EA Q1 Falls, Harry Potter Hits, Spore Still Set For Spring '08

Electronic Arts has announced its first quarter results, showing a slight drop in sales and rise in its losses, despite one-week sales of two million copies of Harry Potter and the Order of the Phoenix. [UPDATE: EA "can't be more bullish" on
Electronic Arts has announced its first quarter results, showing sales down slightly to $395 million and losses up to $132 million, despite one-week sales of two million copies of Harry Potter and the Order of the Phoenix. Sales were down four percent from the $413 million quarter a year prior, while losses in the prior quarter were $81 million. EA says its top selling titles in the quarter were Harry Potter and the Order of the Phoenix, Command & Conquer 3 Tiberium Wars, The Sims 2 Pets, Need for Speed Carbon and The Sims 2. EA also says it expects sales between $465 and $570 million for its second quarter, and has raised sales guidance by $100 million to between $3.2 and $3.5 billion for its full year. The company notes as its highlights that this fiscal year will see the launch of ten new properties: Boogie, EA Playground, Army of Two, SKATE, Warhammer Online, The Simpsons Game, Smarty Pants, its Spielberg-related block puzzle Wii exclusive, Rock Band and Crysis. EA also notes that it won six Best of E3 Awards for Madden NFL 08, Burnout Paradise, Crysis and Rock Band. The company also again highlighted its reorganization into four Labels: EA SPORTS, EA Games, EA Casual Entertainment and The Sims, with Kathy Vrabeck joining to head the Casual Entertainment label, and Peter Moore coming from Microsoft to head its EA Sports label. EA CEO John Riccitiello said in a statement that the "team, structure and strategy are coming together quickly." Finally, EA says it is continuing its expansion in Asia with a 15 percent equity investment in Chinese online game operator The9 Limited and an agreement to bring EA Sports FIFA Online to China, along with a 19 percent equity investment in Korea-based online gaming company Neowiz. Said CFO Warren Jenson, “Looking ahead, we have a strong slate. In the balance of the fiscal year, we plan to launch our full EA SPORTS lineup, Need for Speed Pro Street, MySims, Medal of Honor Airborne and ten new properties, including Army of Two, The Simpsons, SKATE, Boogie and Rock Band.” [UPDATE: In EA's earnings call with investors, Riccitiello outlined its agenda moving forward with the new labels, mentioning specific priorities: increasing segment shares, growing core franchises with new IPs and new platforms including Wii and DS, and expanding new revenue streams through in-game ads, microtransactions, and subscriptions. He added that EA was also looking at smart growth through acquisitions, and looking to simplify its corporate structure, streamlining many systems and processes. Finally, he added that it was looking to increase R&D productivity, saying the company was "not getting enough bang for our buck." Distributing The Rock Asked if the company was confident about the launch of Rock Band, specifically EA's distribution of the title with a number of bulky peripherals, Riccitiello said that despite the fact that "clearly it is a complicated launch," its partnerships with Harmonix and MTV are going strong and noted that "clearly the game is doing very well from a demand standpoint," leading to very strong confidence. Holiday On Murderer's Row Asked how the company feels about what EA Games president Frank Gibeau has termed 'Murderer's Row 2' with a holiday season falling under the shadow of Halo 3 and GTA IV, Riccitiello said that the respective launches weren't a "mixed blessing," but a "double positive." He noted that "great software sells hardware," and in every analysis, the launch of those two titles is "going to have a dramatic effect on sell through" of hardware, and that EA stands to be a "net beneficiary" of that. He added, though that the company was being "a little selective about dates," warning that it's somewhat akin to "launching an animation company in the shadow of Pixar," but said a game like SimCity Societies would sell very well in the same window. Moving The Sims Specifically on the Sims, which has seen a quarterly rise of 65% internationally, Riccitiello said that apart from a general trend toward PC versus console gaming in Europe, one of the major keys to those sales was that European retail treats Sims as its own merchandise, with entire Sims sections of stores. One thing that was good about this new label focus, he added, was that Sims division head Nancy Smith was working on bringing that same retail focus to North America. Spore Still Spring 2008 Finally, asked about the continued development of Spore, Riccitiello said that both he and Gibeau had been playing the title, adding that "the great news is that it's coming together as one of those breakthrough products that comes out every 3 to 5 to 7 years." "We cannot be more bullish about Spore," he said, adding that right now the game was still being "squarely targeted at March, April, or May of next year," and was such a large and complex title that they chose not to put it in the company's fiscal guidance. He warned, though, that the company, with a title as ambitious, and with as much potential, as Spore, would always make the choice of "shipping a better game than an on-time game."]

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