To armchair quarterbacks and couch-potato commandos, Electronic Arts (EA) is their Picasso. EA is a top-three global video game publisher with popular titles such as Battlefield, Madden NFL, The Sims, and Need for Speed. The company also distributes third-party titles such as Rock Band and Valve Software's Left 4 Dead, and it publishes games based on other media franchises such as Harry Potter. EA develops its games for consoles from Sony, Nintendo, and Microsoft, as well as for PCs. EA also serves mobile devices, including e-readers, and provides online social games, including Hasbro-licensed games such as Monopoly, via websites Pogo and Playfish. Most of EA's sales are divided between North America and Europe.
As EA pursues a digital approach, its structure morphs along with it. The company now divides operations into various labels: EA Games (Battlefield, Dead Space, Medal of Honor, Need for Speed), EA SPORTS (Tiger Woods, Fight Night, FIFA), BioWare (Mass Effect, Star Wars, Dragon Age), Maxis (Sims, Spore), recently-acquired PopCap Games (Bejeweled, Plants vs. Zombies, Zuma), and social and mobile studios (EA Mobile, Playfish, Pogo). The company's social and mobile efforts entail free-to-play social games produced for sites such as Facebook, Google, Bebo, MySpace, as well as for Google's Android operating system and Apple's iPhone.
Whether digital or physical, product revenues still drive the business, but EA's digital focus also means growing service revenue (less than 20% of sales). Service revenue includes games and content that require hosting support for the essential game experience, as well as recurring subscriptions.
For fiscal 2012 (ended March), EA finally turned around two consecutive years of revenue decline, thanks to payoff in its digital aspirations. Digital sales climbed nearly 50%, outweighing the marginal dip in publishing. Major title contributors to product revenue, which rose 7%, were FIFA 12 (13% of overall sales) and Battlefield 3 (11%), Madden NFL 12, and Crysis. Service revenue increase of nearly 80% was driven by BioWare's online role-playing action game Star Wars: The Old Republic, microtransactions from The Sims Social, and the FIFA Ultimate Team add-on service.
Although it's pressing hard to be predominantly a digital publisher, EA'a largest single customers are still retailers, the two biggest being GameStop (15% of sales) and Wal-Mart (now less than 10%). The company, however, increasingly looks to mobile and third-party e-commerce marketplaces, and more so its own e-commerce platform, Origin, which also offers titles from other publishers such as SEGA.
Like most of its competitors, EA has responded to industry struggles by culling its catalog to focus on titles that generate the most revenue. In line with its digital transformation, those games are now designed to include additional online features, where they used to have few or none. In 2009 EA published more than 60 titles, practically devoid of online options, in the packaged goods format, but plans only 14 for 2013, each with an online component. Social and mobile platforms will be where it attacks with volume, slating in excess of 40 titles for release.
In tandem with its strategy to offer fewer titles for consoles and PC, EA also hopes to make them year-round revenue generators, and taking a cue from Hollywood, seeks to develop and maintain brands that can produce sequels. Its sports games, for example, typically are iterated on a yearly basis, while others, such as Battlefield and The Sims, receive new installments less frequently. – less