Electronic Arts CEO Optimistic About Industry, Despite NPD Gloom

Despite turmoil surrounding the current state of the game industry, EA CEO John Riccitiello had nothing but optimism for the prospects of both EA and the larger video game sector in remarks today. “It’s easy to lose the thread of just how robust our sector is,” he said during a Q&A at the 2010 Bank of America Merrill Lynch Media, Communications & Entertainment Conference, which Gamasutra listened in on. “By any standard, nearly doubling the business from $16 billion to a $29 billion [over the last five years], software only, is an incredibly positive performance.” Even more recently, Riccitiello says he thinks a focus on declining in the NPD’s new U.S. video game retail sales numbers has blinded some industry watchers to strong sales growth in areas such as digital content and high definition consoles. “I think there’s more of a cloud over the industry for the lack of certainty than what those of us in the industry feel is real,” he said. “I really do see opportunity... we really do see 20% growth in the first half on high definition game consoles, where we concentrate our business. We really do see burgeoning digital growth ... It doesn’t feel like a recession to me.” For EA specifically, Riccitiello presented data showing that the company’s recent strategy of focusing on fewer, higher quality titles each year had been working for the company. For the 2010 fiscal year, EA expects to make $66 million dollars in average revenue off each of 54 releases, compared with $55 million in average revenue for 67 releases in fiscal 2009. Looking forward, the company expects that trend to accelerate in fiscal 2011, when a mere 36 titles will each bring in $84 million in revenue, on average. While this strategy means less overall revenue for EA, it also means the company has been able to reduce costs an estimated $100 million per year, from $2.2 billion in 2009 to an expected $2 billion in fiscal 2011. Widespread layoffs at the company have been key to that cost reduction. While Riccitiello said having to let go of 2,000 employees since fiscal 2009 was “very painful,” the efficiencies associated with outsourcing things like artistic work to other countries has been incredible. “It takes a while to get a team used to not sitting next to the team that’s putting the art together,” he said. “But now they’re pretty happy. They put out two key frames before they go home... they come back in the morning and they’ve got sometimes a man-month of work done overnight as 30, 40 people worked on the art in China.”