EA takes a loss in Q2 as digital sales continue to outshine physical

Today's the day that Electronic Arts publishes its results for the latest fiscal quarter, and while the company reported a loss in terms of profits, its earnings seem to be a bit better compared to the same period a year ago.

For the three months ending September 30th, EA reports a  (GAAP) loss of $22 million on $959 million in revenues. That's not great, but it's better than the $38 million loss on $898 million in revenues it reported during the same period last year, and EA called out its sports games, specifically its microtransaction-studded FIFA Ultimate Team live game.

The big story here is that EA (like many game companies) is accelerating its transition into a business that makes the vast majority of its money from sales of digital goods, rather than physical ones.

Of the $959 million in revenues it reported for this latest quarter (the second quarter of its 2018 fiscal year), EA says $689 million came from sales of purely digital products, and $270 million came from sales of physical goods. That's roughly a 70/30 split in favor of digital, and EA is forecasting (see charts below) that sales of physical goods will diminish further in the months ahead.

Intriguingly, EA reports that the majority of its income from digital sales comes from consoles, rather than mobile; moreover, the lion's share of that digital income comes not from full game sales but from "live services", which encompasses in-game microtransactions, subscriptions to services like EA Access, and the like.

“We saw a notable shift to digital in our sports titles and remarkable growth in Ultimate Team,” EA CFO Blake Jorgensen stated in the earnings release. “This quarter demonstrates how they can drive our business and offers a window into how our games will evolve over the months and years to come.”