Electronic Arts ramps up digital strategy as disc business is expected to wane

Is the game disc getting the long goodbye?

Electronic Arts Chief Executive John Riccitiello on Wednesday said the game publisher is shifting its focus more on digitally distributed games and de-emphasizing its investments in shrink-wrapped games sold at retail stores.

"Today, we're announcing a big shift," Riccitiello said during the Redwood City, Calif., company's fourth quarter earnings call with analysts. "Over the coming years, we're transforming EA from a packaged goods company to a fully integrated digital entertainment company."

The announcement is largely symbolic because EA has been gradually ramping up its digital and mobile games business over the last two years.

EA bought social game developer Playfish in 2009 in a deal valued at $400 million, followed by a $20-million purchase in October of Chillingo, a mobile games publisher. On Tuesday, the company announced it had acquired two other mobile game companies, Firemint and Mobile Post Production, for undisclosed sums.

In addition, EA announced that it will launch its long-awaited online game Star Wars: The Old Republic late this summer or early this fall. Already, about a million players have tested the game, which would compete with Activision Blizzard's hugely popular World of Warcraft.

Though traditional game discs won't be disappearing anytime soon, EA and other game companies have been aggressively pursuing other avenues to sell their titles.

Meanwhile, 27% of EA's revenue in the fourth quarter ended March 31 came from the digital side of the business, including social games on Facebook, downloads on PCs or game consoles or mobile games, up from 18% a year earlier, according to Eric Brown, EA's chief financial officer.

EA also reported an 11% increase in revenue to $1.1 billion in the fourth quarter, up from $979 million a year ago. Net income spiked five-fold to $151 million, or 45 cents a share, up from $30 million, or 9 cents a share.

For the full fiscal year, EA saw a 2% decline in sales to $3.6 billion. Net loss declined to $276 million, or 84 cents a share, last year, down from a $677-million loss, or $2.08 a share, the year before.

EA's shares, which lost 24 cents to $19.92, gained 46 cents to $20.38 following the earnings release.

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-- Alex Pham

 

 Photo: AP

Comments

[albert venti]

This is a great story and encoraging. I work with an indie label and that decision came in 2006 amid statements you will drive away 90 percent of your customer base. Times are changing as we see this company doing the same thing and it came at a nice time when we thought about the issue of physical cds for a particular artist we are developing.

[Brett]

It depends on the game, really. The main issue for switching over to a downloads-only system (aside from the concerns over piracy) is that it can eat up bandwidth fast. Download a 10-gigabyte game on a 250 gig/monthly Comcast plan, and you've just used up 4-5% of your monthly allocation of bandwidth.

Meanwhile, you can store a lot on blu-ray discs (50 gigabytes if I recall correctly).