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EA Updates Outlook, Warns of Potential Layoffs, Consolidation

EA press release and conference call covers upcoming belt-tightening.

Electronic Arts held a conference call and issued a release today stating that the company expects to come in below its previously announced financial expectations. Rather than releasing updated guidance, the company has opted to hold off until after the holiday shopping season has concluded, and claims it will update when the company reports results in February.

The key parts of the call center on what sounds like a round of belt-tightening at the publisher and its associated studios triggered in part by lower-than-expected sales across most of its current lineup.

EA's CEO, John Riccitiello, outlined a three point plan for getting the company back into shape.

  • First, we will reduce titles and SKUs and invest more – particularly marketing – on the titles with the greatest hit potential.
  • Second – we will focus on games with strong online features and ongoing new content.  This will prolong the catalog sales life of our products. 
  • Third, we will reduce expenses beyond cutting the number of titles and SKUs.

So, in short, EA is going to rally around the games that it thinks will become big hits, it will attempt to prolong the life of its games with more post-release support (which may help keep demand and the average retail price up), and it will reduce expenses. How do you reduce expenses when you're a company as big as EA? It's a bit more painful than dimming the lights in the gym and shrinking the portions available in the company cafeteria. Chief Financial Officer Eric Brown had this to say during the call:
...we’re going to continue to focus on quality and innovation, keeping what it takes to drive hit titles and our digital / direct to consumer initiatives, and taking a very hard look at cutting the rest.
He also spoke about plans to to reduce the amount spent on R&D and claims that the company will be putting fewer products on shelves next year. Consolidation of facilities and the ever-popular reduction of headcount--that's layoffs to you and me--were also brought up.

You might think that this would lead to the immediate halting of sequels based on the games currently on shelves, but that doesn't seem to be the case. Reporting on the Q&A that took place at the end of the call, Shacknews is quoting Riccitiello as saying that sequels for games like Dead Space and Mirror's Edge are still on. Considering most of the hard work on those two games is already done and they're now both established names, that makes sense. Warhammer Online was also specifically mentioned, with Riccitiello expressing a belief that it "will continue to perform very very well."

Instead, this will probably have a most direct impact on the EA games in development that you haven't heard of yet. That's the sort of thing that sounds like it could have fairly dramatic implications in the future.

Here's another curious quote from Riccitiello that Ben Fritz over at Variety picked up on:
One of the things we didn’t want to do on call is provide specific info on title performance. I would only highlight that "Rock Band" is one of the top franchises in the industry overall and one that I think consumers are finding themselves delighted with. I would encourage all of you to get out before the end of the weekend and pick up one for yourselves.
Maybe I'm reading too much into this, but that sounds a little desperate.
Jeff Gerstmann on Google+
22 Comments
Posted by Jeff
Electronic Arts held a conference call and issued a release today stating that the company expects to come in below its previously announced financial expectations. Rather than releasing updated guidance, the company has opted to hold off until after the holiday shopping season has concluded, and claims it will update when the company reports results in February.

The key parts of the call center on what sounds like a round of belt-tightening at the publisher and its associated studios triggered in part by lower-than-expected sales across most of its current lineup.

EA's CEO, John Riccitiello, outlined a three point plan for getting the company back into shape.

  • First, we will reduce titles and SKUs and invest more – particularly marketing – on the titles with the greatest hit potential.
  • Second – we will focus on games with strong online features and ongoing new content.  This will prolong the catalog sales life of our products. 
  • Third, we will reduce expenses beyond cutting the number of titles and SKUs.

So, in short, EA is going to rally around the games that it thinks will become big hits, it will attempt to prolong the life of its games with more post-release support (which may help keep demand and the average retail price up), and it will reduce expenses. How do you reduce expenses when you're a company as big as EA? It's a bit more painful than dimming the lights in the gym and shrinking the portions available in the company cafeteria. Chief Financial Officer Eric Brown had this to say during the call:
...we’re going to continue to focus on quality and innovation, keeping what it takes to drive hit titles and our digital / direct to consumer initiatives, and taking a very hard look at cutting the rest.
He also spoke about plans to to reduce the amount spent on R&D and claims that the company will be putting fewer products on shelves next year. Consolidation of facilities and the ever-popular reduction of headcount--that's layoffs to you and me--were also brought up.

You might think that this would lead to the immediate halting of sequels based on the games currently on shelves, but that doesn't seem to be the case. Reporting on the Q&A that took place at the end of the call, Shacknews is quoting Riccitiello as saying that sequels for games like Dead Space and Mirror's Edge are still on. Considering most of the hard work on those two games is already done and they're now both established names, that makes sense. Warhammer Online was also specifically mentioned, with Riccitiello expressing a belief that it "will continue to perform very very well."

Instead, this will probably have a most direct impact on the EA games in development that you haven't heard of yet. That's the sort of thing that sounds like it could have fairly dramatic implications in the future.

Here's another curious quote from Riccitiello that Ben Fritz over at Variety picked up on:
One of the things we didn’t want to do on call is provide specific info on title performance. I would only highlight that "Rock Band" is one of the top franchises in the industry overall and one that I think consumers are finding themselves delighted with. I would encourage all of you to get out before the end of the weekend and pick up one for yourselves.
Maybe I'm reading too much into this, but that sounds a little desperate.
Staff
Edited by RyeBread

Times are getting hard ; (

Posted by FallopianTube

EA??

Posted by Media_Master

Yup, pretty desperate

Posted by ezekiel2021

Man I really like Dead space and Mirror's Edge and loved the idea of new IP.  I just hope this means that when things get better they will add more IP or at least keep the cool crap from Burnout Paradise ongoing.

Posted by jakob187

Reducing R&D?  Ouch.  As for putting less on shelves, it sounds like a solid idea.  I think that Conquest will be a pretty big hit for them when it launches, and Dead Space seemed to do pretty well with critics...but for some reason, I'm sure it failed to perform at retail due to being an original IP in a sea of sequels.  Mirror's Edge really deserves a sequel so that the problems in the first game can be hammered out and prove what Digital Illusions and DICE can REALLY do with that IP.

I'm just hoping that they aren't going to cut anything that might have to do with the words "Road" and "Rash" in the title...
Posted by troyx

it seems that alot of the major publishers in the industry are having a hard time EA,THQ and midway hopfully this won't effect the quality

Posted by RHCPfan24

Yeah! a new story!

Posted by TheHBK

EA is fucking up, simple as that.  Other companies that dont put out flops will do ok.  I think they highlighted Mirrors Edge as being a failure for them and will stick to what they do best, Sequels!

Posted by WholeFunShow

Second that, sounded accidental. Tough times.

Posted by Bombmaster

I doubt he was talking about the stand alone game I would think he is probebly refering to the bundle there as well, problem is no mater how good Rock Band is $180 is a lot of cash that is 3 games or 1 game and a bunch of plastic insturments.

Posted by player66

I keep hearing from some of the women in the office who have sons and daughters that play console games that Rock Band 2 Special Editions are hard to find. I suggested Amazon.com, but it sounds like EA's having a hard time keeping stores supplied with the gigantic boxed items.

Posted by Coldbrand

As long as we get more Mass Effect, Mirror's Edge, and Rock Band, I could care less. Oh, and continued support for Warhammer Online.

Posted by ProfessorZombie

Dang... My brother works there... hes scared to loose his job

Posted by jakob187

Again, here are the two ways to fix this:

Mutant League Football
Road Rash

And I'm spent.
Posted by Milkman

It's kinda sad. EA finally has that great, innovative in-house game in Dead Space and they take a hit.

Posted by lamegame621

Fuckin' economy, mates.

Posted by Bellum

Meh. More room for better developers.

Posted by TwoOneFive

when the tough gets goin and the goin gets tough BOOM tough actin tenactin. 

Posted by floodiastus

This is what happens when you start waging wars on other countries and let the weapons industry milk your country for cash!

I was looking forward to some EA Big titles, perhaps a REAL def jam sequel and so on :/
Posted by jyurakyumihawk

I say it's a step backwards because it's reducing, if not eliminating risk taking in the development process.

Posted by deadpoool

I'm so fuckin sick of this shit! They make a terrible Monopoly with no reason for any sane person to buy it (monopoly) - no online play, then moan because their shitty, rushed out, sup - par game doesn't sell.....

one

two

three

everybody

FUCK EA!

=andy=