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EA's top brass get ready for challenging console transition
EA's top brass get ready for challenging console transition
May 7, 2013 | By Kris Ligman

May 7, 2013 | By Kris Ligman
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    7 comments
More: Console/PC, Smartphone/Tablet, Business/Marketing



Electronic Arts continues to face a rough road in the coming fiscal months, not simply from a flagging boxed retail market but also from the upcoming next-generation console transition. In the wake of SimCity's troubled launch, mass layoffs and the departure of CEO John Riccitiello, EA aimed to focus on the positives with its growing digital and mobile market.

In its earnings call with investors and analysts following the posting of the company's 2013 fiscal year earnings, CFO Blake Jorgensen, president of EA Games label Frank Gibeau, and EA executive chairman Larry Probst -- who stepped in to temporarily replace Riccitiello while the Board of Directors continues its search for a new CEO -- expounded on the company's earnings data with a new plan of action for the 2014 fiscal year.

Here are some highlights, excerpted from the earnings call Q&A follow below. The execs focused (heavily) on the positives, but we all know that console transitions, along with continuing massive shifts on other platforms, can make for very challenging times.

Gibeau on preparing for the next-gen

"Regarding next generation consoles, we are under a non-disclosure agreement with our platform partners, however, we're planning a full reveal at E3 including more next generation titles in development for FY14.

"...I also want to call out a big accomplishment by the teams that built the development engines for our next generation of games -- Frostbite 3 engineered at DICE, and a brand new engine from EA Sports. These world class tech stacks are powering all of our development on the new systems. They provide an enduring common technology that saves cost, fosters efficiency, and provides spectacular physics and graphics for our games.

"This isn't a vision -- these engines are fully functional right now and powering the games you'll see at E3 in June."

Gibeau on the SimCity fiasco

"SimCity [is] a great game that has recovered from a challenging launch. The short explanation for the launch is that the initial rush of consumers overwhelmed our game service, disrupting the consumer experience. As we stabilized the game and improved service in the first week, fans continued to pour in. So far we are ahead of forecast with more than 1.6 million units currently sold through to consumers. The digital story is particularly strong - nearly 50 percent of those sales were high-margin digital downloads.

"The key takeaway here: SimCity is a highly resilient, global franchise with a long service life in front of it. But we learned our lesson and are now building better processes to anticipate and service demand. This won't happen again."

A lean transition

Jorgensen: "Our cost reduction plans will reduce our overall headcount by approximately 10 percent. ...Operating expenses will be impacted by the severance payments [of recent layoffs] and we expect our total non-GAAP operating expenses to be $530 million."

Probst: "I'm pleased to say we have locked a plan that delivers higher revenue while keeping our operating costs essentially flat. Doing that in the middle of a hardware transition will be a challenge - something we've never done in the 31-year history of this company. But we are committed to making it work.

"...This is a time when we tighten our belts and position the company for future growth and success."


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Comments


Erin OConnor
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Dear EA.

I will not be purchasing any of the following titles from your company:
Madden, FIFA, FIFA Manager, NBA LIVE, NHL, and NCAA Football, as well as Need for Speed, Battlefield, Command and Conquer, FUSE or Sims 4.

There is a good reason that you were voted worst company in America 2 consecutive years.

Where in the list of games there is there anything new? Its all the same old same old. Where is the innovation? Where is the creativity?

Maybe you need to spend less money telling me how great your game is (eg. marketing) and spend money MAKING a great game.

Origin. Its pure garbage and its REQUIRED. NO ONE wants, likes or needs your software. You are not Steam, stop trying to be Steam. I know this is hard for you, but give your customers the choice. Let them choose what digital distribution platform the want to use. Steam? uPlay? Direct2Drive? GOG? [other]?

Day one DLC's and DLC/Season passes/In game stores in general. Stop, just stop. People Do NOT want to spend their hard earned money on INCOMPLETE games.

The worst part of it all is EA appears to be completely oblivious as what is going on and appears to be doing nothing to address why they are so hated as a company.

Your window of opportunity to turn things around is closing. I Am only 1 person but I vote with my wallet. Judging by your financials I Am not alone. Either change, or go out of business.

Ramin Shokrizade
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The recent social network games implosion and the shift to mobile has left the AAA environment relatively underpopulated. This means less competition and higher revenues for those still standing that intend to service this market. Presumably EA is still standing, if a bit wobbly after being caught in the aforementioned implosion. If they can double down on AAA, where they excel, I think they can recover. This presumes they get over their infatuation with questionable monetization models.

Joe McGinn
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Very insightful comment Ramin, I had not though of it from that POV.

Josh Neff
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When EA has been responsive to its customer base, it has done well. When it has ignored the outcries and pleas, it has floundered. In spite of everything, EA still has much potential, and quite a few worthwhile IPs under its belt. So long as it fixes the rectal cranial inversion, and drops the myopic "We are the best... no matter what" EA could quite possibly be great again.

John Flush
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At the start of the X360 / PS3 generation I was a fan of EA again. Here I am at the end of this one and I realize they don't make games for gamers. Businesses are suppose to maximize profits, I get it, but the way EA does it doesn't make me feel like a gamer, it makes me feel like the friend that always gets suckered into paying the check. I don't hang out with friends like that for very long and no matter how hard they beg to hang out with me I'm always too busy for their shit.

Spencer Franklin
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"The short explanation for the launch is that the initial rush of consumers overwhelmed our game service, disrupting the consumer experience..."

WTF... So, it had nothing to do with the DRM, the blatant lie that online was needed, the blatant lie about the millions of AI calculations (AI is dumb as hell), The fact that players were able to prove how false their statements were on all these things...

Anything with "EA" on the label will never be supported by me, ever again. They are not about making great games, they are purely about manipulation and profit maximization, and nothing could make me happier than to see them die out.

John Flush
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Remember this... I've been trying to support the same stance for the last year or so. I missed out on playing ME3 but none of the laughter that ensued. You have to go past the logo though and really research the dev you buy from - EA is everywhere... I caught myself playing free to play games made by Popcap until I realized that is an EA shop. At least they still haven't got any money from me in a few years now.


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