EA Reveals New Titles As Revenue Peaks

Author: by Brandon Boyer, Simon Carless

Electronic Arts has announced a record net revenue for its second quarter at $784 million, up 16 percent over the last year, which it attributes to the steady popularity of its long-running sports franchise titles like Madden NFL 07. EA saw overall profit of $22 million, as compared to the prior year's $51 million, a drop attributed to including employee stock option expenses in its results, but still beating overall Street estimates. EA's highlights for the quarter include $166 million revenues on Xbox 360 alone, a console which it dominates as the number one publisher in both North America and Europe, offsetting a 25% decline in current-gen revenue. It also noted the strength of its array of sports franchises, with 5 million copies of Madden NFL 07 sold in just five weeks, 2 million copies of NCAA Football 07 sold in the quarter, a platinum record for NHL 07, and 2 million copies sold worldwide of its FIFA 07 in just one week. Other highlights for the publisher include the recent partnering with hardware manufacturer Apple to bring select EA titles to the iPod, the parnership with Massive and IGA to bring in-game ads to its games, and the acquisition of real-time strategy developer Phenomic Games and MMO developer Mythic Entertainment. EA officials projected its third quarter holiday expectations to see a net revenue between $1.2 and $1.3 billion, bolstered by the new next-gen Playstation 3 and Nintendo Wii console launches. In addition, it expects its fiscal year to net revenue in the range of $2.950 and $3.125 billion, up from previous expectations of $2.8 to 3.0 billion. EA's chief financial and administrative officer Warren Jenson said, "This was a strong quarter for EA. While our industry remains in the midst of transition the landscape looks strong enough that we are able to increase our guidance range for the year." [UPDATE: Some of the highlights of an accompanying EA investor conference call included a mass of further confirmed fiscal 2007 titles (to debut before April 2008), with EA execs revealing: "We're moving Army Of Two and Crysis from fiscal '07 to fiscal '08", continuing: "There's a Sims title that's being specifically developed for the Wii platform". The company also noted Harry Potter, Road Rash, Command & Conquer 3, Warhammer Online, The Simpsons (in conjunction with the movie) games, plus EA's new skateboarding game "to compete with Tony Hawk" and Spore. When later asked about Spore, execs stated: "The development on Spore is going great - Will and the team... are making strong progress", and also revealed: "Yes there is a Sims 3 in development, and it's likely to be a fiscal '09 title [debuting before April 2009]." Yet another topic was EA's major shareholding stake in rival publisher Ubisoft, for which execs simply commented: "We feel great about our investment... we own roughly about 20% of the company", and that their relationship with management at Ubisoft was "cordial and professional". Discussing the notable sales growth for the quarter, EA execs were interesting in noting: "The [Xbox] 360 business is a little stronger in North America" compared to Europe. They said that overall, the current-gen and handheld sales growth was strong over all territories, mentioning that EA was seeing "a healthy marketplace" as the hardware transition continues. They also discussed digital downloads for EA, noting that, in the quarter, if you look at total digital revenue (including in-game advertising, Pogo.com casual games, other PC micropayments, and Xbox Live revenues, among others), "we had $28 million of revenue, up 40% on the year." In addition, it was revealed that FIFA Online has generated 700,000 microtransactions as part of its launch in South Korea. EA execs were keen to continue to expand online micropayments as a revenue source, particularly in its Asian efforts. The 100 developers at EA in Shanghai, mentioned as "part of the development marketplace" and sensitive to local comment, are being positioned for "long-term revenues and long-term success" in Asia. Interestingly, outsourcing also came up, and EA execs made it clear that the concept was "fundamentally nothing new" - but they suggested "the number one rule for us is that it has to be about quality". They noted that some of EA's transaction processing is moving to India, and mobile development is in progress in Romania and India, and will be expanding, and also noted that art outsourcing to locations such as Korea are also in progress.