Electronic Arts Pressured to Outperform in Soft Videogame Market
Electronic Arts will be under pressure to report strong financial results this afternoon after the industry experienced a disappointing holiday period.
The videogame company’s stock has also been hammered by recent concerns about how well its new online blockbuster title Star Wars game is selling after launching in December.
In 2011, U.S. retail sales of new physical videogame content — including portable and console hardware, games and accessories — totaled $17.02 billion, an 8 percent decline over the $18.6 billion generated the year before, according to NPD.
Additionally, multiple reports indicate that while unit sales were up year over year in December, overall revenues suffered from steep discounting. Game retailers, such as GameStop and Amazon, both reported that holiday sales fell below expectations.
Electronic Arts’ third-quarter figures will be released today after the bell.
Its stock is trading down 12 cents, or .62 percent, to $18.46 a share. That has fallen significantly from its recent high of $25.20 back in November.
Back in October, the company said it was expecting third-quarter revenues of $1 billion to $1.1 billion and a loss per share of 77 cents to 63 cents. Excluding some stock-based compensation, acquisition-related expenses and other charges, the company said it is expecting a profit of 85 cents to 95 cents a share.
Analysts are expecting revenues of $1.61 billion and earnings per share of 93 cents.
The company also faced a setback when it announced that Barry Cottle, who was in charge of the company’s digital efforts, was leaving the company. Cottle took a job with Zynga, the company’s rival when it comes to talent and publishing games on Facebook.
And, while the industry is continually contracting on the hardware and physical retail front, one area of tremendous growth is digital.
At the time of Cottle’s departure, which was the third high-profile steal Zynga made over the past year, EA confirmed the company had achieved more than $1 billion in digital revenues in 2011.
Digital revenues include everything from downloadable content on consoles to social games, like the company’s hit The Sims Social, to the new release of Star Wars: The Old Republic, which is set to challenge Activision’s World of Warcraft game.
In the second quarter, EA said digital revenues were growing 30 percent year over year, and because of that, it was able to raise its full-year guidance.
Check back here to see if the company can deliver.