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Analyst: More Cuts Likely For EA As  Mirror's Edge, Need For Speed  Underperform
Analyst: More Cuts Likely For EA As Mirror's Edge, Need For Speed Underperform
December 8, 2008 | By Leigh Alexander

December 8, 2008 | By Leigh Alexander
More: Console/PC

Electronic Arts is likely to cut franchise titles -- and possibly even further staff -- as part of ongoing cost-cutting measures, says Lazard Capital Markets analyst Colin Sebastian, who believes the publisher's titles are not meeting estimates.

"Specifically, we believe several EA titles are tracking below plan at retail this holiday, including Need for Speed Undercover (with disappointing reviews), new franchise Mirror's Edge, and Rock Band 2," said Sebastian, as he lowered his estimates for the company's third fiscal quarter revenue slightly from $2.14 billion to $2.07 billion.

Still, the analyst says, "solid sales" of Dead Space, FIFA 09 and Valve's Left 4 Dead are helping to offset the weaknesses in EA's portfolio.

Sebastian sees "greater uncertainty" in the company's product slate for next year, including the Rock Band franchise and the publisher's EA Casual revenue. Though EA has announced new projects in collaborations with developers like Grasshopper and id Software, Sebastian suggests these could be "lower margin" revenue generators.

EA recently laid off approximately 6 percent, or 600 employees, of its global staff, and as losses widened even among ramping revenue in October, the publisher expressed caution at weakening retail, citing an "ongoing imperative to manage our cost structure."

"We believe further cost and franchise reductions are likely," said Sebastian. "Importantly, we believe EA is continuing to review its cost structure and franchise base, and it is possible that management will announce further cuts in headcount and the development pipeline (including existing franchises) over the coming quarters."

Sebastian's prediction is consistent not only with EA's own admitted cost management plans, but with CEO John Riccitiello's assertion that killing underperforming projects in development is essential to overall portfolio quality. He recently told Gamasutra that "EA will kill a game or two a year. Forever," as he discussed the recent cancellation of Tiberium.

Long term, though, uncertainty in the industry landscape "could ultimately benefit EA," says the analyst. EA's John Riccitiello recently spoke about sacrificing short-term profitability in favor of longer-term investments like digital distribution, and Sebastian seems to support the strategy.

"While product execution and sell-through trends continue to be a challenge for EA midway through the current console cycle, we believe the company will be able to leverage longer-term its early investments in online distribution, emerging business models (e.g., free-to-play), and geographical diversity," he says.

"In addition, ongoing M&A opportunities and strength in the partners/distribution business should help to generate ongoing year-over-year revenue growth."

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Mark Williams
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Publishers need to learn not to put all their eggs in one basket during the holiday season. Yes, it is a prime time for shopping but when you are releasing these titles you need to make certain that your game is going to stand above the rest, and it can't be a new IP. During the holiday season every development and publishing company tries to push their games out for the consumers to grab. Unfortunately, consumers are only going to look at sequels as they know what they are getting.

Publishers need to learn to spread their games out throughout the year. This helps with their titles standing out much more to the consumer and not going against 10 other blockbuster titles launching on the same day.

Frank Smith
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When you put all your money and hopes into a few unoriginal titles your screwing yourself, what if a couple of EA's franchises tanked, they'd be out of business. The big publishers business models of cramming the same game year after year down people throats has scared people into not spending their hard earned money on anything new and original, granted a few titles make it through

Peter Park
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It's really sad to hear Mirror's Edge is in danger of being put to bed, forever.

I think it was one of the most original and innovative title of recent years, and also think it has quality and potential. It just need better marketing strategy and schedule...

If it came out mid-year '09, I think it could've stood up for itself better.

Peter Olsted
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There are so few faults with Mirrors Edge and so many greats things. Killing this wonderful & innovative IP would be terrible.

Lo Pan
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Need for Speed needs a LONG sabbatical. Mirror's Edge, great innovation and cool female lead...poor controls and collision detection (and story/world was poorly realized). Rework ME, for a mid-summer 09 release..fix the flaws.

Paul Lazenby
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Agreed with Rebecca, ME was a great idea that wasn't fully realized, and the poorly integrated story was unforgivable, especially considering this was a new IP that needed a strong showing right out of the gate.

mr jasler
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I think it had been accounted for that new IP like Mirrors Edge could sell poorly. From a PR perspective the game has helped EA's image departing from a yearly franchise updater to one that is willing to take risks with new IP and be innovative. I feel EA wasn’t banking heavily on the game being a hit..

In regards to Need For Speed, I had once worked on the franchise for many years and have some insight. Like Rebecca has said, it needs a sabbatical. Give the development team (BlackBox ) time to rebuild the technology and infrastructure. Remove the people that are just sticking around to collect the big bonuses, remove the you are my buddy and I will promote you boys club. Bring in fresh faces that want to work on the game, who are passionate about need for speed and not from Hollywood just hoping to cash in on the great EA salaries. Also give time for all areas of the game so they aren’t rushed. Maybe Integrate the technology from the burnout franchise, heck even give it to them and let them rejuvenate it and do their take. I think the general public needs time to want a comeback as well.

In terms of the games design , I think they should take it back to its roots with diverse environments like tropical and desert themes, reduce the amount of open road so you remember the cool shortcuts and drive experience. Keep the Cops and Expand the Car roster. Integrate a story that doesn’t make you feel like you are watching a movie for the entirety of the game. The list goes on.. at the end of the day, changes need to be made at the top and I wouldn’t be surprised if JR makes some bold moves. He has done it before and will do it again.

Stephen McDonough
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I didn't have a problem with the controls in Mirror's Edge. The issues with the collision detection are minor, when you encounter objects that can't be clambered up as they are too small. It's unforgiving nature is a trade-off compared to the more recent Prince of Persia's very automated approach to platforming.

The major issue has definitely been with the story mode. Simply put, it shouldn't be there. The story itself is shallow, and it is interesting to see most everyone express frustration at having to repeat difficult sections, yet wholeheartedly endorse the ultra repetitive nature of the time trials. DICE'S announced DLC clearly abandons the story to provide abstract levels.

I can't understand the decision to include a story where it is neither needed nor appreciated, let alone include a poorly fleshed out one. It will be a major disappointment if this IP is dropped and other developers are warded off from creating a similar game due to its poor sales.

Jr Hawkins
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Sadly EA (like always) is late to the party. Too late did they realize the benefits of original IP, and again late in learning that new IP doesn't sell as well halfway through a generation cycle. Hopefully they will understand this gets worse the later we get into current gen, and next generation they may get things right, and focus on releasing cool new games right away instead of waiting a few years.

As for Mirrors Edge the only major problem with the game is that everybody has their problems with it. Some people hate the controls, some the design, others the graphics, and apparently some even hate the story.

As for Rock Band it's sad to see it's hit the hardest by all the commotion. It's not just one thing it's everything. The ecconomy, the over saturated "quality" game market, and the competition (guitar hero) all affect Rock Band much more than "normal" titles.

As for EA I'd expect for them to close down smaller studios, and axe projects they don't feel will have cross market appeal. I hope they learn not release games so close together anymore, and risk competing against their own product like they are right now.

flv converter for mac
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So few faults with Mirrors Edge and so many greats things. Killing this wonderful & innovative IP would be terrible.

avchd converter
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I also think they should take it back to its roots with diverse environments like tropical and desert themes