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Author: newsreporter Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1598  
Subject: Strategy doubts Date: 1/9/2013 10:15 AM
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EA Battles Doubters, Citing Strong Digital Revenue
http://allthingsd.com/20130108/ea-battles-doubters-citing-st...


Sterne Agee analyst Arvind Bhatia downgraded the company’s shares from “buy” to “neutral,” calling the Street’s estimates “overly optimistic.”
Bhatia is concerned about the company’s performance when it came to its big console game titles of the year. But Electronic Arts is increasingly offsetting its declines in the traditional packaged goods market through the sale of digital content.

But will digital will be able to generate enough revenue this time to make up for its poor-performing console games?

In a note to investors, Bhatia said that he believes EA should have lowered full-year guidance “following disappointing early performance of Medal of Honor Warfighter and the cancellation of NBA Live in October of last year.”

...

However, EA continues to talk about how digital revenue is more than making up for the drop it is seeing from packaged-good sales.
In the second quarter, it reported that digital revenue was 40 percent higher year over year.

For instance, the FIFA soccer game generated more than $115 million in digital revenue in the first half of 2013, and Battlefield 3’s premium service has sold more than two million subscriptions to date (all of that revenue will be recorded in the fourth quarter). Additionally, the company’s Simpsons game on iOS, called Tapped Out, has been the top-grossing game for the past four weeks.

While digital revenue is up, the company is not as bullish on Facebook as it once was, and is scaling back its investments in the platform. In addition to developing fewer games for Facebook this year, EA also started shutting down underperformers such as World Series Superstars, EA Sports PGA Tour Golf Challenge, Monopoly Millionaires and Age of Immortals.

Similarly, social games leader Zynga recently said it would shutter 13 titles.

EA’s CFO Blake Jorgensen told AllThingsD last quarter that the company believes social will be key for games going forward, but not necessarily as an individual platform. “I would say that, overall, digital is growing the fastest, and within digital, it’s the mobile business that’s growing the fastest,” he said. “Clearly, mobile is up dramatically, and it’s no surprise — it’s driven by smartphones, tablets.”
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