A new way of arguing Wii Third Party Games can't sell, and an old standby.  The new one - If you don't count the top selling third party games for Wii, it will help prove third party games for Wii don't sell well. The old standby - Don't take into account that making a Wii game costs about a third of what it costs to make an HD game, just ignore development costs and complain Wii games don't move equal units to the HD games). Anyone else getting sick of this?

http://www.gamesindustry.biz/articles/electronic-arts-has-missed-the-current-hardware-cycle-analyst

EA has "missed the current hardware cycle" and is unlikely to return to historical operating income margin levels "anytime soon", according to a new report by analysts at Cowen Research.

In an occasionally damning critique of EA's plans and guidance the report states that: "We believe that following serial earnings disappointments, Electronic Arts now deserves a lower valuation premium than the company has historically enjoyed."

"Since management first laid out its initial full year 2010 guidance and full year 2011 long-term guidance in February 2008, the company has failed to deliver on its earnings targets and has been forced to repeatedly revise down its guidance. Given this historical record, we do not think investors should place too much faith in management's current guidance."

The report suggests that EA's guidance for the next financial year is "fairly aggressive" but that its targets could still be met. EA's revenue targets currently stand at USD 4.3 billion, but the report suggests this can only be achieved via further cost cutting - which is likely to be damaging in the long term.

The report points out that publishing revenue growth will need to outperform overall industry figures by a considerable margin, despite a "pared back" release schedule and currently difficult global economic conditions.

Growth in digital distribution is seen as a key factor, with EA aiming for a 100 per cent increase over the course of the year - which the report again characterises as achievable but with considerable downside risk.

Despite considerable scepticism over EA's business model and guidance the report is not entirely critical, maintaining a share rating advice level of "neutral".

Indeed, the report suggests that EA's own expectations for its first quarter may be unnecessary low, with a strong line-up including EA Sports Active and Bloom Blox: Bash Party on the Wii. First year sales in the US are estimated at 1.4 million and 350,000, respectively.

Although this would make EA Sports Active one of the most successful third party titles on the Wii, the report is general sceptical about the ability of any third party publisher to thrive on the format.

The report is particularly despondent about third party sales when revenues for Guitar Hero and Rock Band are ignored, where the top 5 per cent of third party titles for the Wii sold an average of 860,000 units, compared to 2.5 million on the Xbox 360 and 1.2 million on the PlayStation 3.

These top 5 per cent of titles accounted for only 31.8 per cent of total market share on the Wii, compared to 41.2 per cent on the 360 and 34.2 per cent on the PS3. The figures also suggest that quality and critical reaction are far less import on the Wii, making successful titles even harder to predict.

The report is also sceptical over the impact EA's increase in unlicensed new intellectual properties will have, with only 36.5 per cent of sales expected to come from unlicensed titles in the next financial year. Estimated first year US sales for selected EA-owned titles stand at 1.5 million for The Sims 3, 0.4 million for Brutal Legend, 0.63 million for The Saboteur, 1.3 million for Army of Two: The 40th Day, 2.1 million for Dragon Age: Origins, 1.1 million for Battlefield: Bad Company 2, 1.1 million for Mass Effect 2 and 0.8 million for Dante's Inferno.

In a final comment on the company's future for the next 12 months, a potential buyout is mentioned - especially given EA's current share price is currently significantly below its historical valuation. The report hints that Disney and Time Warner may be the most likely suitors - although the latter suggestion seems to have been made before the recent move for Midway.

Although Cowen Research's expectations for 2010 are only a little below that of EA's it is significantly lowering its 2011 estimates, from a year-on-year earnings per share increase of 48.7 per cent to just 24.0 per cent. The firm's analysts suggest that "further margin gains will be difficult without significant new hit games". However, little is currently known about EA's publishing schedule for that period.

Yeah, pretty inept analysis. But I've come to expect nothing less from the folks who predicted Wii would sell 18m lifetime units.

wOrd.

They haven't been nearly as successful on consoles. I think they secretly wish this console generation, whether its Wii or HD consoles never happened. On the PS2 they had many multi-million sellings games and lower development costs overall. They could produce more games, and those games sold more on average an absolute win/win. Sure they can develop titles relatively cheaply for the Wii, but compared to the PS2 these titles just aren't performing as well as some of their big hits like NFS Underground. Also their big Sims franchise might be winding down a little with lower sales all around. Its definately not a cheery time to be an EA employee.

The article would have been good if it stopped right there.

I wonder what they mean by "missed the current hardware cycle".  Through the first half of the article, it sounded like it meant that EA should have bet on the Wii instead of the HD consoles.  Then in the second half of the article they say that they don't like how the Wii sells third party software.  So what should EA have done?  It sounds to me like "missed the current hardware cycle" is a nice was of saying "EA is fucked no matter what they do".

The analysis is all doom and gloom, no solutions.  Terrible.

I don't think a single third party developer expected the Wii to sell this well.  It wasn't just EA that missed the boat in the beginning.  Since then they have shifted more attention to the Wii.  

People complained that all EA could do was release cookie cutter games every year.  Well they have done a fantastic job of publishing new IP's recently and it looks like there will be more to come.  It's up to gamers to support their new efforts. 

The Wii is to touch and go... games like GH and RB do well on it, but after that it's mostly going to be better to release your Harry Potter or Bolt game on the system. Or better yet sell to the massive ammount of Wii Fit owners. I think that their Fittness game will do well. It's not selling on the same level as out Wii Fit, but it's selling about 2/3s. I also think they undestimate what Mass Effect 2 will do. I think it'll probably be closer to 2 million.

I'm archiving these expectations for game sales somewhere.

Don't blame the Wii. Blame the CEO for thinking that message boards are fact and that people want original games. EA spent all this money making high quality and original titles that got totally ignored for the 58th version of Call of Duty and 73rd version of Guitar Hero. All the money down the drain making games nobody wants to play.

And yes I said it, a game that sells poorly is a game nobody wants to play. You'll never convince me that the logic of, "I really want this game so I refuse to buy it" makes more sense than, "I don't really want this game, so I refuse to buy it."

They should have stuck to there guns and only released titles that have a 3 or higher in the title. The only "original" IPs that people want are ones that are blatant copies of something else.

How did Guitar Hero get popular in the first place? THAT is what EA needs to figure out and recreate.