No Light At The End Of The Tunnel For Electronic Arts

For very many years Electronic Arts were the biggest game publisher on earth. They have an income of billions every year and they employ thousands of people all around the globe. EA are very important indeed for the video games industry. But they are no longer undisputed number one. The marriage of Vivendi and Activision, fed by the cash cow that is World of Warcraft, with mega hits like Modern Warfare and Guitar Hero and very ably led by Bob Kotick are now probably established at the top of the heap, especially when it comes to profit. (Amazingly they were bankrupt in the early '90s.)

So again, very unsurprisingly, Electronic Arts have issued more bad financial results. They lost $82 million in the quarter ended 31 December (the best time of year for video games!). Their stock price took another hit. They can't blame the industry, big global publishers like the aforementioned Activision, and also Ubisoft have done very well indeed. Even Sega have managed to get themselves back into profit. I have written about EA's problems on here before. Repeatedly.

So what is going wrong?:

• The market for all entertainment IP (including films, television and books) is polarising into blockbusters and niche. Everything else is a potential loss maker. The most successful publishers are those who have geared themselves to the new reality.
• This generation of HD home consoles have awful business models to develop for. Basically making a came costs far, far too much. Several times the cost of games for the previous generation. The root of this is that HD games need a massive amount of content which is still largely hand crafted. The next generation of platforms will have enough power to run lots and lots of middleware so development costs should drop back to sensible levels. In the meantime we are stuck with the PS3 and 360 and they are causing a lot of problems.
• The Wii has been a black hole for many third party publishers. Their fault. They mostly haven't made the games that Wii owners want to buy. Just look at the Metacritic for Wii to see this.