The road to XBOX ONE. Follow the journey

EA's future gameplan

EA's future gameplan

EA is performing. In both Europe and North America, EA was the number one overall publisher in the quarter - number one on the PS3, Xbox 360, and PC, and number two to Nintendo on the Wii.

[In future] we see a tale of two sub-sectors. The various digital sectors are performing very well. [But] the packaged goods sector is under pressure. Retail data services do not tell the full story.

For the global industry, including online and mobile, we expect growth in 2009 with gains on the digital side more than offsetting temporary weakness in the packaged goods sub-sector.

Calendar year-to-date, packaged goods software sales are down 12 per cent in North America and we estimate minus 13 per cent in Europe. While the recent hardware price reductions are driving higher console sales, the improvement is not enough to get the industry back to flat software sales for the calendar year.

We now expect packaged goods software to be down mid-to-high single digits in North America and Europe combined. This is well below our initial expectations for the year.

As recently as five years ago, we estimated that digital was less than ten per cent of the global industry. Today, we estimate digital is 35 per cent of the total.

Our sense is that the various digital businesses will grow at 20 per cent or higher this year and for the next several years. When we combine digital growth and the packaged goods business, we expect that the total sector will grow in 2009 and the years beyond.

Given our longstanding view on the evolution of our industry, EA continues to transform itself from being nearly entirely packaged goods dependent to being a leading player on the digital direct side of the industry.

'TWO BOLD STEPS'


I’d now like to turn to two bold steps we are taking toward that transformation. The first is a targeted cost reduction which will allow greater investment in our hit titles and digital businesses. The second is our acquisition of social gaming leader, Playfish.

This year, we have had success putting more resources behind fewer packaged goods titles. We’ve decided to narrow our title slate further in preparation for FY11. We are implementing a thoughtful, targeted action that will reduce titles, close several facilities and decrease headcount by approximately 1,500 positions, of which 1,300 will be included in a restructuring plan.

Laying off employees and closing facilities is never pleasant. We have a lot of compassion for those impacted but these cuts are essential for transforming our company. Our operating expenses will be reduced by at least $100 million compared to our current run rate.

Second, our acquisition of Playfish. Their management team is strong and will assume leadership for EA’s global push into social games. We see it this way – Playfish will continue to be Playfish, but they will have the added benefit of EA’s powerful intellectual property and access to EA resources globally.

Two bold steps. The first – a narrowing of focus and cost reduction to enable investment in hits and digital. The second – a strategic M&A investment on the digital direct side.

EA is playing offense – positioning ourselves for the future.

The full transcript of EA's earnings call is available from SeekingAlpha.

Advertisement

Tags: This article has no tags

Follow us on

  • RSS