EA's Riccitiello: Cuts Necessary To 'Transform Our Company'

"We have lots of compassion for those affected," Electronic Arts CEO John Riccitiello said today of the publisher's 1,500 planned layoffs, but he added that "these cuts are essential to transforming our company." Riccitiello commented on the matter in a conference call following EA's latest quarterly earnings, which saw the company's net loss widen to $391 million. Although the company said it expects to see profitability in its upcoming third and fourth fiscal quarters, the CEO warned that the back half of 2009 might not be as strong for the industry as some expect. "Retailers remain cautious and report that foot traffic remains slow," he said. "The consumer is not showing up at retail as consistently as we would like." Recent console price cuts will continue to help to some extent, but "the improvement is not enough to get the industry back to flat software sales for the year," Riccitiello warned. Still, he said, "We do not believe that calendar '09 packaged goods weakness is a permanent condition." In particular, the CEO looks forward to further console price cuts that will bring the accessibility of the current generation of machines in line with that of the previous generation late in its lifespan. And "the console add-ons coming in 2010 will drive new consumers to the market," Riccitiello added, referring to new motion controllers from Microsoft and Sony. Another area that EA believes is likely to soften the blow to packaged goods is the digital distribution and online space. As recently as five years go, Riccitiello said, the company estimated the value of the digital segment to be less than 10 percent of the industry; now it's more than 35 percent, and the company sees the digital space growing by 20 percent on an annual basis for the next five years. In fact, when taking into account online revenues as well as retail revenues, the publisher actually expects the industry to see positive growth in 2009 -- and with its Playfish acquisition, the company clearly plans to bolster its digital position. "EA continues to transform itself from being almost totally packaged goods-dependent," Riccitiello said, to being "a leading figure" in the digital sphere. "Downloads extend the life and profitability of our disc-based games," said COO Eric Brown. Dragon Age: Origins, which has strong integration with both free and paid online and downloadable features, was said to have seen strong early performance.