Hey EA, how's that NFL Exclusive License treating ya?!

[GTHobbes]

Sorry for making this its own thread, but as a hater of EA's business decision to buy up the NFL license, I've been waiting for this day for a couple of years now.

"EA has announced financial results for the second quarter, with a net loss of USD 195 million."

http://www.gamesindustry.biz/content_page.php?aid=30201

"EA explained that part of the loss stems from the fact that the company "no longer charges for its service related to certain online-enabled packaged goods games." Apparently a $296 million increase in deferred net revenue will be recognized in future periods."

http://www.gamedaily.com/articles/news/ ... ffs/18387/

My bad...maybe EA's grossly overpaying for a monopoly on NFL games and Madden's stagnant game sales didn't have anything to do with the $200 million loss after all. (Sarcasm).

The next sunny day in my life will be when Tiburon is finally given their walking papers. I'd love for Madden to become enjoyable again in my lifetime.

[WillHunting]

I thought NFL is to blame for the exclusive license. They didn't want to sell multiple license so they sold it to the highest bidder (EA).

[wco81]

I thought Madden sales were still good.

Wasn't it at the top of the charts in August and Sept?

It could be their other games which haven't been producing.

I think the stock is still up on less than expected losses.

If EA has problems, low sales of Madden isn't likely to be the cause, although they have a pretty high bar.

It could be that sales declined for last-gen systems and the current gen systems aren't selling as many units.

[seanmac31]

I thought Madden sales were still good.

Wasn't it at the top of the charts in August and Sept?

It could be their other games which haven't been producing.

I think the stock is still up on less than expected losses.

If EA has problems, low sales of Madden isn't likely to be the cause, although they have a pretty high bar.

It could be that sales declined for last-gen systems and the current gen systems aren't selling as many units.

Madden's sales dropped dramatically from last year, but it's primarily because people aren't buying it (or anything else) for last gen systems anymore. The next gen figures went up.

[Danimal]

Madden's sales dropped dramatically from last year, but it's primarily because people aren't buying it (or anything else) for last gen systems anymore. The next gen figures went up.

Exactly, but facts and common sense don't make good talking points when you've got an axe to grind.

[kevinpars]

EA is suffering from a number of issues. For one, there is no longer a monster console like the PS2. While the install base of the PS2 is still huge and the system still sells, it does not push new games like it used to do. The 360 is almost 2 years old and still suffers from issues of reliability and still is seen as the console for hardcore gamers and the PS3 is still (especially the $499 model) viewed as too expensive. The Wii continues to move hardware, but has not been selling a lot of third party software.

Plus, the "buzz" for next gen versions of Madden and NCAA has been soft at best and negative at worst.

EA is still selling a lot of games, but the sluggish sales of next gen console software has got to be alarming. It will be interesting to see the numbers for October hardware sales - did the bump from Halo 3 carry over for another month or will 360 hardware sales drop? Will the price cut prove to be a system mover for the PS3?

As for the Wii, unless EA does something fresh and innovative to utilize the controller, it is hard to imagine Madden being a big seller on this console ever. Ironically, considering the popularity of Wii sports, Nintendo has not and is not seen as a good console for sports gamers. There are a ton of Wii's being sold but will we even see NCAA on this console?

[GTHobbes]

Madden's sales dropped dramatically from last year, but it's primarily because people aren't buying it (or anything else) for last gen systems anymore. The next gen figures went up.

Exactly, but facts and common sense don't make good talking points when you've got an axe to grind.

Dan, my point really is that EA was going to sell 4-5 million copies of Madden, with or without the exclusive license. They've been hitting those numbers for years now. By vastly overpaying for the exclusive, rather than upping the quality of their product, EA made a really dumb business decision and it's now coming back to bite them in the ass, IMO. It also really hurt gamers, so in the end everyone has been losing.

You're absolutely right that I do have an axe to grind. But I'll take that anyday over being someone who thinks (still?) that EA made a wise business decision in buying up the license. To me, that's the epitome of lacking common sense.

[spooky157]

Dan, my point really is that EA was going to sell 4-5 million copies of Madden, with or without the exclusive license. They've been hitting those numbers for years now. By vastly overpaying for the exclusive, rather than upping the quality of their product, EA made a really dumb business decision and it's now coming back to bite them in the ass, IMO. It also really hurt gamers, so in the end everyone has been losing.

You're absolutely right that I do have an axe to grind. But I'll take that anyday over being someone who thinks (still?) that EA made a wise business decision in buying up the license. To me, that's the epitome of lacking common sense.

I agree - they were already dominating the market so the exclusivity deal didn't make sense. Whether or not EA or the NFL forced this deal matters very little because EA's forecasters should've taken one look at the numbers and seen that this was a losing venture for them. I doubt Take Two could've afforded this deal, even with their grossly inflated financials at the time. EA was bidding against themselves and overspent.

[JRod]

EA is waiting for SPORE. That game will make up for everything!

[WillHunting]

Not to defend EA, but what did you expect them to do? Let the NFL license to go to some other company? In which case, they will lose their best seller franchise?

They paid dearly for it, but I am more pissed at NFL for doing exclusives than EA.

[Danimal]

Dan, my point really is that EA was going to sell 4-5 million copies of Madden, with or without the exclusive license. They've been hitting those numbers for years now.

That was your point? I didn't get the above at all from your orignal post.

By vastly overpaying for the exclusive, rather than upping the quality of their product, EA made a really dumb business decision and it's now coming back to bite them in the ass, IMO. It also really hurt gamers, so in the end everyone has been losing.

I'll disagree here and say that most executives would have jumped at this deal if their flagship title was a football game and their company could have afforded it. Hind sight is 20-20 of course and 3 years down the road this deal doesn't look so good. But neither does the 2K baseball deal, in fact the only deal worthwhile is the ESPN / EA deal and the company getting the most benefit is ESPN.

As for hurting gamers I won't disagree

You're absolutely right that I do have an axe to grind. But I'll take that anyday over being someone who thinks (still?) that EA made a wise business decision in buying up the license. To me, that's the epitome of lacking common sense.

Well you're entitled to your opinion, but I don't think you've backed up your argument very well. You haven't pointed out a single thing that indicates that the deal has hurth them. As for whether it was a wise move to begin with, we have already covered that.

There is a whole plethora of reasons why EA is losing money, S-Mac covered some. It's only a small and vocal minority that are still brining up the license deal and frankly these guys are just still crying because they lost their favortie video game.

I have no great love for EA, the day they bought Bioware I was really pissed off for about 10 minutes, and then I moved on. It's just that simple.

[Airdog]

"EA explained that part of the loss stems from the fact that the company "no longer charges for its service related to certain online-enabled packaged goods games." Apparently a $296 million increase in deferred net revenue will be recognized in future periods."

Did they really charge for these games to begin with? They were flirting with it for awhile but basically gave everybody one free year with each game, right? Unless I'm missing a bunch of games that were pay-for-play before and now are not.

Their recent aquisitions of BioWare and Pandemic will probably do much to not only help their bottom line, but also bolster their status with "hardcore" gamers again but who knows how much that had to do with the downtuwn to begin with. Also, they should probably stop paying massive amounts of money for licenses for games based off of movies, etc., and not delivering a solid product.

[GTHobbes]

I know things are bad all over, but it sure doesn't sound like those exclusive licenses are doing EA any good. Sounds bad:

"Electronic Arts net loss wider, cuts 1,100 jobs"

"Video game publisher Electronic Arts Inc posted weaker-than-expected results on Tuesday and said it would delay several games, causing it to forecast a loss for fiscal 2009.

EA, publisher of popular franchises such as "Need For Speed" and "Madden NFL," said its fiscal third-quarter net loss was $641 million, or $2.00 a share, compared with a loss of $33 million, or 10 cents a share, a year ago."

http://money.cnn.com/news/newsfeeds/art ... 534775.htm

[hellbent]

I'm curious as to whether these losses are part of an industry-wide trend (ie, bad economy and new titles being priced at $60) or if EA is getting hit particularly hard due to their release schedule of annual "sequels" to titles like Madden and NFS.

In a way, if flooding the market with annual releases is an issue that leads to buyer apathy, it would probably actually help the end product if EA started releasing Madden on longer development cycles. In particular, if they are already DONE with programming NCAA 10 as has been reported, they can stand to spend additional time coding and testing their new releases.

I'm also wondering if EA is showing losses for their flagship franchises on the Wii compared to the relative success reported by other developers. If so, that would be a bad sign for them.

[XXXIV]

Dont forget about the NFLs deal with DTV...I now blame them.

[bdoughty]

I know things are bad all over, but it sure doesn't sound like those exclusive licenses are doing EA any good. Sounds bad:

"Electronic Arts net loss wider, cuts 1,100 jobs"

"Video game publisher Electronic Arts Inc posted weaker-than-expected results on Tuesday and said it would delay several games, causing it to forecast a loss for fiscal 2009.

EA, publisher of popular franchises such as "Need For Speed" and "Madden NFL," said its fiscal third-quarter net loss was $641 million, or $2.00 a share, compared with a loss of $33 million, or 10 cents a share, a year ago."

http://money.cnn.com/news/newsfeeds/art ... 534775.htm

I never understood the NFL exclusive from the get go. They had to have gone into it expecting a few more sales. Of course it has always shown me that they were absolutely frightened of what "that other game brought to the table."

You do not have to be an economist to figure this one out.

1) Pay A TON more money for license.
2) Sell game for same price you would if you did not have the license.
3) Sell roughly the same amount of games.

= Less profit

Don't get me wrong they have done steps to reduce cost, outside of the license and increase revenue by taking in more ad money. Still I never saw the ends justifying the means. You can't blame the economy for this one. Just a really bad business decision.

[DivotMaker]

1. Sorry for making this its own thread, but as a hater of EA's business decision to buy up the NFL license, I've been waiting for this day for a couple of years now.

2. The next sunny day in my life will be when Tiburon is finally given their walking papers. I'd love for Madden to become enjoyable again in my lifetime.

1. Shocking.

That being said, if you were in EA's shoes and the NFL approaches YOU and your competitor asking for quotes on an exclusive license, honestly now...what would YOU have done? Let 2K Sports walk off with the NFL license for the next 5 years? You are kidding, right?

Three years ago, EA thought they were doing the right thing for EA and their customers. Today, Madden is not where any of us thought it would be. TODAY, this looks like a bad decision on EA's part and with the current economic climate, they may ask the NFL to renegotiate the agreement. I know if I were in their shoes, I damn sure would ask. At the end of the day, EA made a decision that they thought would pay dividends by increasing sales due to the licensing agreement. It hasn't happened and I challenge you to show me where there are no other instances in the videogame industry where other publishers have made licensing agreements that did not live up to expectations. It happens all the time, but likely not to the proportion of this agreement.

2. That may happen if Madden 10 continues the pattern that the previous Next Gen versions have suffered from. We all want a Madden worthy of Next Gen and if EA continues to over-promise and under-deliver, then I think you can expect to see some changes in the near future. They are under a microscope moreso than ever these days because they are not used to posting staggering losses to their shareholders.

[Rodster]

I've reading several articles lately where analysts have been suggesting that the $59 price tag of games is too high especially in this economy and needs to come back down to $49.

If that happens expect more game developers and publishers to suffer as a result.

[fsquid]

I believe the right honorable Hobbes is simply asking EA how his ass tastes.

[GTHobbes]

I believe the right honorable Hobbes is simply asking EA how his ass tastes.

LoL.

[GTHobbes]

I never understood the NFL exclusive from the get go. They had to have gone into it expecting a few more sales. Of course it has always shown me that they were absolutely frightened of what "that other game brought to the table."

You do not have to be an economist to figure this one out.

1) Pay A TON more money for license.
2) Sell game for same price you would if you did not have the license.
3) Sell roughly the same amount of games.

= Less profit

Don't get me wrong they have done steps to reduce cost, outside of the license and increase revenue by taking in more ad money. Still I never saw the ends justifying the means. You can't blame the economy for this one. Just a really bad business decision.

My thoughts exactly, bd.

[wco81]

Where's the evidence that EA is losing money on the Madden deal?

Sales may not be as high as they'd like but they're probably profitable from Madden. Their other games may not be faring as well.

Plus, you have to look at the sales and profits during the life of the contract. Another factor is their stock price before and after the deal was announced.

Don't be surprised if EA had to renew at the previous price for the exclusivity, they sign on again.

As for the state of the game, I don't think that's affected by the presence or absence of other NFL games so much as competing for sales against other mega-franchises. In this generation, FPS games have taken over on consoles so EA has to win sales from gamers who might otherwise spend his $60 on the latest COD game.

[GTHobbes]

Where's the evidence that EA is losing money on the Madden deal?

Plus, you have to look at the sales and profits during the life of the contract. Another factor is their stock price before and after the deal was announced.

I don't think anyone has said that EA is losing money on Madden. They're just not making as much profit on the game as they were before the deal.

It only stands to reason...if it used to cost EA $100 million (I'm pulling these figures out of a hat) to make Madden before the deal, and it now costs $200 million due to the cost of the license, if they're still selling roughly the same amount, then the cost of the license cuts into the profit margin, big time.

As for your statement re: checking EA's stock price, it appears that EA's stock reached its peak back in 2005 when it was nearly $70/share. Today, it's selling around $15.

Short term, yes...it looks like the deal was a good move. It put EA's football competition out of business.

Long term, not so much.

[greggsand]

EA is a notoriously horrible place to work (esp the LA Studio, what's left of it). Disgruntled employees, law suits, unpaid overtime, etc... I almost took a job at EA a few years and hi-five myself every day for turning it down.

The NFL exclusive deal did exactly what it was supposed to do: protect them from competition.

[Danimal]

The NFL exclusive deal did exactly what it was supposed to do: protect them from competition.

Even if that's your take on the deal, I think hindsight being 20/20 we can say now it was probably unnecessary. The way 2K or rather Take Two has been run in the past 5 years it's a marvel they are in business still. There sports franchises are not up to par save one and they keep cutting corners.

People tend to forget we never got to see the other end of the marketing strategy for 2K5, would it sales of fared well if it went to full price in 06? Would they have done another year at $20? Easy to speculate on what could of been, impossible to prove. From a financial stand point APF was a disaster, they got their $60 bones form their loyal customers and within a month the game could be had for a deep discounted price. I love APF for what it is, played it last night as a matter of fact but I feel like a dope for paying full price for it.

They axed College Hoops, regardless of what people think that was all their decision based on sales. There baseball games have left something to be desired and IMO was just a reactionary moved to the NFL deal that I am sure they wish they could take back. Besides NBA what do they have in the sports area?

EA is bleeding somewhere, while not sports related they basically just pushed back a PC game that is done in Dragon Age so they could hold off and release it multi platform at Christmas time. Sure they are spinning it another way, at least Bioware is but as of last week that game was going to ship in March. They pushed the Sims 3 back for similar reasons.

When I think about the games that I really enjoyed this past year most of them come from outside the major publishers who are pushing out 20-30 games a year. The dynamic is changing and the old horses like EA, Take Two and even UbiSoft need to start changing with it or else they are going to be gone.