EA Talks 'Fewer, Better, Bigger' Titles, NFL Strike Ramifications

On its post-results earning call, EA execs discussed its mantra of "fewer, better, bigger" titles, also touching on NFL strike ramifications for the Madden series and why the "connected game" is more important than 3D stereoscopic games. Discussing its overall statistics during its Gamasutra-attended earnings call, Electronic Arts employed 7,742 employees at the end of 2010, down 9.3 percent from the year before. Multiple executives stressed that the firm continues to focus on releasing fewer titles that individually make more money, with both CEO John Riccitiello and COO John Schappert repeating the "fewer, better, bigger" retail games business objective during the call. The smaller staff led to a seven percent reduction in operating expenses in the first three quarters of the fiscal year, according to the call accompanying the company's third quarter earnings report. Yet despite the smaller size, revenues per title were up 25 percent for the last three quarters of calendar 2010, and recent release Dead Space 2 is approaching two million units shipped to retailers, a rate double that of the original game. EA showed confidence in the performance of its new, leaner form today by announcing a $600 million stock buyback over the next 18 months, which EA CFO Scott Brown said was indicative of a "strong cash position" and an improving earnings model with more focus on digital revenues. EA also said an expected NFL strike in the coming year could have an effect on the company's bottom line, due to the signature Madden NFL American football game franchise, and that this effect has already been factored into its financial expectations. "We, like you, are looking forward to the NFL and the [players] resolving their differences and starting the season on time this year," said EA COO John Schappert, "but in terms of a planning assumption ... we've baked in the most conservative assumption, meaning no season. We're optimistic it can be better than that, so there's an upside." Responding to a question about the impact of stereoscopic 3D on the market, Schappert said he actually thought other technologies were more important to EA and the industry's bottom line. "My personal view is the larger idea, at least for the present, would be the connected game," he said. "I'm more in the camp that IPTV is a bigger idea for gaming, at least in the near term, than 3D is. It just provides a better social experience and you know that consumers playing with one another is a very positive and powerful motivator." "While there's no doubt that our industry will have its 'Avatar', where 3D is a defining aspect of the game ... I'm mostly interested, with all the mobile devices that are coming out, in how they're being connected to one another and how the same IP is shared over the top," he continued. "I think that's actually a bigger driver for EA and the industry in the near term." EA used today's conference call to again emphasize that lower reported retail game sales in 2010 ignores industry strength in digital and in subsegments like software on HD systems, which grew over 22 percent in the last year. "Today, we estimate that digital sales represent roughly 30 percent of revenue in Western markets and roughly 45 percent worldwide – sales not captured in the retail tracking data," Schappert said.