Electronic Arts (EA) have been making so many losses for so long that I am amazed that nobody has done anything about it. This time they have doubled their loss for their first quarter from $95 million to $234 million, massive figures, nearly $4 million every working day down the grid. They have been a prime takeover target for ages but still nobody has moved to buy them. Let’s see what could be going wrong:
- Boxed console games in this generation mostly make a loss. The business model is not very good.
- The market is polarising into a small number of genre leading mega hits (GT, GTA, CoD etc) and a large number of underperforming “me too” titles. EA have too few of the former and too many of the latter.
- There is still an emphasis on the misguided and self defeating practice of concentrating game releases in Q4 each year.
- Publishers got the Wii wrong. They came to it too late and with too much drossy shovelware. EA is starting to perform here, but over a year late.
- MMOs are exploding. EA have massively underperformed in this market.
- EA were late at moving from licensed product to owning their own IP. It has been a painful transition.
- It is possible to put in management targets and exception reporting systems that get rid of whole swathes of suits. So more people in a company are engaged in actually making and selling product.
- Marketing has changed from being TV advertising based to being fragmented engagement with communities. Many marketing departments have not moved with the times.
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The reason no one’s taken them over is because nobody’s got any money due to the recession.
A juggernaut like EA suffers from having a very wide turning circle, leaving it vulnerable during times of change within the industry, like now. However, it does seem to have gotten its act together of late, and has the potential to be back in profit by the end of next year.
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To be fair to EA, they are improving and doing the things that they need to do to survive. They’ve been dominating the Wii charts for the past month or so, focused on their own IP and dropped some licences, having a good stab at MMOs, improved their yearly titles like FIFA a lot, trying new payment models, and bolstering their franchises like Battlefield and Need for Speed.
What they still haven’t fixed are chopping away all the useless suits and their high wages in favour of the talent folk that actually make the game. As long as they keep them then they are just letting money that they are no rightfully earning to slip through their fingers and into the pockets of the matey-network of underskilled managers.
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I hate EA. I hate their treatment of their employees and their treatment of their customers, I hate the way they attempt to milk customers for every cent they can get, I just hate them.