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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+