EA Sports - Reason for big $$$ loses?

[JonB-School]

This is a favorite website of mine that I've been reading daily since I enrolled in my first of many comp science classes back in 2000. Now I'm taking night time business classes and writing a report on EA Sports. I couldn't help but wonder what the folks at Anandtech currently think of EA.

Anyway, EA has taken some serious financial hits lately. I won't go into the what the financial analysts think of this. I generally respect the subject matter experts (gamers like yourself). So I'll ask you, what is EA doing wrong? And what do you think they are still doing well?

• 2011 -$173 million loss
• 2010 -$677 million loss
• 2009 -$1,010 million loss
• 2008 -$454 million loss

 

[GoodRevrnd]

 

[thejunglegod]

judging by those figures, i think they are already cutting down their losses. So where's the fire anyways?

 

[sandorski]

They've been dicking us around.

 

[Rifter]

EA can suck on a great big bag of dicks!

 

[Maximilian]

So I'll ask you, what is EA doing wrong? And what do you think they are still doing well?

They do everything wrong.

They do nothing well.

 

[frozentundra123456]

As you can see, there is a lot of hate for EA on these forums. However, I will assume you are asking a serious question and not just trolling. I am no expert, but these are my opinions.
First, games are extremely expensive to produce. Secondly, there are not any great new franchises coming out, and a lot of EA's games have become derivative, show no innovation, and have actually declined in quality(e.g. Dragon Age 2 and the ending to ME3). And the consoles, where the bulk of the revenue comes from, are getting very old now, and leave little room for innovation.

2012 could be an interesting year though. They had Mass Effect 3, which disappointed a lot of people, myself included, but probably sold well. Also their MMO, TOR, again which does not interest me (I really wanted KOTOR 3 single player), could bring in a lot of revenue. They could also see a good boost when the new consoles come out.

 

[Beev]

They do everything wrong.

They do nothing well.

Fantastic summary.

 

[nenforcer]

Specifically with EA Sports, they purchase an exclusive license to make the one and only NFL game for some huge amount of money.

Then they refuse to make what most consider necessary fundamental changes to the franchise mode on a year to year basis.

The difference between versions on a yearly basis is very hard to tell, basically little to none. They may make a new menu system with different music along with a few graphical tweaks and some gameplay additions (new players) / subtractions (turbo button, training camp).

I'm relegated to purchasing the game every other year, if that.

I've emailed

madden@tiburon.com

nearly a decade ago asking for things like restoring a roster spot for a franchise team after placing a player on injured reserve and it still not in the game!

Again your not going to please everybody but innovation has slowed to a crawl after they got that exclusive license.

 

[shortylickens]

Agreed. The worst thing to happen to innovation is monopoly. No need to improve your product after that.
They also squeezed out 989 Sports and some other companies too. That just makes it worse.

The PGA series has actually gotten worse sine the 2004 edition. Better graphics, MUCH worse game play. Damn annoying.

 

[ViRGE]

Is EA's revenue even split up by division like that? It seems to me that you're looking at net income for the entire company, which is far more than just EA Sports.

 

[darkewaffle]

Large acquisitions (Popcap, Playfish, VG Holding Corp [Bioware and Pandemic]) which over the last five years have cost almost $2B collectively, but in addition to that they have also been divesting liquid assets into actual investments (they hold/held almost 100M USD in Ubisoft stock as of a couple years ago). They've actually acquired eight other companies in that same time frame for undisclosed amounts, none of which were as high-profile as the aforementioned but you can be sure they didn't come cheap either.

It's a long term strategy that reflects poorly on their books in the short term. The PopCap acquisition in particular cost about 650M + 100M in stock right off the bat but has provisions for over 500M more paid out to the holders (sellers) based on performance. Which quite possibly could have been accounted for on their books already, dragging them down further.

Their big games are selling as well, if not better, as ever and EA actually has one of the most highly scored aggregate catalogues on Metacritic amongst game publishers. Most stock analysts are split with about half of them having EA has a "Buy" or a "Hold" with a general consensus that their stock is undervalued.

 

[terry107]

I'm assuming the numbers you provided are net income, yet they don't agree with what is reported in the 10-K. Also, I'm no fan of EA's current business practices, but I wouldn't characterize the company as taking serious financial hits. Their net loss and EBITDA has decreased each of the last three years while their net cash flow from operations has increased from $12 million in 2009 to $320 million in 2011.

 

[StrangerGuy]

They bought Bioware to be used as a badge of quality, only for the latter to completely squander their reputation with a disastrous DA2/ME3 and leaving them with a sinking ship called SW:TOR. Karma? Terrible business acumen? Who knows.

 

[RavenSEAL]

Money > Fanbase

 

[Grooveriding]

I think the only real solid dev they have left is Dice. Even BF3 has been monetized to shit and laid out with a mass DLC plan. But, Battlefield 3 MP is amazing and it's an excellent game.

They've even turned Crytek and Bioware into console-port turd producing factories.

 

[silvan4now]

it appears that just releasing games and expecting the name will be the only factor that sells isn't that profitable these days!

 

[waggy]

Specifically with EA Sports, they purchase an exclusive license to make the one and only NFL game for some huge amount of money.

Then they refuse to make what most consider necessary fundamental changes to the franchise mode on a year to year basis.

The difference between versions on a yearly basis is very hard to tell, basically little to none. They may make a new menu system with different music along with a few graphical tweaks and some gameplay additions (new players) / subtractions (turbo button, training camp).

I'm relegated to purchasing the game every other year, if that.

I've emailed

madden@tiburon.com

nearly a decade ago asking for things like restoring a roster spot for a franchise team after placing a player on injured reserve and it still not in the game!

Again your not going to please everybody but innovation has slowed to a crawl after they got that exclusive license.

/this i have a older madden game. a buddy has 2011 besides minor team updates i don't see a difference.

There is no reason to buy the SAME game every year.

Also EA is just releasing shit. they purchased bioware and turned it into a shit company. used to be i would buy games from them 1st day adn they were fine. now? yeah i will wait. if at all.

 

[Golgatha]

They purchase other companies IP or the company outright, and have a knack for running once beloved franchises into the fucking ground. This fosters outright contempt from the very core of people who would possibly purchase their products. Everything they release is in buggy beta version status, and unless it does financially well in the marketplace, it will never see a patch. Their customers have been burned by them, and there are many many equivalent replacement products for EA's products in the marketplace.

Also, EA is trying to control the distribution and usage of its products in the forms of Origin and those Online pass tickets for their sports franchises. Also, the sports franchises have their servers systematically shut down once they have been on the marketplace for over a year typically. All this does is generate more contempt from their customers and their actions systematically devalue their own products to the point that the value proposition is no longer present. Couple the devalued product with some of the poorest customer service, draconian DRM control of their products, and molestation of several franchises gamers used to love; and you have a perfect shitstorm of consumer backlash that translates into the financial results EA has "enjoyed" for the last several years.

Cliffs: EA is bad for gamers and gamers couldn't care less if EA goes bankrupt. Some gamers are actively avoiding EA games to speed up the process (raises hand to be counted).

 

[crownjules]

They purchase other companies IP or the company outright, and have a knack for running once beloved franchises into the fucking ground. This fosters outright contempt from the very core of people who would possibly purchase their products. Everything they release is in buggy beta version status, and unless it does financially well in the marketplace, it will never see a patch. Their customers have been burned by them, and there are many many equivalent replacement products for EA's products in the marketplace.

Also, EA is trying to control the distribution and usage of its products in the forms of Origin and those Online pass tickets for their sports franchises. Also, the sports franchises have their servers systematically shut down once they have been on the marketplace for over a year typically. All this does is generate more contempt from their customers and their actions systematically devalue their own products to the point that the value proposition is no longer present. Couple the devalued product with some of the poorest customer service, draconian DRM control of their products, and molestation of several franchises gamers used to love; and you have a perfect shitstorm of consumer backlash that translates into the financial results EA has "enjoyed" for the last several years.

Cliffs: EA is bad for gamers and gamers couldn't care less if EA goes bankrupt. Some gamers are actively avoiding EA games to speed up the process (raises hand to be counted).

Boom! Headshot.

 

[Maximilian]

They purchase other companies IP or the company outright, and have a knack for running once beloved franchises into the fucking ground. This fosters outright contempt from the very core of people who would possibly purchase their products. Everything they release is in buggy beta version status, and unless it does financially well in the marketplace, it will never see a patch. Their customers have been burned by them, and there are many many equivalent replacement products for EA's products in the marketplace.

Also, EA is trying to control the distribution and usage of its products in the forms of Origin and those Online pass tickets for their sports franchises. Also, the sports franchises have their servers systematically shut down once they have been on the marketplace for over a year typically. All this does is generate more contempt from their customers and their actions systematically devalue their own products to the point that the value proposition is no longer present. Couple the devalued product with some of the poorest customer service, draconian DRM control of their products, and molestation of several franchises gamers used to love; and you have a perfect shitstorm of consumer backlash that translates into the financial results EA has "enjoyed" for the last several years.

Cliffs: EA is bad for gamers and gamers couldn't care less if EA goes bankrupt. Some gamers are actively avoiding EA games to speed up the process (raises hand to be counted).

That is the saddest part for me :'(

 

[Beev]

Bullfrog

Westwood

*sobs*

 

[Martimus]

I avoid EA games. It isn't for some altruistic or philosophical reason, it is purely pragmatic in my case. Their products have often caused me more stress and consternation than enjoyment in the past, and the whole purpose of their products are to cause enjoyment and reduce stress. This means that their products are on a practical level counterproductive to me. If I need to jump through multiple levels of hoops just to get their products to work, and they won't help me to get said products to work, then I see no reason to ever buy one of their products.

 

[Atomic Playboy]

Their sports games suffer from a lack of direct competition (in the case of Madden, Tiger Woods, NHL and the like) or from being completely inferior to a competitor's product (NBA 2K12). Their incremental upgrades on an annual basis amount to little more than updated rosters which people are tired of paying $60 for. I'm surprised that they're losing money, to be honest, but the overall lack of quality has to be a factor.

 

[LurkerPrime]

Bullfrog

Westwood

*sobs*

Thats just the tip of the iceberg. According to wiki 38 aquisitions over 21 years. Talk about buying out the competition.