EA Lost More Money In Three Months Than You'll Ever Make

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Alex Pecha Vas Normandy:
Well hopefully when Old republic gets released they will make up for it ASSUMING BIOWARE RELEASES IT IN THE NEXT DECADE

IT'S SO CLOSE, YET SO FAR.

OT: Yikes, that's going to leave a mark. A considerable one.

It's kind of hard to tell what these numbers mean. If indeed such things as investment in future projects aren't considered, then the numbers are basically meaningless.

Might be this is just publicity, getting the name out. They have Bad company 2, Dead space 2, new Battlefield, new Dragon age and Mass Effect are coming really soon, they'll make up the money. <-- see that, publicity

McNinja:

gmaverick019:

McNinja:
I think it has something to do with The Old Republic. Didn't the game cost around $300 Million to make?

Also, once they get a well-made MMO out there, with the subscription, they will turn a profit.

hopefully this is true. by the looks of it they have at least a game purchase plus a month or two minimum from me.

psrdirector:
I hope this doesnt allow apple to buy them out, that would be devistating the gaming industry

i might die if this happened

I might as well.

As for SW:TOR in terms of making money: just roll with this for a bit: 1 million people buy the game. That's $60,000,000. Then add in the subscription for three months. Tis makes it $120,000,000. The game will have to run with at least one million players for more than one full year to make up for the money it took to create it.

I'm sure there will be more than 1,000,000 people who buy the game and subscribe on launch, so I'll do more numbers then.

well just estimating a bit more, mass effect 2 sold over 2 million copies in the first week(i realize thats collective, being multi platformed, but just using it as a number).

so with that

2,000,000 - games sold
$120,000,000
three months for each person
$240,000,000

now thats all spitballing, but just saying, kotor had a decent sized fanbase (look at the mods alone) and if people love bioware as much as alot of them have been spouting, those COULD be accurate assumptions (notice i said could, not that they were or anywhere close)

AC10:

JeanLuc761:

AC10:
Oh no we ONLY made $1.053 billion instead of $1.243 billion! It must be those damn pirates! How can a company humbly survive of a measly billion dollars of revenue???

EA is huge, but a $332,000,000 loss is massive, no matter who you are. They lost nearly 25% of their revenue, which means they'll be unable to take as many risks in the near future.

Right, but they lost revenue. It's not like they're operating in the red, they still MADE a billion dollars.

I never got why business assume they can just infinitely grow and their profits will always "gain". If you think of the world on a macro level, there is only so much money and so many people willing to spend it. Sometimes you're up some times your down, so long as it's a positive revenue stream after operational costs I fail to see what the deal is.

This is what has always confused me. When someone reports a loss of revenue as compared to the prior quarter it's not an actual loss of money but a loss in profit margin. Right?

Someone please explain that for me i'd appreciate it.

aPod:

AC10:

JeanLuc761:

EA is huge, but a $332,000,000 loss is massive, no matter who you are. They lost nearly 25% of their revenue, which means they'll be unable to take as many risks in the near future.

Right, but they lost revenue. It's not like they're operating in the red, they still MADE a billion dollars.

I never got why business assume they can just infinitely grow and their profits will always "gain". If you think of the world on a macro level, there is only so much money and so many people willing to spend it. Sometimes you're up some times your down, so long as it's a positive revenue stream after operational costs I fail to see what the deal is.

This is what has always confused me. When someone reports a loss of revenue as compared to the prior quarter it's not an actual loss of money but a loss in profit margin. Right?

Someone please explain that for me i'd appreciate it.

This is what I thought as well. Maybe I'm like WAY off the mark, I just program computers I don't deal with the business end of things in real life, never even took an econ class.

D'aawwww.

Am I supposed to feel sorry for EA? Because if so, fission mailed.

AC10:

aPod:

AC10:

Right, but they lost revenue. It's not like they're operating in the red, they still MADE a billion dollars.

I never got why business assume they can just infinitely grow and their profits will always "gain". If you think of the world on a macro level, there is only so much money and so many people willing to spend it. Sometimes you're up some times your down, so long as it's a positive revenue stream after operational costs I fail to see what the deal is.

This is what has always confused me. When someone reports a loss of revenue as compared to the prior quarter it's not an actual loss of money but a loss in profit margin. Right?

Someone please explain that for me i'd appreciate it.

This is what I thought as well. Maybe I'm like WAY off the mark, I just program computers I don't deal with the business end of things in real life, never even took an econ class.

It's about the investors. It's not enough that the company is making money, it has to making the MOST money. If a company's profits are down they'll sink their money into a different company because they want the BEST return possible. When the rich stop investing stock goes down considerably because they buy the most shares. This erodes consumer confidence, scaring off new investors, new projects get cut or are simply not taken on, word gets out, scaring off more investors and so on. The truth of the matter is greed, plan and simple: You can never be making enough money that you don't want to make more faster.

revenue basically means the amount you make from the sale itself, that doesn't include the factor of expenses or COST of what was spent to make the product itself.

basically:

revenue - expenses = profit

so, yea, this article is extremely misleading. nothing was LOST, it just wasn't GAINED.

Don't forget they just took on the secret world as well. They'll make it up upon release, because that game looks fantastic. Two mmos and lots of games. ....Still waiting on mirror's edge 2, in fact i'm gonna assume they spent 100 million dollars on mirror's edge 2.

gring:
revenue basically means the amount you make from the sale itself, that doesn't include the factor of expenses or COST of what was spent to make the product itself.

basically:

revenue - expenses = profit

so, yea, this article is extremely misleading. nothing was LOST, it just wasn't GAINED.

Damn it, you're right.

Please, Escapist staff, stop using such sensational headlines!
It's just a cheap way to increase view counts.

Zero_ctrl:

Damn it, you're right.

Please, Escapist staff, stop using such sensational headlines!
It's just a cheap way to increase view counts.

its also a way to get regular viewer's, such as myself, to get my information elsewhere.

How I see this is as follows:
* The DS is on its way out. People are anticipating the 3DS, fewer DS consoles are selling, and fewer DS games are selling to match. This must have made EA's casual/DS department somewhat less than optimal this last quarter, especially with the market emphasis on more big-name titles.

* EA seems to have been spooked by Activision's CoD: BLOPS into keeping their big-name titles out of the Christmas season. Aside from Need for Speed (a comparatively niche title) and Medal of Honor (back in October; it sold a lot on release, but I imagine it dropped off rather quickly), they haven't released very much during the last season.

* EA didn't really do much with the launch of the PS Move and Kinect. I count two total games that have to do with these systems, one of which is a me-too sports game and the other is the Deathly Hallows dud. New accessories were the hot new fad this last Christmas, and EA seems to have missed the bandwagon.

* EA released a couple of outright duds. These include the Harry Potter game (currently $19-$29 new from EA) and Create (almost completely unavailable in their store).

These factors combined paint a pretty compelling picture to me of why their fortunes were not optimal, and also why this spring is likely to reverse their situation somewhat. They have a good spread of high-profile games coming out across multiple genres and audiences, even one of which could be a mainstay of their fortunes - Crysis 2, Bulletstorm, Dragon Age 2, Sims Medieval, Darkspore, Shift 2... and that's just through March.

Incidentally, Wikipedia tells me of 610 games published in 2010. That's a lot of games. (Even though it admittedly includes some mobile/iPhone titles)

Are you serious? "How can this happen to a company like EA"?

How about forking over 100 mill for a game that croaked in like 2 months? (APB)

Daemascus:

ZombieGenesis:
I'm not even going to pretend to understand how someone can publish as much crap (MASSIVELY popular, well selling crap mind) as EA does and still make a three-hundred million loss.

Popular, well selling. Words not usualy associated with crap...

Actually, I'd say nowadays they're synonymous :(

vrbtny:
Piracy's fault.....

Hey, it's what they'll blame...

Ninja'd. I was about to say; in before 'Piracy did it!'

Damn you. :p

JeanLuc761:

AC10:
Oh no we ONLY made $1.053 billion instead of $1.243 billion! It must be those damn pirates! How can a company humbly survive of a measly billion dollars of revenue???

EA is huge, but a $332,000,000 loss is massive, no matter who you are. They lost nearly 25% of their revenue, which means they'll be unable to take as many risks in the near future.

Not only that, it seems people tend to forget that the profits they make tend to pay their employees salaries, they don't just hoard it all to themselves and if losses like that keep up it is bound to cause some payment issues and have many people out of a job.

3 words: Project 10 Dollar.

I find myself in a tough place. I've hated EA for the longest time, but now they've bought out a lot of my favourite properties. I guess this is sad.

AC10:

JeanLuc761:

AC10:
Oh no we ONLY made $1.053 billion instead of $1.243 billion! It must be those damn pirates! How can a company humbly survive of a measly billion dollars of revenue???

EA is huge, but a $332,000,000 loss is massive, no matter who you are. They lost nearly 25% of their revenue, which means they'll be unable to take as many risks in the near future.

Right, but they lost revenue. It's not like they're operating in the red, they still MADE a billion dollars.

Ugh, I had to scroll to post, what, 23(?) to find this comment? Should have been in the first 10...

It seems to be an Americanism: If a company projects profits of X, and ends up making less than X, they are said to have made a loss, or ran at a loss.

That is not what a loss is. A loss is when your costs exceed your revenues, or, alternatively, when your profits are negative. They still ran at over one billion dollars revenue. $1,000,000,000+.

In Gamasutra's version of the news describing EA's 'loss', they explain that their net profits for the year are dramatically higher than before, and that their shares catapulted up 8% in the period immediately following a surprise buyback scheme and adjusted projected profits for mid-2011. That's amazing. [1]

Greg Tito:
The only good news from this report is that digital distribution for the company grew in revenue to $211 million from $152 million in '09. That tiny growth is small consolation seeing as total sales dropped from $1.243 billion last year to $1.053 billion in 2010.

Curiously, when you look at that digital growth, it seems to be something that EA is pinning their hopes on. Though I'm sure sure I like the man's plans for the future, EA's CEO John Riccitiello fully expects Digital to overshadow Retail by the end of this year.[2] Certainly a bold claim, but it's possible, given the rampant growth it's been displaying. It's got a way to go yet, but it's moving in the right direction.

And to the people who talk about The Old Republic costing so much, going to sink EA, etc, I have some counterevidence[3] from Scott Brown, EA's CFO:

Scott Brown, EA CFO:
"At half a million subscribers, the game is substantially profitable, but it's not the kind of thing we would write home about."

[...]

"Anything north of a million subscribers, it's a very profitable business."

As you can see, they're not especially worried about it. One million subscribers isn't a hard ask, so I think they'll be A-Ok. EA's not going anywhere, folks.

AC10:
Oh no we ONLY made $1.053 billion instead of $1.243 billion! It must be those damn pirates! How can a company humbly survive of a measly billion dollars of revenue???

In order to regain some of those profits in the next fiscal year, there will be a code included with every new EA published game which is required to play the single-player as well as the multi-player content included on the disc.

ultimateownage:
It just saddens me that Activision is rolling in money while EA is in danger of running out, and is constantly losing more.

Indeed. Us gamers, I mean "those gamers" who hang on Activision's titles and DLC, are the bane and source of it all. I accept no other conclusion "Sarcasm".

Ah, they did not lose money, they just did not make as much.......big difference!

Because they are throwing Money at projects that have piss poor turn overs.

Remember, they had to eat that flop that was APB and deal with the fallout afterwords. also, they are taking huge gambles pushing the new iOS brand of games which, at the moment, doesn't have a good turn over profit wise as that market is still largely dominated by indy developers.

vrbtny:
Piracy's fault.....

Hey, it's what they'll blame...

If piracy is the cause, their new idea of charging $60 for PC titles instead of $50 is REALLY going to help them fight piracy. Well, I'm not buying anything else from them with the price raise. My 2% raise at work isn't enough to afford their 20% raise in prices.

psrdirector:
I hope this doesnt allow apple to buy them out, that would be devistating the gaming industry

...that's...

...that's just horrible. How can you even think that, you psycho?!

I'm going to have nightmares now. Terrible, DRM-filled nightmares.

AC10:

JeanLuc761:

AC10:
Oh no we ONLY made $1.053 billion instead of $1.243 billion! It must be those damn pirates! How can a company humbly survive of a measly billion dollars of revenue???

EA is huge, but a $332,000,000 loss is massive, no matter who you are. They lost nearly 25% of their revenue, which means they'll be unable to take as many risks in the near future.

Right, but they lost revenue. It's not like they're operating in the red, they still MADE a billion dollars.

I never got why business assume they can just infinitely grow and their profits will always "gain". If you think of the world on a macro level, there is only so much money and so many people willing to spend it. Sometimes you're up some times your down, so long as it's a positive revenue stream after operational costs I fail to see what the deal is.

You're actually mistaken. There isn't only "so much money", nor are there really only "so many people". You can perhaps make the "so much money" argument on the basis of physical goods (it's a perilous argument there too), but anything non-physical (services, digital goods, etc.) breaks the argument immediately. Even if you want to talk about physical goods exclusively, there're a lot of resources still untapped. Similarly, the "so many people" issue has problems when you consider rising populations and the fact that your product generally doesn't reach every possible consumer in the world.

As for why it matters, companies invest the money they make and use profit to attract investors. Any money a company doesn't make means less investment in developing new products and any money a company doesn't make that it expected to make means fewer investors. Both of these are especially damning when the company makes creative products: a lumber mill can continue milling lumber without investing in more high-efficiency machines, but you can't just keep developing the same game over and over (though, apparently, you can come awfully close if EA is any indication).

Hmmm...

If my interpretation of that article is correct, the "$322 million loss" figure is only really relevant to accountants. For everyone else, EA made a $196 million profit.

I would laugh at them for ages if i was not worried for ME3. I thought their new business plan was sucking LESS. Going to write a letter blaming the loss of revenue on the way they marketed MoH and BC2. Ya know with the whole childhood rivalry with MW2 and black ops. Just because i feel it might, MIGHT, make them act like an adult for 5 seconds.

It's really misleading to say they lost money in this column but more than made up for it in another column.

When game companies talk about losing money, I guess we should just figure they are lying.

gmaverick019:

McNinja:
I think it has something to do with The Old Republic. Didn't the game cost around $300 Million to make?

Also, once they get a well-made MMO out there, with the subscription, they will turn a profit.

hopefully this is true. by the looks of it they have at least a game purchase plus a month or two minimum from me.

psrdirector:
I hope this doesnt allow apple to buy them out, that would be devistating the gaming industry

i might die if this happened

It's interesting you should find this devastating. I felt the exact same way when EA bought out some of my favorite companies, such as Origins. I will shed no tear.

Garak73:
It's really misleading to say they lost money in this column but more than made up for it in another column.

When game companies talk about losing money, I guess we should just figure they are lying.

This is all about perception. In the eyes of corporate setups such as EA, each division has to be profitable. It's not acceptable that one division doesn't do well, and all the others more than make up for it. They will cry and then blame it on software piracy and the need for more draconian security measures.

I would be interested to see in what area they lost this money.

Baresark:

gmaverick019:

McNinja:
I think it has something to do with The Old Republic. Didn't the game cost around $300 Million to make?

Also, once they get a well-made MMO out there, with the subscription, they will turn a profit.

hopefully this is true. by the looks of it they have at least a game purchase plus a month or two minimum from me.

psrdirector:
I hope this doesnt allow apple to buy them out, that would be devistating the gaming industry

i might die if this happened

It's interesting you should find this devastating. I felt the exact same way when EA bought out some of my favorite companies, such as Origins. I will shed no tear.

If EA was bought out before ME3 got released i would cry like a baby.

RT-shotgun-support:

Baresark:

gmaverick019:

hopefully this is true. by the looks of it they have at least a game purchase plus a month or two minimum from me.

i might die if this happened

It's interesting you should find this devastating. I felt the exact same way when EA bought out some of my favorite companies, such as Origins. I will shed no tear.

If EA was bought out before ME3 got released i would cry like a baby.

Haha, no worries. Usually what happens during the buyout of a game company is they clean house. They decide what properties are worth keeping, what properties are worth keeping as is, and what ones aren't worth it, then they either decide to trash them or try to renew them. Since Mass Effect 2 was an unmitigated success, it's safe to assume it would definitely be coming out, and as it's intended now as well.

Edit: The main thing is this. Just because they posted a single quarter of losses doesn't mean they are on the verge of getting bought out or sold. They stock is still quite valuable. Today it ended at 15.62, not bad at all, even if it is down.

Baresark:

RT-shotgun-support:

Baresark:

It's interesting you should find this devastating. I felt the exact same way when EA bought out some of my favorite companies, such as Origins. I will shed no tear.

If EA was bought out before ME3 got released i would cry like a baby.

Haha, no worries. Usually what happens during the buyout of a game company is they clean house. They decide what properties are worth keeping, what properties are worth keeping as is, and what ones aren't worth it, then they either decide to trash them or try to renew them. Since Mass Effect 2 was an unmitigated success, it's safe to assume it would definitely be coming out, and as it's intended now as well.

Just hope without shaking much up.

An Activision buyout seems likely within 3 years if they continue this downward spiral.
Never thought I'd live to see the day EA gets bought out, but I did know that it would be by an even bigger douche of a company than EA.

Call me callous, but to me, this is poetic justice for EA fucking over Westwood.

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