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EA Beats Expectations Despite Widening Losses,  Sims 3  Sells  3.7 Million Units
EA Beats Expectations Despite Widening Losses, Sims 3 Sells 3.7 Million Units Exclusive
August 4, 2009 | By Leigh Alexander

August 4, 2009 | By Leigh Alexander
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    7 comments
More: Console/PC, Exclusive



Electronic Arts' losses mounted in its first quarter, opening to $234 million, compared with $95 million for the same period last year. EA's fiscal first quarter ended June 30.

But the company still saw plenty of success during the period. EA reported net revenue of $644 million -- which although less than last year's $804 million quarter, still means EA did "better than expected," according to CEO John Riccitiello, chalking the performance up to "good execution."

Specifically, most analysts had predicted the company would lose 13 cents per share -- excluding restructuring and other items, the company ended up losing just two cents. And its adjusted revenue rose 34 percent to $816 million, also a better showing than the $729.5 million that analysts anticipated.

The launches of The Sims 3, EA Sports Active, and Fight Night Round 4 were the company's primary sales drivers, the company says, and Riccitiello notes EA's "very pleased" with sales of the first two.

The Sims 3 sold 3.7 million copies, the company revealed alongside the results, and EA says it was the top seller at retail for Europe and North America combined during the quarter. EA Sports Active has sold 1.8 million units, making it the company's most successful Wii title to date.

The company also says it's seeing a new high in its Wii marketshare: a record 21 percent in North America and 13 percent in Europe, thanks not only to EA Sports Active, but also to Tiger Woods PGA Tour 10, EA Sports Grand Slam Tennis and Rock Band 2.

EA still expects to make its estimate of $3.7 to $3.85 billion for the fiscal year, and did not adjust its guidance.


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Comments


Dan Saundberg
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But the company still saw plenty of success during the period. EA reported net revenue of $644 million -- which although less than last year's $804 million quarter, still means EA did "better than expected," according to CEO John Riccitiello, chalking the performance up to "good execution."



Hum Hum... better double check those numbers.

Dan Saundberg
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"GAAP net revenue for the quarter, which includes the impact of deferred revenue adjustments, was $644 million, down from $804 million in the prior year quarter.



Non-GAAP net revenue for the quarter rose 34% to $816 million from $609 million a year earlier. Sales were driven by launches of The Sims™ 3, EA SPORTS Active™, and Fight Night Round 4."



Accounting is a bitch, amazing how numbers can get twisted ;)

Christopher Plummer
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Any idea what the deferred revenue represents, Dan?

Dan Saundberg
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To me the increase in deferred revenue points to a an expected weak xmas. Games will continue to pile up in shelf's if we see another 31% drop in retail. So a little creative accounting was necessary.



EA doesn't want another xmas 2008 so they are deferring revenue just in case things don't go well. Looking at the EA catalog, it's biggest franchise The Sims 3 is now past. And NFL 2010 is their greatest hope for Q3. These are blockbuster franchises, like Batmen or Transformers movies. Other than that the catalog is a gamble under this economy.

Christopher Plummer
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I could see that being the case.



To be fair they have have FIFA 2010 coming out (last years sold about 8 million copies); it is going to be the soccer game that comes out during the World Cup hype. They have Need For Speed Shift coming out (last years did over 5.5 million copies). Both of these "brands" did better than the Madden brand.



They also have Dragon Age: Origins from Bioware and Brutal Legend which they are being humble about, but will probably do decent considering it is the furthest away from Modern Combat II as one can get.

Simon Carless
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Dan - actually this is to do with a change in EA's accounting rules where they are recognizing deferred revenue from online play for their games into the future. So if a game has significant online play that has cost (for EA to maintain) related to it, they spread the cost and therefore some of the revenue from the game out over a longer period of time. At least, that's how it has been explained to me. The change was made between last year and this year, hence the slight oddness.

Dan Saundberg
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@Chris - Under normal economic times, that would be a nice line-up. But with retail sales being down so much and with no signs of a game changer like a price drop in consoles, it's going to be though to beat expectations. Let's not forget that EA has 10Qs of losses under it's belt.



I doubt (but hope i am wrong) that both DA and Brutal will pick up anything but marginal sales of 1 million. Much like Dead Space and Mirror’s Edge disappointing performance so far. Please note that i am not criticizing the quality of the games - EA is a powerhouse - just their ability to generate a big amount of revenue under this economy. ME is actually one of my favorite games of the year, and i was sadden by the sales numbers. It would have made sense for EA to buy a few more small studios like Majestic that is doing well in the casual Wii space. Or for EA to merge with TTWO, i beleive both would win from the merger. Perhaps gameloft... if there was a time to buy it was this past Quarter



@Simon - Thanks for the clarification. But i am under the impression that this is simply an accounting trick. "Change in Deferred Net Revenue (Packaged Goods and Digital Content). Electronic Arts is not able to objectively determine the fair value of the online service included in certain of its packaged goods games and online content" - not able to objectively determine fair value?! - well determine a fair value or start a subscription service or charge for content like ATVI does. I find it odd that such a big chunk of revenue is deferred due to online services.


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