about company

Electronic company During its more than 40-year history, Arts has contributed to the creation of the most popular game titles and franchises. Its library includes, for example, the Need series For Speed , Battlefield , Star Wars games or many sports games under its EA Sports brand , such as Fifa or Madden NFL. In recent years, EA has focused on adapting to the changing landscape of the gaming industry, with a greater emphasis on digital distribution, live services and subscription models. The company is also looking to diversify its portfolio by investing in new rights and expanding its presence in the mobile gaming industry.

Restructuring measures

EA recently announced a 5% reduction in its workforce. Allegedly, this is a measure connected with the restructuring of the company, part of which is a reduction in the number of office spaces and real estate. The gaming industry has cut a large number of jobs over the past year, with EA itself laying off around 800 employees. According to the annual report, which was last published in May last year, the company had 13,400 employees as of March 31, 2023, so the restructuring could affect more than 600 employees. [1][2]In addition to these measures, EA also wants to suspend development or live service of several titles. According to CEO Andrew Wilson's company is withdrawing support for products it believes have no future in the ever-changing gaming industry. Restructuring plans should be completed by the end of this year.[3]

A wider issue in the industry

Electronic Arts is not the only company that has been forced to streamline its operations. The problems of economic growth in the industry have also affected Sony, for example, which has already announced the layoffs of about 8% of employees, which is a total of about 900 jobs, Riot China's Tencent Games plans to cut workforce by 11% and even Activision -led Microsoft Blizzard and Xbox have to lay off around 1,900 employees. The video game industry experienced a huge boom during the Covid-19 pandemic. It was the rapid growth during this period that caused companies to increase their assets, but after the frenzy died down, they were forced to consolidate. According to the data of Game Developers organizers Conference (GDC), about a third of game developers were directly or indirectly affected by layoffs during 2023.[4]

EA controversies

EA has been under fire for years for its business practices, which have been the subject of various lawsuits. This includes, for example, placing so-called microtransactions or " loot boxes" in purchased titles, whereby the user pays for additional optional items in the game, but does not know what the reward is until he completes the transaction, which some courts and opponents have described as gambling, often targeted on minors. Other controversies have been linked to deceptive advertising, incomplete content in released titles in order to charge more, or a decline in the quality of their game library in general. In these few years, EA has earned an unflattering place among the most hated game companies.

Financial results

Fiscal year 2023 of Electronic Arts ended on 3/31/2023. EA ended the 12-month period with total revenue of $7.43 billion, up 6.22%, and net income of $802 million, up 1.65%. The net profit margin decreased by 4.34% year-on-year, which was the third year-on-year decrease in a row. The last published economic results are quarterly for the period from 1.10. until 31.12.2023. The firm posted total revenues of $1.95 billion with a net profit of $290 million. Earnings per share for the period were $2.78.* Fiscal 2024 earnings are expected on May 7. The company expects total annual revenue of $7.4 billion to $7.7 billion and profit of $1.14 billion to $1.27 billion. [5][6][1] Despite the restructuring measures, the investment bank Oppenheimer keeps the rating of EA shares at the level of "exceeds expectations."[7]

Development of the share price of Electronic Arts for the last 5 years. (Source: Google Finance )*

Sports games are the most popular

The best-selling titles of the Electronic library Arts consists of games from the EA Sports brand powered mainly by Fifa and Madden NFL. Their new versions are released every year and regularly record millions of sales within the first month of release. Despite the success, from 2023 Electronic Arts and Fifa cut ties over "differences in vision" for the game. Since the latest release in September 2023, it has been renamed to EA FC 2024. The company sees fans of sports games as the most dedicated and therefore wants to focus its strategy on creating new titles just for them, which is already indicated, for example, by the return of Sports College Football .[1]

Conclusion

Electronic Despite the austerity measures, according to analysts, Arts still has growth potential. But in recent years, the company's unfair business practices have deepened consumer distrust, which undoubtedly has a negative impact. Although EA is one of the least popular companies in the gaming community, it still records huge sales, mainly driven by revenue from sports games, or various transactions for optional items or services, some of which are the subject of controversy. The gaming industry as such may be experiencing a slower period, but it is far from saying its last word. After all, the industry has long surpassed the film industry in size and is fueled by endless technological innovation.

Adam Austera , chief analyst at Ozios

* Past performance is no guarantee of future results.

[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.

[1] https://www.statista.com/topics/7545/electronic-arts-ea/#topicOverview

[1] https://www.reuters.com/technology/electronic-arts-lay-off-5-workforce-2024-02-28/

[2] https://edition.cnn.com/2024/02/28/tech/electronic-arts-layoffs/index.html

[3] https://www.bnnbloomberg.ca/electronic-arts-to-cut-5-of-workforce-and-sunset-some-games-1.2040598

[4] https://www.wired.com/story/the-video-game-industry-is-just-starting-to-feel-the-impacts-of-2023s-layoffs/

[5] https://www.google.com/finance/quote/EA:NASDAQ?sa=X&ved=2ahUKEwiEiOCmmt2EAxW4gv0HHfIeBi0Q3ecFegQIGxAf

[6] https://s22.q4cdn.com/894350492/files/doc_financials/2024/q3/Q3-FY24-Earnings-Release-FINAL.pdf

[7] https://www.investing.com/news/stock-market-news/electronic-arts-stock-maintains-150-pt-at-oppenheimer-amid-restructuring-93CH-3322047