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Peak Performance

Comment: Is it all downhill from here for EA?

Electronic Arts' revenue didn't grow last year. It won't grow this year, either.

Every company has their ups and downs, of course, but Electronic Arts has been such a rock of solid growth that its success has come to be seen, in some quarters, as a mirror held up to the success of the videogames sector as a whole. Even, so a slight tumble of a few percentage points on the revenue line doesn't mean anything significant - does it?

Actually, it may well do. Electronic Arts is a hugely unusual company, in that not only is it the 800 pound gorilla of the videogames industry, it's a solitary 800 pound gorilla sitting in the midst of a horde of far smaller apes. With in or around $3 billion in revenue, the firm's income dwarfs the software income of every other company in the industry, and its market capitalisation is simply immense compared to even its closest rivals.

To an external observer, it might seem that EA is untouchable - a company set to lead the field of third-party games publishing practically forever. Looking more closely at the situation, however, reveals what could easily be perceived as a rather different reality.

EA's meteoric growth has been based on a few simple formulas. The firm hoovers up the cream of the crop of the licensing world, and then turns out solid but generally unremarkable games on a one-year development cycle to take advantage of those licenses. Its annual sports updates are the best examples of this, but there's also a similar expectation that the likes of Harry Potter, Lord of the Rings and - until it lost the license this week - James Bond 007 will all have annual updates as well.

It's a great strategy, and one which EA has mostly managed to execute on successfully. However, it's by no means a catch-all strategy - and observers both inside and outside the company are starting to see the large chinks in the market leader's shiny coat of armour.

For a start, EA doesn't do well with disruptive technology - and there's rather a lot of that about at the moment. Everything the company does on platforms like Nintendo consoles or mobile phones is an attempt to shoe-horn traditional console gaming onto devices which are ill-suited to it; while the development skill and ingenuity is clearly there, the corporate will to innovate on new platforms seems to be weak at best. The firm's DS efforts in particular have been appalling, and if - as many predict - Nintendo's Wii manages to make major inroads into both the casual gaming and the "second console" market, this may well be a market which EA simply doesn't know how to exploit.

Equally, the quality of EA's titles has been patchy, to say the least. Movie franchise tie-ins like Catwoman, Batman Begins and the recent Harry Potter games have demonstrated that even if some of the Lord of the Rings titles were very solid, a significant amount of EA's franchise output is suffering from a serious quality decline. The best marketing in the world can only make up for so much low-quality product, and as EA approaches the next generation, its quality problems will only become more and more apparent unless something is done internally to prevent crap games from going out with the EA brand on them.

Perhaps most telling of all, however, is the fact that while the quality of EA's titles has seen a decline, and its ability to innovate on new platforms remains a serious question mark, the firm's investment in development has steadily climbed for several years. Charitably, one could attribute this development spending - which has grown despite the flat revenues realised in the same period - to investment in the future of the company. Less charitably, you could ponder the possibility that project budgets, scheduling and staffing are out of control in significant parts of EA - and ask, as some within the company undoubtedly have, whether better quality products might not have been produced for less money by smaller, external teams.

To EA's credit - and for a firm of that size and with that track record, a great deal of credit is due - it is certainly moving to fix some of these problems. The acquisition of Jamdat earlier this year should, in theory, give the company significant leverage to fix the problem of being unprepared to launch mobile games that are fully designed to take advantage of mobile devices, rather than being console games shoehorned onto phones - assuming, of course, that EA's own management allow Jamdat to continue to do what they do so well, rather than trying to apply their own twisted logic on how disruptive devices should be approached to the division.

Talk from the firm's studio general managers is also promising; Fiona Sperry, the new boss of EA's European studio in Surrey, where titles including Harry Potter and Burnout are produced, talks about a culture built around smaller teams and focused on developing internal IP, which is exactly the kind of thinking that the company needs to stay in front of the competition.

Because make no mistake, the competition is snapping at EA's heels. Even though some other publishers have had tough years as well, firms like Ubisoft and SEGA are looking very aggressive - and could well make the vital leap up to EA's scale in just a few solid years of growth. Only EA's sports market dominance protects it from that for the moment, but if it fails to address emerging markets which in which its rivals thrive, it could quickly find itself not as the unchallenged number one publisher, but as "a top three publisher" - not exactly shame and despair, then, but certainly a slap in the face for the firm which right now, as far as the markets are concerned, IS the games industry.

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Rob Fahey avatar
Rob Fahey: Rob Fahey is a former editor of who spent several years living in Japan and probably still has a mint condition Dreamcast Samba de Amigo set.