The big daddy of U.S. gaming companies, Redwood City-based Electronic Arts has been developing diversions since the days of Atari and Apple IIs. With a market cap of $7.32 billion, EA is the leading U.S. manufacturer (it swallowed up most domestic competitors) and now faces stiff competition from Japanese giants SEGA, Nintendo and Sony.
The company is famous for success in the PC and console markets with such games as "Madden NFL Football" and "NASCAR 2000," and is shifting resources now to create an online subscription game market.
It's a painful transition.
The EA.com online group lost $99.4 million for the 12 months ending March 31, 2001, compared to $34.2 million during the same period in 2000. And, overall company revenue dropped from $1.4 billion for the year ending March 31, 2000, to $1.3 billion for the same period in 2001.
The loss is bad for shareholders (stock is now trading around $46 compared to $63 earlier this year), bad for employees (an undisclosed number were axed following EA's acquisition of pogo.com), and bad for positioning the company to make more acquisitions.
But it's hardly disastrous and hardly enough for analysts to call the company a "has been." In fact, industry watchers are applauding EA's push to create and dominate the subscription gaming market.
Pundits from Gartner Dataquest, IDC, META Group and the like have called the move "bold" and "smart." Through online subscriptions, game companies can forgo the costly and often cumbersome manufacturing and distribution process required by traditional shrink wrap software. Instead, they can update and tweak online games with a few clicks to a centralized network.
While it remains to be seen when, if at all, the online subscription model will comprise the lionshare of the $6 billion game industry, EA executives say they're willing to wait. Developing a new market takes time, they've said. And, judging from the gusto they've given Majestic -- EA's newest and splashiest online push -- EA's committed to gambling for a few more games. They spent $10 million last summer to market the game, more than any other to date.
Neil Young, Majestic's creator and producer, has said gamers' initial lukewarm reaction doesn't phase him either.
"We're the first to create a new form of entertainment specifically for the medium of the Internet and are very excited with the end result," said Young in an earlier interview. "It extends past the traditional boundaries of a game. It doesn't ask you to step into its world so much as it will step into your world."
SOURCE:
San Francisco Business Times.
