No light at the end of the tunnel for Electronic Arts

For very many years Electronic Arts were the biggest game publisher on earth. They have an income of billions every year and they employ thousands of people all around the globe. EA are very important indeed for the video games industry. But they are no longer undisputed number one. The marriage of Vivendi and Activision, fed by the cash cow that is World of Warcraft, with mega hits like Modern Warfare and Guitar Hero and very ably led by Bob Kotick are now probably established at the top of the heap, especially when it comes to profit. (Amazingly they were bankrupt in the early ’90s.)

So again, very unsurprisingly, Electronic Arts have issued more bad financial results. They lost $82 million in the quarter ended 31 December (the best time of year for video games!). Their stock price took another hit. They can’t blame the industry, big global publishers like the aforementioned Activision, and also Ubisoft have done very well indeed. Even Sega have managed to get themselves back into profit. I have written about EA’s problems on here before. Repeatedly.

So what is going wrong?:

It is not all doom and gloom. The losses are less than they were. The management are cutting out the non block buster games. EA moved away from licensed products so have built up the beginning of a portfolio of good IP that they actually own. There are huge economic advantages of scale in publishing, which positions EA very nicely indeed. The world’s consumers will spend more on games in the future than they are now. The next generation of home consoles will reward those with enough clout to invest heavily in middleware.  And EA do have some excellent employees.

So where does the future lie? I still think that EA are a prime M&A target. They would make a perfect acquisition for Microsoft to give them ammunition in their console wars against Sony and Nintendo. And they would also be a perfect fit for Apple, if and when Apple launch their own home gaming console. To both of these companies EA would be far more valuable than it is for its current stockholders. And both of them have the cash sitting in the bank to buy EA with ease.


  1. i blame moore’s law.

  2. I find it interesting the companies like popcap don’t make giant blockbuster games. While they don’t have the pricing discipline that other companies do, they are able to be far more flexible on pricing because they aren’t throwing nearly as many resources into the game. They aren’t trying to make an awesome 3d title, they are usually making small puzzle games. They have found a niche and have well dominated in it.

  3. EA are trying to ‘get it’ but failing pretty badly. The example being their utterly awful attempts with Dante’s Inferno.

  4. “The root of this is that HD games need a massive amount of content which is still largely hand crafted. The next generation of platforms will have enough power to run lots and lots of middleware so development costs should drop back to sensible levels. ”

    Are these two things supposed to be related? How does any kind of generic runtime -as this is related to cpu expense- middleware reduce the cost/time of hand-crafting content? (which is specific and generally offline)

    Any middleware that would fill this need -generating assets offline programmitcally, or increasing productivity- has no boundries from existing now…

    The more powerful the consoles become, the MORE content people will expect. This drives up the existing massive cost (and time) of content creation. Likewise, more investment in middleware will probably become more expensive too; middleware companies have to cover their costs of developing on new platforms too.

  5. @Graham Reeves
    Middleware can be used in game to create things like weather, water, particle effects, foliage etc. Each of these reduces the amount of hand crafting. And each requires a processor and memory overhead. Their use will increase with each generation of platform.
    As for cost, once middlware is written it can be used in hundreds of games. This is massively more effective than just throwing the art away, which is what often happens today once a game finishes development.

Comments are closed.