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Packaged games expected to further harm EA's bottom line

Packaged games expected to further harm EA's bottom line

Tue 18 Dec 2012 10:36am GMT / 5:36am EST / 2:36am PST
BusinessPublishingFinancial

Sales of Dead Space 3, Crysis 3, Fuse and more to hit publisher hard for 2013 financial year

With Electronic Arts falling out of the NASDAQ 100, analysts have begun to estimate significant reduction in its 2013 financial performance, ending March next year.

Although Cowen & Company expects EA shares can outperform the market by 20 per cent in the 2014 financial year boosted by a new console cycle and the next title in the Battlefield franchise, near term performance will be hampered by the publisher's packaged goods business, it said.

Consensus puts EA's 2013 financial year earnings per share at $1.04, the company itself expects $1.00 - $1,15, but Cowen & Company is bracing for $0.82.

While FIFA 13 and Madden NFL 13 have been strong for EA so far this year, titles such as Medal of Honor: Warfighter, Need for Speed: Most Wanted and NHL 13 have all underperformed at retail. And its boxed games portfolio for the rest of the 2013 financial year also raises a lot of questions, according to analyst Doug Creutz.

"The company's Q4 FY13 line-up faces a murderer's row of competition from the deepest industry AAA release slate we can remember outside of the holiday window," he wrote in a note to investors.

"In general, we note that the Q1 calendar 2013 industry release slate calendar is very crowded, with other scheduled releases including titles from the Gears of War, God of War, Bioshock, Metal Gear Solid, Devil May Cry, and Tomb Raider franchises.

"We think EA's Q4 FY13 slate may have a tough time competing for attention, particularly with gamers also likely anticipating the release of Grand Theft Auto V in Q2. Other than Dead Space 3, interest in EA's titles as measured by current Amazon sales rankings appears to be lagging well behind the competition."

Cowen & Company offered sales estimates and commentary on all Electronic Arts' boxed titles due before the end of the financial year.

Dead Space 3

  • US sales estimate: 1.05 million

"Of all the titles in EA's Q4 FY13 slate, we believe this is the only one that has a reasonable possibility of meaningful upside to our estimate, due to the title's relatively strong current ranking on Amazon, and due to its release timing that gives it a window before the deluge of AAA titles in March. Both of the first two iterations of the franchise were well-reviewed, and we believe gamer goodwill for the franchise remains high."

Crysis 3

  • US sales estimate: 950,000 (including boxed PC sales)

"Although the first two iterations of the franchise were well-reviewed, we think Crysis 3 will do well to match its predecessor's performance. Its Amazon ranking is well below that of many other spring launches, and with a likely late February launch, it will not have a lot of time before competing March releases hit retail."

Army of Two: The Devil's Cartel

  • US sales estimate: 500,000

"If anything, we think our 500K estimate could be aggressive. Frankly, we think EA might have been better off rebranding the game under a different franchise name; while launching 'new' IP is tough, we think it is even harder to reverse sales trends for a franchise that has previously suffered from poor title quality."

Fuse

  • US sales estimate: 500,000

"The new IP is currently ranked dead last among the major AAA releases on Amazon (and well below the second to last title, Army of Two: TDC). The game faces a difficult release window in March, and if anything, we think our 500K unit estimate could be aggressive."

Sim City

  • US sales estimate: 500,000 (excluding digital sales)

"The shift to digital makes anticipating retail performance difficult; however, we note that in the last two years, only four PC titles have been released that have exceeded 500K in US retail unit sales, and all were hardcore role-playing games."

Unknown title (expected to be Tiger Woods PGA Tour 14)

  • US sales estimate: 600,000

"We note that the franchise's sales have generally been trending down for years and we do not expect that to reverse materially this year. In the event that some other title fills this slot, given the lack of marketing to date, we doubt that there would be any upside against our current estimate predicated on a Tiger launch."

EA recorded digital revenues of $314 million for the second quarter of the 2013 financial year.

Breaking out digital revenue estimates of $1.01 billion for the second half of the 2013 financial year, Cowen & Company expects MMO revenues to drop 14 per cent, while Origin sales are estimated to be up 7 per cent. PC Social and Free To Play sales are expected to increase 12 per cent driven by Sim City Social.

EA does have a tail wind, with around $100 million expected from DLC sales of Battlefield 3 in the final quarter of the year, according to the analyst. As a result digital console and PC DLC sales are expected to be up 23 per cent and mobile gaming sales up 25 per cent.

While the end of the financial year looks to be a burden on EA, on the upside Cowen & Company noted that international sales, particularly of FIFA 13, are tracking ahead of last year, although a lack of data makes estimates difficult. EA may also reveal better digital revenues that could "bail out" the packaged goods business, it said, and there's a slim possibility that Dead Space 3 sales will break out.

8 Comments

Stephen Woollard
Online Infrastructure Specialist

146 71 0.5
Popular Comment
An analyst who bases their predictions for a multi-billion dollar market on Amazon's sales rankings.

Really? Just... wow.

Then they complain about a lack of data for FIFA13 - maybe they could try Walmart's website, or failing that go rummaging through people's rubbish bins looking for receipts.

Posted:A year ago

#1
people will believe anything, look at Friday's doomsday preppers!
I reckon we should have a Deadspace Battlefeld Army blowout!

Posted:A year ago

#2

Peter Dwyer
Games Designer/Developer

481 290 0.6
I'd have more faith in the Friday preppers than this data. At least the Friday guys are trying to fool no-one but, themselves!

Posted:A year ago

#3

James Berg
Games User Researcher

134 163 1.2
Cowen & Company expects MMO revenues to drop 14 per cent, while Origin sales are estimated to be up 7 per cent. PC Social and Free To Play sales are expected to increase 12 per cent driven by Sim City Social
These aren't publicly reported - how do they even make guesses when they don't have access to the data?

Posted:A year ago

#4

Greg Wilcox
Creator, Destroy All Fanboys!

2,132 1,039 0.5
Gee, more speculation and stupidity from folks cobbling data to make their own "facts" up. That and hell, EA needs to start selling SOME of its physical games through their own online shop at some point. That would hopefully help them keep a few extra pennies here and there.

Posted:A year ago

#5

Aaron Brown
BA Computer Science Student

56 21 0.4
Fuse will not sell as well as it should. Its initial trailer was encouraging but the corporate style of EA killed the game. The title looks like a rushed, dummed down gears of war clone. A few of the guns are cool, as you would expect from Insomniac, but the game looks awful. I wonder how the lackluster sales it produces will affect EA.

Posted:A year ago

#6

Greg Wilcox
Creator, Destroy All Fanboys!

2,132 1,039 0.5
Well, Europe is a good start... but I live in the US and don't use Origin (or any other console download services thanks to a lousy connection). My entertainment dollars go primarily to games, so it would e nice for someone like me to be able to spend my money on EA's or any other games and get them on a format I can actually use. My one concession to this is getting Vita and PSP games as well as the occasional small gog.com or Steam file, as I can hang out at a library or Starbucks around here and download away. Which can be a pain when everyone else has the same idea and it's a slow, slooooooooow few hours of speeds dipping way down.

I'm betting there are a few million of us low tech/no tech users out there, so hopefully the industry will perk up its ears and listen once in a while.. I don't care about overpriced collector's editions and fancy schwag at all (no space here in the 2000+ and counting games library for anything but more games in cases).

Posted:A year ago

#8

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