cutbacks

[UPDATE] Publisher slashes outlook following lower-than-expected holiday retails sales; indicates more layoffs, studio consolidation, SKU reductions.

Yesterday, prolific Wedbush Morgan Securities analyst Michael Pachter warned of imminent financial turmoil at megapublisher Electronic Arts. Citing the poor performance of Mirror's Edge, Rock Band 2, and Need for Speed Undercover, the analyst projected that EA would see a 16 percent decline in fiscal-year revenues.

It didn't take long for present events to catch up to Pachter's predictions.

EA announced today that it has lowered its net revenue and earnings-per-share guidance for its fiscal year 2009, which runs through March 31. No specific figures were revealed as part of today's announcement, with EA saying only that it would provide updated fiscal guidance as part of its third-quarter report, which is expected in early February.

The publisher attributed the revised outlook to lower-than-expected retail sales in North America and Europe. It also said that it expects to trim its product portfolio--that is, game releases--for fiscal year 2010 and, as a result, plans to make further staff cuts and facility consolidations.

"While we saw significant improvement in the overall quality of our key products this year, we are disappointed that our holiday slate is not meeting our sales expectations," EA CEO John Riccitiello said in a statement. "Given this performance and the uncertain economic environment, we are taking steps to reduce our cost structure and improve the profitability of our business."

Riccitiello further noted that despite the cost-cutting measures, his company plans to proceed with previously stated initiatives to amp up EA's overall game quality, as well as continue investing in new properties and direct-to-consumer operations. The executive also stated that EA plans to launch "several new titles and online games in fiscal 2010," a period that runs from April 1, 2009, through March 31, 2010.

Today's news is the latest in EA's ongoing financial struggles. In October, the publisher announced a greater-than-expected $310 million loss, or 97 cents per share, for its fiscal second quarter. That loss comes despite net revenues spiking 40 percent to $894 million during the July-September reporting period. At that time, EA also revealed that it would be cutting 6 percent of its workforce--or roughly 600 jobs--across a variety of divisions within the company.

[UPDATE] Following EA's earnings revision, the publisher held a conference call with analysts to provide further color on today's development. As part of the call, Riccitiello noted that a primary factor contributing to the publisher's lower guidance was the decision by many retailers to end the year with lower inventory. The executive also noted that while this decision won't necessarily be felt by consumers, it will have a dramatic effect on product sell-in to retailers.

Riccitiello also further expounded on EA's plans to trim its upcoming product portfolio. He said that sports games won't be affected by these cuts, with the reductions divided evenly between core and casual games. The EA executive also said that these reductions will primarily be made to product SKUs that have exhibited a lower profitability margin and that the publisher plans to ramp up advertising on games that have the biggest "hit potential."

Riccitiello declined to provide specific figures on any given game's performance. He did express satisfaction over the new franchises Dead Space and Warhammer Online, saying of the latter that "we expect [it] to continue to perform very, very well." Riccitiello also addressed DICE's first-person action adventure game Mirror's Edge, saying that while the overall quality met expectations, the publisher plans to "take a look" at its franchise potential.

135 Comments

  • orcane3643

    Posted Jan 20, 2009 8:54 pm PT

    hmm, why all the hate for EA?? If they come out with bad games, dont play them. If they come out with good ones, buy them and play them to ur hearts content. Who cares about DRM? if you are not happy that u get a limited amount of activations, all you have to do is email EA and ask for more and they give you more. EA has released countless memorable titles and has entertained me for hours on end. Just because a game company is trying to do something to prevent piracy and comes out with many sub-par games but still with some very good games is no reason to boycott it and hate it.

  • shazam_lp

    Posted Jan 3, 2009 10:42 pm PT

    They deserve it, I'm one of many that have boycotted EA which I was once a big fan of. They've become a giant monster that not just eats smaller game studios and ending whatever creativity spark they've had but 90% of their latest titles have had a complete lack of quality.

  • hurricaner

    Posted Dec 26, 2008 11:50 am PT

    let the boycott continue for years to come im still pissed at what they did with spore

  • hurricaner

    Posted Dec 26, 2008 11:46 am PT

    electrovit they cant make another good game because they are the worst,worst as in dissapointing there fans all the time

  • electrovir

    Posted Dec 19, 2008 10:06 am PT

    Maybe this wouldn't be happening if stupid EA would just make their new games GOOD!! It's their own fricken fault! I'm a big fan of NFS. Apparently this one SUCKS so i'm not going to buy it. What happened guys? Most Wanted was amazing, why can't they make another good game???

  • fluffebunnie

    Posted Dec 13, 2008 9:14 am PT

    The government needs to take EAs remaining money and bailout other game companies

  • punkdsk8erdude

    Posted Dec 11, 2008 5:01 pm PT

    well EAs got some huge franchises.
    need for speed, all the sports, etc. in addition to all of the one or two game series'.
    i love EA games, the company often doesnt pull through as much as i would like but i love need for speed, skate, etc.
    if they drop support for ps3, honestly, the ps3 is done. the 360 will have so much more to offer its ridiculous. ps3 will lose this console war terribly, which would suck because hard competition from sony will only make the next gen systems that much better, but if 360 crushes ps3 in this console war than sony may very well consider not to create a ps4 and microsoft may create a half-a** system knowing they have no competition.
    and im exaggerating a little, but imagine if one more big company follows EAs lead. honestly, it could really crush one system or the other.
    And as far as their sports games being released every year, they aren't making sales nearly as much as they would if they were more reasonable.
    how about this: every year, put out all the new rosters for teams, and maybe one additional feature, for DLC. maybe priced at 10 bucks. you buy 1 disc, then every year pay 10 bucks to keep it current. that would be awesome. if they want to completely revamp controls, then put out a new disc. otherwise, don't bother.
    new stadium or something comes out? ok. DLC that stuff, dlc always has new levels for games...
    want to upgrade graphics? then wait till they have a s***load of new features, revamped controls or something, and much better graphics, then release a new disc.
    becaus otherwise its never ever worht buying a new disc for 60 bucks everyyear. a slightly diff roster and barely better graphics are dumb reasons to waste 60 bucks. and these days, everyone is holding onto every penny they got. EA wud prob make just as much money sellin the DLC b/c so many more people would buy it...then a lot more people would be happy with EA and im sure they would see sales actually increase.
    idk much about businesses, i know a little about economics but not a lot, its just an idea...

  • Triton

    Posted Dec 11, 2008 3:55 pm PT

    Maybe they will all get PS3's as parting gifts. - It would help the holiday sales numbers...

    Serious, we are hardly quoting any new any new jobs / construction going on in our area. 2009 is gonna be very interesting to say the least. As my old American government teacher my Senior year in H.S. would say, "Kids...life's tough!"

  • lamprey263

    Posted Dec 11, 2008 12:53 pm PT

    it'd be interesting to know how their latest games have sold, just this year they had some really good games like Army of Two, Battlefield Bad Company, Dead Space and Mirror's Edge, just those games alone are some of my favorite this year

  • GhostStalkerX1

    Posted Dec 11, 2008 10:36 am PT

    Heh I agree with you Durio, even if I am American. But its our government not our people. So long as they try to police the world, history may repeat it self. Hope this finacial crisis comes to an end soon.

  • Inconnux

    Posted Dec 10, 2008 10:12 pm PT

    Couldn't care less how good their games are now. ever since EA included idiotic DRM on their pc software I have boycotted anything they have released.

  • durio

    Posted Dec 10, 2008 4:10 pm PT

    Damn this financial crisis. I hope everyone will get out of it. But Americans you screwed yourselves up when you entered Iraq. Dunno what'll happen, I doubt (respectfully) that US will pull themselves out of this.

  • MarcJL31

    Posted Dec 10, 2008 2:47 pm PT

    Maybe if EA saved all the money the put into buying exclusive rights for sports games, they could save some money or do what many other companies do, put it towards the quality of the games. Competition helps the gaming industry because it forces companies to put effort into their games. If EA keeps up their current practice, they are either going to waste money on buying out rights for games that sucks, or putting out games that no one wants to buy. Either way, EA is losing funds.

  • crazymoose99

    Posted Dec 10, 2008 2:05 pm PT

    Nooooo, i was just starting to get into Warhammer online... I am gonna be so pissed if it goes offline like Tabula Rasa. But chances are it wont.

  • chikahiro94

    Posted Dec 10, 2008 2:04 pm PT

    @SalarianChemist
    EA never supported the Dreamcast, period. And now? Dropping support for a core platform means that title will sell half as much as it should have. Ubisoft claimed they can make a game cross-platform for 10% more - EA should be about the same.

    Pay 10% more or cut sales in half. Not a hard decision.

  • DarthVillainous

    Posted Dec 10, 2008 1:34 pm PT

    @Salarian Chemist

    I think dropping support for any of the 3 systems would be a foolish business decision for any company, unless they are getting paid significantly by one of the big 3 to do so.

  • enoslives7

    Posted Dec 10, 2008 1:29 pm PT

    keep up the boycott on EA.....it's working !!!

  • tomasz73

    Posted Dec 10, 2008 12:49 pm PT

    boobush EA made The Orange Box ? are You crazy ??????? It's Valve games - not EA...

  • SalarianChemist

    Posted Dec 10, 2008 12:03 pm PT

    EA needs to drop their support for the Playstation 3 in the same way that they dropped support for the Dreamcast.

    Focusing exclusively on the Xbox 360 would allow the quality of the software to increase, and it would actually lower the development costs. The Wii versions of the EA sports games have completely different development teams, and they sell well with little development cost.

    EA needs to focus on the Wii and Xbox 360 because the benefits will pay off. Drop support for the PS3 as soon as possible and development operating costs will decrease, and the revenues will increase because the higher quality software on Xbox 360 will result in increasing sales.

  • neonblueshadow

    Posted Dec 10, 2008 11:51 am PT

    Grigjd3 just mentioned EA being so big. I think he's dead on in how its been affecting their decision making. Also there no single game that caused this. Ea after years of criticism decided on to take a chance on new IP, and it happened to be around the same time as the downturn of the economy. and if you feel the pinch of the wallet, you'd spend money only on the best game, not all the 'better' ones.

  • grigjd3

    Posted Dec 10, 2008 11:30 am PT

    EA is large and bloated. They support so many projects, it's next to impossible for the people near the top to know one way or another what's worth the investment and what's not. I counted 14 unique releases (games released on multiple platforms count as one) in 2008 alone just checking the Gamespot list of games and they have to spend extra time making all their games multi-plat. The shining gems of these releases were Battlefield: Bad Company, Spore and Warhammer Online. Of those, Spore was the only one that really got any play. Their 2007 release schedule was larger and included some better games but still was rather unwieldy. The company could stand to break apart maybe into three companies that each have to oversee fewer games. Edit: I've noticed my number was off and far too low for how many games EA makes. In truth I count something like 75 releases with their name on it though often with other developers. My skills at navigating the information tools at Gamespot need improving. This only reinforces my point though.

  • Zorlac0666

    Posted Dec 10, 2008 10:55 am PT

    I'd say the big cause of this is the mess they made with Spore. I hope they learn from it.

  • favre4thewin

    Posted Dec 10, 2008 10:55 am PT

    Same as any US Corp right now. I lost my job, does anyone care? Is the Government going to bail me out?...Didn't think so. I just wish EA's NCaa and Madden Games would actually not suck year to year. Every year its a roster update, 1 new feature at the expense of removing an old feature and a little more graphical polish. All for $59.99.

  • boobush posted Dec 10, 2008 8:54 am PT (does not meet display criteria. sign in to show)

    boobush

    Posted Dec 10, 2008 8:54 am PT (hide)

    EA will always pull through. Because a lot wonder about it. If EA makes a bad game, them throw crap at it. If it makes a good game, them quickly compare it and say not at good as. EA has made quality, like The Orange box, Dead Space and the never failing FIFA series. That's what it will always pull through.

  • SLjimbolian

    Posted Dec 10, 2008 8:50 am PT

    Not surprised here, a lot of companies that are bloated are feeling the effects of the troubled market.

  • onlineruler

    Posted Dec 10, 2008 8:43 am PT

    i hope they make a red alert 3 expansion!

  • MURDA_B

    Posted Dec 10, 2008 8:20 am PT

    thats crazy alot of people is losing there jobs

  • shadowblade99

    Posted Dec 10, 2008 8:04 am PT

    Ouch, hopefully they won't cut a second Dead Space game. That game is great!

  • Phlakaton

    Posted Dec 10, 2008 7:51 am PT

    Imagine if the Take-Two Interactive buy went through... EA would have probably layed off a lot of those people right after it. That was close!

  • rahl247

    Posted Dec 10, 2008 7:51 am PT

    yup when i find out that companies are usen DRM i wont buy it.was gona buy spore till i found that out i will just wait for the Wii version. i mean these companies got to realize that they are taking our rights away from us cause we bought the game if we want to sell it or dl it on 5 pcs that we do use at some point we should be able to do so.

  • crepair

    Posted Dec 10, 2008 7:04 am PT

    EA is falling as US economy...

  • mvaiks

    Posted Dec 10, 2008 6:39 am PT

    You know why EA's sales were less then expected? Simple answer: DRM!
    I was going to buy Spore, but didn't because of DRM.
    I was going to buy RA3, but didn't because of DRM.
    If you put that rootkit virus called Securom on your products, I'm not buying then, period.

    When I purchase something, that thing is mine to do as I please. Look at Stardock's example with Galactic Civilizations: no DRM, huge sales. Why? Because it was a good game. People buy good games. When you treat me like a thief, I might as well behave like one. No money for you!!!

    Stop selling crap games. Give us freedom to do as we wish with the ones we buy and you have a winning combination.

  • wkociol

    Posted Dec 10, 2008 6:35 am PT

    or sell rights to dead space costumes to lbp

  • Rhubarb9

    Posted Dec 10, 2008 6:30 am PT

    quick EA! pump out more non-free dead space costumes and weapons DLCs

  • wkociol

    Posted Dec 10, 2008 6:22 am PT

    Increadible strategy - let's make as much games as we can, maybe some of them will be good. And suprisingly the loss was greater-than-expected. Bravo!!!

  • greenhillscone

    Posted Dec 10, 2008 4:30 am PT

    ea kick ass, burnout, dead space and mirrors edge all rule. i suggest people go out n buy these games as they'le be missing out. all we need now is a new ROAD RASH baby

  • pencilpusher69

    Posted Dec 10, 2008 4:10 am PT

    " DJ-MOTION

    Posted Dec 10, 2008 11:32 pm GMT -12

    So almost every game company isin deep sh@t. I bet it's cause the economy no one can afford to buy anything right now."

    That's not it at all.

    Game sales are experiencing record sales right now. The problem is the business model.

    Sony and Microsoft have created platforms that are basically impossible for publishers to make a profit on. For every 1 game that earns them a modest amount of money back, they put out 9.4 other games that lose everything.

    The industry is booming, and yet so close to imploding. It really is the strangest thing.

    People can hate on Nintendo all the like, but were it not for the Wii and DS right now, most of these publishers wouldn't have a chance at survival at this time.

  • puffydogg

    Posted Dec 10, 2008 3:58 am PT

    Release Battlefield 3, that might boost some sales....lol

  • maldoror19

    Posted Dec 10, 2008 3:55 am PT

    "...the publisher plans to ramp up advertising on games that have the biggest "hit potential." A shame on you EA for a) being the bully with other publishers and developers b) proposing to put EVEN MORE advertising in your games; and c) for every decent game you put out, there are at least 10 bad games to go with it. EA is the McDonalds of the gaming industry. Their products are popular but they are also breifly satisfying if not unfullfilling, unmemorable and disposable. And, in the end, no one really cares what happens to them except for the bad karma that is owed them.

  • DJ-MOTION

    Posted Dec 10, 2008 3:32 am PT

    So almost every game company isin deep sh@t. I bet it's cause the economy no one can afford to buy anything right now.

  • JOKER677

    Posted Dec 10, 2008 2:14 am PT

    Yeah but I'm sure gamers really appreciate the content still coming for burnout paradise city

  • celebrity5858

    Posted Dec 10, 2008 1:25 am PT

    ha ha ha and HA?! that deserves ea for that damaged nfs undercover cuz i mean common are these cars ingame are magnetize to the road?? if you try pushing a car you get pushed yourself ?!,and the major reason that it deserves them is for postponing mirrors edge's pc release into 2009 ?!

  • firehawk998

    Posted Dec 10, 2008 1:12 am PT

    If the unthinkable happens and EA goes bankrupt. Please please release DEAD SPACE 2 the first game was awesome but the ending sucked. I really wanna know how DEAD SPACE 2 will turn out.

  • chris_assassin

    Posted Dec 10, 2008 1:11 am PT

    i think ea should focus on a few good games instead of keep churning rubbish ones

  • foxracing1313

    Posted Dec 10, 2008 12:58 am PT

    I havent bought an EA game in ages. Glad they are finally starting to suffer.

  • MrGordons

    Posted Dec 10, 2008 12:21 am PT

    i think now they regret buying every F@#$%*G thing they laid eyes on...

  • Hedfix

    Posted Dec 10, 2008 12:06 am PT

    So why is EA in this mess? Aside from the market it's own tactics are being used against it by Activision, they managed to compete with themselves via free content for Burnout and they've also taken a hit because their short games have come up against some monsters this season.

    Pro Street was a really poor choice and must have led to people losing faith in the franchise and going for the rarer (ie non-yearly) Midnight Club, which has a lot of life to it I am told. Not only this but whilst trying to sell people a new racer they are giving away free content for the last Burnout: now why go out and buy a new game when your old ones have just got something new to play with and haven't cost you a dime?

    Next up they're competing with games like Fallout 3 which demand multiple playthroughs withthings like Mirrors Edge which I'm told is quite a short and linear title. Not good.

    Now EA are also being beaten by Activision who are putting out better games using EA's "yearly formula" routine. The COD games are far above EA's ideas of quality for yearly updates. They're varied AND they update the engine and gameplay so much it is very noticeable. EA don't.

    So there's some extra reasons as to why EA is failing. Quality over quantity is currently winning: especially when the marketplace is crowded with games.

  • kevinl2046

    Posted Dec 9, 2008 11:59 pm PT

    well i woulda bought their games (Mass Effect, Spore, Dead Space, Fallout3) if it weren't for the crappy DRM limited online activations that shortens the lifetime of my game. I'll probably buy Fallout3 soon cuz it looks fun and the DRM is a little less strict that Mass Effect's, BUT i woulda bought the game right when it came out if i weren't so worried about its DRM scheme. Mass Effect having 3 activations total? No way am I buying that unless its in the 10 dollar bin.

  • darkwolf1982

    Posted Dec 9, 2008 11:29 pm PT

    Midnight Club: L.A. in action compared to the video reviews of NFS Undercover shows just shows how a good fanchise can lose touch causing it to eventually "Crash'N'Burn".

    For EA to release crap like that and expecting it to sell, it's no wonder losing out!

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