EA reports record revs, delays Mercenaries 2

[UPDATE] EA reports $1.5B in quarter sales despite $33 million profit slide; Pandemic's shooter pushed back alongside Battlefield: Bad Company.


The past few months have been tumultuous for publishing giant Electronic Arts, and the company's third-quarter financial report released today bears evidence of that fact.

EA posted a record $1.5 billion in revenue for the quarter ended December 31--a number nearly equivalent to Vivendi Games' full-year tally reported yesterday. According to EA CEO John Riccitiello, EA's third quarter haul, which was up 17 percent from 2006's $1.28 billion revenues, was "the single biggest revenue quarter for any third party publisher in our industry."

EA also laid claim to the top market share for calendar year 2007, with an 18 percent share in North America and 19 percent share in Europe. According to Activision chairman and CEO Robert Kotick in December, Activision's market share through November stood at 16.8 percent in the US. Though third-party publishers have struggled to find footing on Nintendo's Wii, EA said it had managed 12 percent share, up from 3 percent from the year before.

But while revenues were up, profits were not. The publisher's take for the quarter stood at $721 million, an 11 percent slide from the $811 million it brought in the year before. That figure represents a $33 million net loss for Q3 2007, compared to a $160 million net gain compared to the same period last year. Profitability has been a subject of much interest for EA in recent months, especially following the closing of Fight Night and Def Jam studio EA Chicago and the reportedly routine company-wide layoffs the company experienced in late 2007.

EA's numbers may have looked better had it not deferred an additional $234 million in sequential net revenue to unspecified "future periods" due to accounting changes related to some online-enabled games, as well as $78 million restructuring charge due to the aforementioned studio closures.

Top titles for the publisher during the quarter were Need for Speed ProStreet, FIFA 08, Rock Band, The Simpsons Game, Madden NFL 08, The Sims 2 Castaway, and NBA Live 08. FIFA Soccer 08 continued to be the top title in EA's catalog, with an additional 4.5 million units sold during the quarter. Need for Speed ProStreet did surprisingly well in the international market, selling 5.5 million copies globally, 65 percent of which were sold abroad. EA also noted that Rock Band, which has thus far played second fiddle to Activision's Guitar Hero III, sold 1.5 million units for the quarter, while the Simpsons Game moved 4 million units.

EA also took the opportunity to officially bump two of its high-profile action games to fiscal year 2009, which begins April 1, 2008. Lending credence to the retail radar's rumblings last week, Mercenaries 2 will go on extended shore leave until EA's next fiscal year. Pandemic's hyperdestructive action game was originally slated to arrive during the 2007 holiday deluge of games before being pushed back to the first quarter of 2008 for further tuning. Joining Mercenaries in fiscal 2009 will be Battlefield: Bad Company, the next console installment in DICE's realistic first-person shooter war game.

Following the windfall of third-quarter revenue, EA has narrowed its guidance for full year revenue projections. The publisher is now expecting revenues of $3.46 billion to $3.58 billion for the year ended March 31, from previous guidance of $3.35 billion to $3.65 billion. For its final quarter of fiscal 2008, the publisher is expecting $925 million to $1.05 billion in revenue.

[UPDATE] In a ranging post-earnings conference call following EA's third-quarter 2008 reporting, the publisher delved further into its performance for the quarter. Though EA stalwart Madden NFL 08 has sold more than 7 million units since taking to the gridiron in August, its tally is 13 percent off year over year. However, dwindling interest in Madden's annualized football was compensated by the debut of Skate, which EA claims is outselling Activision published rival Tony Hawk by nearly two to one.

EA also said that it 23 of the 37 games released for the year have attained platinum status, up from five million-sellers a year ago. Games that achieved platinum status during the third quarter include Need for Speed ProStreet, Rock Band, The Simpsons Game, The Orange Box, The Sims 2 Castaway, NBA live '08, and Crysis. Of these titles, EA called out Rock Band and The Simpsons Game as both beating significantly beating sales expectations.

Addressing Rock Band, EA noted that a European launch is now slated to arrive during its fiscal first quarter, which runs from the beginning of April through June. The publisher also tackled issues of broken or malfunctioning equipment for Harmonix's rhythm game, with EA CEO John Riccitiello saying, "We've had single digit complaints around the guitars and other parts of the package, and single digit percentage of consumers that have acquired them." Following those statements, Riccitiello confirmed speculation that a Wii version of Harmonix's rhythm rocker would join editions already available on the Xbox 360, PS3, and PS2, though he revealed no other details on the matter.

Riccitiello also revisited the ongoing debate concerning development difficulties on the PS3. "Games where we essentially led development on the PS3 platform like Burnout, which is doing well in the market today, we had no issue at all," he said. "But in circumstances where we either led with the Xbox 360 or we ran parallel to partly cloudy production, for the most part, we're still experiencing some delay on the PS3. It is a little bit more challenging a development environment for us."

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