EA’s Annual Digital Revenue to Pass $1 Billion Within Two Years, CEO Says
Electronic Arts’ digital business recently hit the $500 million a year revenue “threshold,” growing 30 percent, CEO John Riccitiello said on an earnings call. He predicted the publisher will do $750 million in digital business in fiscal 2011 starting in April. EA has “programs in place that should take this to well beyond $1 billion” a year “in the coming two fiscal years,” he said.
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EA expects to increase its total digital direct revenue 30 percent or more, from about $575 million in fiscal 2010 to “at least $750 million” for fiscal 2011, said Chief Financial Officer Eric Brown. One-fourth each of the growth is expected to come from console full games and premium downloadable content (PDLC) and from PC and browser full games and PDLC, and the other half from game services and ads from Playfish social games, Pogo, mobile and subscriptions, he said.
Digital revenue other than from mobile totaled $95 million in Q3 ended Dec. 31, a 42 percent increase from a year earlier, Brown said. FIFA 10, Dragon Age: Origins PDLC, Battlefield 1943 and the latest Sims game “performed well” in the recent quarter, he said. EA sold 2.7 million copies of Origins for the PC, PS3 and Xbox 360, he said. EA digital launches for fiscal 2011 will include Tiger Woods Online, which shifts from beta to commercial launch, FIFA Online and Need for Speed: World Online, he said.
Pogo remains the No. 1 online game site “in terms of user engagement,” Brown said. The company had 1.9 million subscribers in Q3 for Pogo and massively multiplayer online gaming, he said. It finished Q3 with 49 million registered users, including console and PC gamers, in its “central user identity management system, up 16 percent” from the previous quarter, Brown said. EA had two of the top 10 Facebook games in Q3, he said.
EA’s mobile revenue increased 14 percent to $57 million from a year earlier, and the company remained the No. 1 mobile game provider in western markets, Brown said. The company had seven of the top 11 games in December for the iPhone and four of the top five in 2009, he said. EA had seven of the top 10 games on Verizon in Q3 and had most of the top 10 games for AT&T, Sprint and T-Mobile, he said. In fiscal 2011, “every one of EA’s releases will have an online component, both downloadable content and online play,” said Chief Operating Officer John Schappert.
For now, though, packaged games still account for most of EA’s sales. It struggled with them in Q3 despite, being the No. 1 packaged goods publisher in North America and Europe through Q3, according to the company. EA narrowed its loss for Q3 to $82 million, 25 cents per share, from $641 million, $2 in Q3 last year (CED Feb 9 p12). But overall revenue tumbled to $1.243 billion from $1.654 billion and its shares fell Monday after the forecast it provided for Q4 came in weaker than analysts had expected. EA expects to report Q4 revenue of $925 million to $1 billion and earnings per share of 5-23 cents for Q4. Non-GAAP Q4 revenue is expected to come in at $800 million to $850 million, it said. EA expects to report an increase for earnings on a non-GAAP basis next fiscal year because of “strong cost controls and growth in our digital businesses,” said Brown.
Company executives said they were just being conservative with their forecast and there are signs favorable to industry growth. EA has “a strong belief in the new motion controllers,” Riccitiello said. “There’s reason to be optimistic. We've just chosen not to because it’s a better planning assumption to be more conservative here."
EA “will be supporting” the launches of new motion-control systems from Microsoft and Sony “at launch” later this year, said Schappert. But he said, “We don’t have any titles to announce right now."
PS3 hardware sales increased 48 percent in Q3 from a year earlier, but Wii hardware sales dipped 2 percent and Xbox 360 console sales tumbled 21 percent, Brown said. “Hardware sales responded to price promotions, particularly the Wii in North America with Wal-Mart promoting the Wii at an effective $149 price point,” he said.
EA sold through more than 2.3 million units of Madden NFL 10in Q3, it said. Left 4 Dead 2 from it and Valve “exceeded our expectations with 2.9 million copies sold in worldwide on the PC and Xbox 360 during the holiday quarter,” and it made the top 10 in North America, said Brown.
The company shipped 2 million units of Mass Effect 2 Jan. 26 for the Xbox 360 and PC, backed by a major marketing campaign, Schappert said. The company was “very pleased with … consumer response” to the game, he said. EA’s “early read” was that sellthrough was “strong,” but he didn’t project how many of the 2 million sold through. The company is also supporting its new game Dante’s Inferno, shipped Tuesday, with a “strong marketing campaign,” including its first Super Bowl spot, he said. EA “saw more than 3 million downloads” for a demo of the game, and “preorders are tracking well,” he said. The company plans to release 36 packaged games in fiscal 2011, down from 54 the year before, Brown said.