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EA: Distribution Business To Be Pared Down, Headcount Stable In 2010

EA: Distribution Business To Be Pared Down, Headcount Stable In 2010

February 8, 2010 | By Chris Remo

February 8, 2010 | By Chris Remo
More: Console/PC

Electronic Arts will be moving away from distributing externally-developed games to focus more on its internal titles, which can generate higher margins, the company said Monday, and it plans to keep its headcount steady through its upcoming fiscal year.

For calendar 2010, EA expects the worldwide packaged goods segment of the games industry to see a three percent drop in revenue, which it admits is a "conservative" view.

To help improve the company's overall profit margin, EA will be partially withdrawing from its external publishing efforts, which are centralized under its EA Partners label.

"While we have great relationships with our partners, we are modeling a reduction in our distribution business as we concentrate on higher-margin EA owned titles and digital initiatives," said COO John Schappert during a post-results analyst conference call.

The move is expected to be reflected by a $450 million year-over-year drop in distribution revenue for the company.

The company was sure to note that some external titles will still be accepted for EA distribution -- after all, it still plans to publish Crysis 2 and an untitled Epic shooter, both EA Partners releases.

"Tighter focus will yield better results," the executive said of the plan.

Internally-developed PC games can have a profit margin of up to 90 percent, while internally-developed console games can return margins of 60 to 70 percent, EA explained, while externally-developed titles necessarily generate lower margins for the publisher.

Notably, EA listed no Rock Band games on its latest release schedule, which stretches out to the first calendar quarter of next year.

[UPDATE: Harmonix has informed Gamasutra that its upcoming Green Day: Rock Band will be published by EA Partners. The full statement is as follows:

"The previously announced Green Day: Rock Band will be published by MTV Games and distributed by EA. Stay tuned for news of MTV Games' other titles soon."]

EA did point to some external successes -- it said Valve's Left 4 Dead 2 had "exceeded expectations," selling 2.9 million units at retail across PC and Xbox 360 during the holiday quarter alone.

Despite the slimming down of its distribution business, EA says it aims to keep headcount steady during its upcoming fiscal year, following a significant recent restructuring effort resulting in the total loss of well over 1,000 jobs.

The company says it expects to have a total workforce of about 8,120 employees at the end of its current fiscal year, which ends March 31, and it aims to end up with roughly the same number when its 2011 fiscal year ends the following March.

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