New EA CEO says video games are "boring"

[Bodhesatva]

Legend11 said:

Sullla said:

 

Over the past four years, EA's net revenue has remained fairly constant at around 3 billion dollars annually, while their gross profit has remained at about the same figure, $1.9 billion. But look at what happens to their operating expenses: the balloon upwards with each year of the "next-gen" consoles! Total operating expenses: 1.08 billion (FY04), 1.26 billion (FY05), 1.45 billion (FY06), 1.84 billion (FY07). Nearly all of those expenses are coming from increases in research and development (ie, the cost of making these "HD" games); R&D costs more than double from $511 million in FY04 to $1,041 million in FY07. As a result, EA's profitability drops steadily every year over this period, from $577 million in FY04, to a paltry $76 million last year in FY07. If you read further, EA tries to explain away their falling profits with a bunch of words about "generational change" and "transition costs", but the writing is on the wall. Developing for the 360 and PS3 is not paying off.

Is it any wonder then that EA is shifting towards more Wii support? The publishers that threw the most support behind the Wii and DS (Ubisoft and Majesco) are reaping huge profits this year. Gamespot even has an article today about how Majesco has recovered from the verge of bankruptcy thanks to developing for Nintendo. What EA is doing is not called "being a whore", it's called good business. Or should they act like Take-Two, and utterly destroy their company's finances just to produce "hardcore" games that fail to turn a profit?

Your first paragraph about developing not paying off on the 360 is complete bullshit. Try taking a look at the actual numbers instead of making blanket statements. You simply looked at the total operating expenses without looking at how many titles and how many platforms were being supported and where exactly profits were being generated and lost. In fact I find it odd that you don't include statements EA made that gave credit to several 360 titles for increasing profit. How about giving us a breakdown of EA's expenditures for each platform vs. the profits generated from each. What you don't have that information? Then how can you pass judgment on something without having even information as critical and basic as that?

EA in increasing development for the Wii which is a no-brainer but the have also stated they want to remain the top third party on the 360 and PS3.

As for Take-Two their "hardcore" games sell extremely well, their problems stem from idiotic mistakes like the hot coffee and manhunt 2 fiascos, cancelling games in development, legal fees (for a stock options investigation, lawsuits, etc), etc. The company was simply run incredibly poorly but to blame it completely on "hardcore" games instead of bad management is well bullshit.

Legend, you need to calm down. I'm sure you're aware that a platform-by-platform listing of expenses and profits is not available, nor will it ever be; however, given that EA publicly stated that they were investing heavily in next generation platforms (and particularly the PS3), one can reasonably assume that this is where most of the expenditures were, and this is where most of the decreased profitability has occured. Sullla has provided significant evidence to back these claims; you've provided no evidence of any kind.

It's very simple -- the companies that have been noted for throwing heavy support behind the Wii have seen dramatic increases in profits. Ubisoft, Majesco, and of course Nintendo itself are great examples:

http://www.gamesindustry.biz/content_page.php?aid=25380
http://www.cubed3.com/news/7832/1/Majesco_Profits_from_Nintendo
http://ds.ign.com/articles/783/783710p1.html

By contrast, companies such as EA and Take 2 that have publicly announced the "next generation" platforms as their main area of focus have seen significantly declining profits or, in the case of Take 2, significant losses.

http://www.ibtimes.com/articles/20070508/electronic-arts-earnings-shares.htm
http://news.yahoo.com/s/nm/20070611/bs_nm/taketwo_results_dc

If you'd like to insist that this is a coincidence, then please provide evidence to explain how that could be so. As Sullla said, I think the writing is on the wall: the next generation platforms are not, by and large, particularly profitable, and this conclusion is further bolstered by the bevy of statements from EA, Take 2, Capcom, Sega, and several other major companies, stating that they are decreasing development on PS3/360 and increasing development on Wii. Why would they do this if it wasn't more profitable? I'll leave it to the President of Take 2 to put this in as simple of terms as possible:

"To be perfectly frank, I don't think it takes a rocket scientist to realize what's going on with Wii and DS. I will tell you that very quickly we turned to both 2K and to Rockstar and said guys, we need a DS strategy and a Wii strategy and we are working on it. As we get into the next quarter and into budget season for 2008, everybody in this company is completely focused on it."

http://www.joystiq.com/2007/06/18/take-two-chair-talks-wii-and-ds-focus/