Support NeoGAF

[sonycowboy]

Earning announcement for EA after market close today. Lot's of questions for them to answer today.

How's Madden doing (analysts should be able to ask the question with NPD in hand)? Will they get good enough shelf space or will the be squeezed out by the big titles? What about the end of this cycle and the beginning of the next? What about handheld support.

Should be interesting.

http://www.thestreet.com/_yahoo/sto...88574.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

By Troy Wolverton
TheStreet.com Staff Reporter
10/19/2004 7:00 AM EDT
Click here for more stories by Troy Wolverton

Challengers are chipping away at Electronic Arts' (ERTS:Nasdaq - commentary - research) dominance among video-game software publishers.

The company is entering the all-important holiday season without a top-tier, blockbuster title. Meanwhile, EA's rivals are starting to use discounts to cut into its market share.

The question is how the company responds to these threats and how successful it will be. EA will get a chance to answer those concerns when it reports second-quarter results after the bell Tuesday.

...

 

[DarienA]

EA needs to be more aggressive about generating new IP's(but they have to be GOOD IP, not just new IP's for the sake of it), and hell they've got a large enough existing base that yes it's going to hurt profits, but at this late stage in the generation they should look at instituting a $39.99 price drop.

It's funny when Sony tried to suggest that drop a bit back the developers were like oh hell no... now many developers are using price drops to ensure strong sales of titles that might have come in under the radar....

 

[jarrod]

It's funny when Sony tried to suggest that drop a bit back the developers were like oh hell no... now many developers are using price drops to ensure strong sales of titles that might have come in under the radar....

Well Sony went about it all wrong, dropping their own software, expecting 3rd parties to just eat the loss in revenue and then complaining to the media when nobody followed their lead, further pissing off publishers. They should've just lowered license fees accordingly if they really wanted MSRPs to drop (like Nintendo did with GBA).

 

[pilonv1]

The company is entering the all-important holiday season without a top-tier, blockbuster title.

What the hell is Need For Speed Underground 2 then?

 

[jarrod]

What the hell is Need For Speed Underground 2 then?

Getting it's ass kicked by GT4.

 

[open_mouth_]

What the hell is Need For Speed Underground 2 then?

shovelware

 

[human5892]

What the hell is Need For Speed Underground 2 then?

I agree. NFS:U was one of the biggest titles of the holidays last year.

There are other bigger games, of course, but the sequel to one of last season's most popular games certainly has potential to be a "blockbuster" in its own right.

 

[sonycowboy]

I agree. NFS:U was one of the biggest titles of the holidays last year.

There are other bigger games, of course, but the sequel to one of last season's most popular games certainly has potential to be a "blockbuster" in its own right.

It was THE biggest title last holiday season.
But last year had no Halo 2, MGS3, GTA, Half-Life 2, GT4, Metroid, or Nintendo DS.

They were able to clean up by default.

 

[Alcibiades]

NFS: Underground 2 is going to really challenge San Andreas and Halo 2 this Christmas, you can count on that...

EA is going in strong, but the sports arena is where they are faltering...

 

[jarrod]

The racing market is so heavily crowded this season though, last year it was just NFSU, Mario Kart, Racing Evolution & PGR2 (R/PGR2 bombing and the other two neatly falling into different markets). This year there's NFSU2, GT4, SRS, Outrun 2, BurnOut 3, Forza, Mudnight Club 3, Enthusia, Crash n' Burn... something's gotta give.

 

[DarienA]

The racing market is so heavily crowded this season though, last year it was just NFSU, Mario Kart, Racing Evolution & PGR2 (R/PGR2 bombing and the other two neatly falling into different markets). This year there's NFSU2, GT4, SRS, Outrun 2, BurnOut 3, Forza, Mudnight Club 3, Enthusia, Crash n' Burn... something's gotta give.

Well the fact that NFSU2 comes out before a few of those games in your above list should help it... it should also have strong interest just based on how the first title sold. I expect Konami's racer to BOMB.

 

[Alcibiades]

the only ones that stand out IMO are Burnout 3, Outrun 2, and NFS: Underground 2.

that said, the edgy, more "fast and the furious" vibe that NFS: Unground 2 gives I think is going to attract more casuals...

 

[sonycowboy]

The racing market is so heavily crowded this season though, last year it was just NFSU, Mario Kart, Racing Evolution & PGR2 (R/PGR2 bombing and the other two neatly falling into different markets). This year there's NFSU2, GT4, SRS, Outrun 2, BurnOut 3, Forza, Mudnight Club 3, Enthusia, Crash n' Burn... something's gotta give.

Mudnight Club 3 (sp?? LOL) isn't out till next year.
Enthusia either
Forza either

SRS has already been forgotten (never recognized either)
Outrun 2 will bomb, relatively speaking

The only racing contenders this holiday season are:
1) Burnout 3
2) GT4
3) NFSU 2

anything else is minor leagues

It's not because the racing market is so crowded, although the top 3 will steal sales from each other, it's more a factor of the entire market being crowded. Amazingly enough, NFSU was THE game last year, although I have no idea why. This year it's on the outside looking in.

NFSU 2 will do well, just not like last year.

 

[human5892]

EDIT: ^^^^Simply put, I agree with sonycowboy. ^_^

Aside from GT4, Burnout 3, and NFSU2, I don't expect any of those racers to do particularly well (yes, even Outrun 2...except for Sonic, Sega's old IP just doesn't seem to perform anymore, particularly on the Xbox). In fact, most of them will probably outright bomb.

 

[Jonnyboy117]

Mudnight Club 3

Sweet, they went rally?

 

[Alcibiades]

Need For Speed: Underground not only had that "fast and the furious" feel (and wasn't the 2nd part of that movie series out last year?), but also has the "Need for Speed" brandname, which is really powerful among a lot of casuals...

IMO, GT4 is coming out way to late to really make a dent because casual sales for NFS: Underground 2 won't be affected during November and 1/2 of December. GT4 will dominate once it's out, but before that NFSU 2 will be fine...

 

[ElyrionX]

Outrun 2 is going to sell like 10 copies alongside NFS:U2's 1 million.....

Those of you expecting Outrun 2 to do well this holiday need a goddamn space shuttle back to Earth........

 

[jarrod]

Mudnight Club 3 (sp?? LOL) isn't out till next year.
Enthusia either
Forza either

SRS has already been forgotten (never recognized either)
Outrun 2 will bomb, relatively speaking

The only racing contenders this holiday season are:
1) Burnout 3
2) GT4
3) NFSU 2

anything else is minor leagues

It's not because the racing market is so crowded, although the top 3 will steal sales from each other, it's more a factor of the entire market being crowded. Amazingly enough, NFSU was THE game last year, although I have no idea why. This year it's on the outside looking in.

NFSU 2 will do well, just not like last year.

I agree with all that actually, except now I don't even see BO3 really being a "contender". GT4 will be NFSU2's biggest obstacle though, while one's sim and the other arcadey they definitely have more overlap than Mario Kart & NFSU did.

 

[heidern]

The thing is, Mario Kart is a GC game. NFS:U is in direct competition with GT4 on the ps2. Also, last year the underground branding making it the big hit surprised everyone including EA. This year though, the novelty is lost to some extent, with a lot of other huge games being released I can see a lot of people skipping it this year to try something different.

Also, I can see some other EA games coming under pressure. LOTR no longer has the movie hype, and also being an rpg may get much lower scores than last years game. Goldeneye:Rogue Agent will be competing with other first person games like Metroid, Halo and Half Life 2, so it will be interesting to see if it can take advantage of the name or if it will get crowded out. As the article points out, shelf space will really be at a premium this year, and the sports games are under seriojus pricing pressure. It will be interesting to see if EA can get the strong growth they have seemed to get every single month.

 

[Deg]

NFSU 2 will do very well. No doubts there.

Goldeneye(ugh) i doubt will have much impact , the bond franchise hasnt been that great under EA with sales falling, EON was a good game but it didnt perform that well. The new LOTR games look good especially Battle for Middle Earth.

 

[Insertia]

NFSU was so succesful because it had no competition last year. I don't expect NFSU2 to perform as well as the first.

 

[UbiSoftologist]

PJ McNealy of American Technology Research expects EA to announce bad news on the sales of Madden and NHL 2005s:

ESPN's low-price, high-quality games may have knocked some of the wind out of EA's Madden and NHL, analyst PJ McNealy predicts.

McNealy says that Electronic Arts' September quarter reports today will likely show that Madden 2005 sales are down more than 20 percent this month, due in part to ESPN NHL 2K5, and that sales of NHL 2005, hampered by the NHL lock-outs and ESPN's NHL 2K5, could be down more than 50 percent in September.

He notes that neither short fall will have much of a financial impact on the company, though the psychological impact could be significant.

"We believe that while (Electronic Arts) has been under pressure in September retail sales in North America... (Electronic Arts) sales in the EU have remained strong and the September quarter should be inline," he added.

McNealy then outlined the possible negative and positive news that could come out of the reporting.

On the positive side you have EA meeting or beating their September quarter expectations, maintaining or raising December expectations, PSP not delayed, EU sales continue to grow and the new slim PS2 sells well.

On the negative side you've got EA missing their September quarter or lowering their December predictions, Madden sales continuing to fall, PSP launch delayed, sales of the new PS2 not good,nd a holidayeason stock sell-off.

It sounds like a pretty mixed bag, though I think we can go ahead and assume that the PSP won't be making Christmas in Japan and frankly can't imagine the slime PS2 invigorating EA sales that much.

Source: http://www.redassedbaboon.com/index.cfm?show=blog_detail&id=285

 

[Lord Error]

Well Sony went about it all wrong, dropping their own software, expecting 3rd parties to just eat the loss in revenue

It's not much different than the chance of them eating their own loss in revenue due to lower price, IMO. Besides, the whole idea was that with lower prices there would be much more sales, which would actually translate into more revenue, regardless of decreased price.

 

[jarrod]

It's not much different than the chance of them eating their own loss in revenue due to lower price, IMO.

Sure it is... Sony was proposing all publishers simply eat $10 in potential revenue back then... $39.99 games now are given a different royalty rate though (thanks to Sony's current royalty structure). Same on GC & Xbox, if a publisher charges $39.99 they pay a different rate than $49.99 (which is what publishers wanted in the first place).

Besides, the whole idea was that with lower prices there would be much more sales, which would actually translate into more revenue, regardless of decreased price.

Too risky... Sony knows better, if they really wanted prices lowered they should taken direct action like Nintendo, rather than PR/media baiting. They deserved getting laughed at by EA, THQ, etc.

 

[Invertibrate]

Well Sony went about it all wrong, dropping their own software, expecting 3rd parties to just eat the loss in revenue and then complaining to the media when nobody followed their lead, further pissing off publishers. They should've just lowered license fees accordingly if they really wanted MSRPs to drop (like Nintendo did with GBA).

Actually the Sony license fees are sliding scale based on MSRP, so it is lower at the lower price. That is how you have titles releasing at 14.99 and such and publishers still making money on them. Nintendo got their sliding scale system from the Sony system that has been in place for around 8 years or so. Sony did the same thing on PS1 and most people did drop price at the same time, including EA. The lower price was an attempt to attract more of the mass market gamers, especially with titles like R&C and Jak, or Crash and Spyro on the PS1. This generation there was more greed. This seems to have resulted in higher discounts sooner after release, as we have seen for the past few years on titles like Second Sight, BGE and countless others. So in a word you are wrong.

 

[Deg]

NFSU was so succesful because it had no competition last year. I don't expect NFSU2 to perform as well as the first.

The only competition it has is GT4. I still think NFSU 2 will do well. It has a different kind of appeal.

 

[Property of Jumpship]

Good. I hate EA so this comes as welcome news.

 

[jarrod]

Actually the Sony license fees are sliding scale based on MSRP, so it is lower at the lower price. That is how you have titles releasing at 14.99 and such and publishers still making money on them. Nintendo got their sliding scale system from the Sony system that has been in place for around 8 years or so. Sony did the same thing on PS1 and most people did drop price at the same time, including EA. The lower price was an attempt to attract more of the mass market gamers, especially with titles like R&C and Jak, or Crash and Spyro on the PS1. This generation there was more greed. This seems to have resulted in higher discounts sooner after release, as we have seen for the past few years on titles like Second Sight, BGE and countless others. So in a word you are wrong.

No, at the time Sony wanted to make a universal drop in MSRPs by $10, and essentially told publishers to eat the costs. There was a little PR/media back and fourth between SCEA and EA over it too. This has nothing to do with the pricing stucture that's currently in place (which usually doesn't occur within a platform's first 2 years on the market btw).

When Nintendo wanted to bring GBA MSRPs down $10 in 2002, they dropped license fees to accomodate that decrease and take the burden off publishers. This is essentially the opposite of what Sony was suggesting but it got the desired result (GBA 3rd party games universally went from $39.99 to $29.99).

 

[sonycowboy]

No, at the time Sony wanted to make a universal drop in MSRPs by $10, and essentially told publishers to eat the costs. There was a little PR/media back and fourth between SCEA and EA over it too. This has nothing to do with the pricing stucture that's currently in place (which usually doesn't occur within a platform's first 2 years on the market btw).

When Nintendo wanted to bring GBA MSRPs down $10 in 2002, they dropped license fees to accomodate that decrease and take the burden off publishers. This is essentially the opposite of what Sony was suggesting but it got the desired result (GBA 3rd party games universally went from $39.99 to $29.99).

Jarrod, that is not correct. When Sony announced $39.99, they had already lowered the royalty to the sliding scale. GBA copied Sony's plan.

EA didn't want to agree, because they are uniquely successful in the full price software and, along, with most publishers have been fighting the drop of ASP. MOST publishers would likely have benefitted by a drop. However, they ALL believe that their product is AAA quality and can command the premium pricing. We see that the majority of them have been wrong.

Whether or not lower ASP will increase software sales is an argument economists have been waging forever and ever. That's not really the point. The point is Sony tried to institute it and they gave every support to the publisher to do so.

 

[Rocket Punch]

So what other big games is EA releasing this holiday season?

Goldeneye 2
NFSU 2
LoTR: The Third Age

Any others? I'll probably pick up The Third Age once it's been lowered

 

[explodet]

They're also releasing The Urbz for consoles and the DS.
Plus the other DS launch games (Madden, Woods).

 

[dskillzhtown]

Did Sims 2 not sell as much as EA thought it would?

 

[DarienA]

Did Sims 2 not sell as much as EA thought it would?

According to this news article it did....

 

[jarrod]

Jarrod, that is not correct. When Sony announced $39.99, they had already lowered the royalty to the sliding scale. GBA copied Sony's plan.

EA didn't want to agree, because they are uniquely successful in the full price software and, along, with most publishers have been fighting the drop of ASP. MOST publishers would likely have benefitted by a drop. However, they ALL believe that their product is AAA quality and can command the premium pricing. We see that the majority of them have been wrong.

Whether or not lower ASP will increase software sales is an argument economists have been waging forever and ever. That's not really the point. The point is Sony tried to institute it and they gave every support to the publisher to do so.

Nope, the SCEA software drop proposition happened in mid 2002, before any budget pricing structure was in place (the GH line started in mid 2002 btw, and had more strict guidelines of 400,000k in full priced sales and was exclusively for rereleases at $24.99). The GBA drop copied nothing, in fact it came at the same time Sony proposed the PS2 software drop (around July 2002). Nintendo wasn't instituting a new sliding scale for GBA game royalties (that did come later though), they had a universal MSRP drop supported by lowering fees across the board... SCEA's never done that (though they did desire a universal drop).

 

[Invertibrate]

No, at the time Sony wanted to make a universal drop in MSRPs by $10, and essentially told publishers to eat the costs. There was a little PR/media back and fourth between SCEA and EA over it too. This has nothing to do with the pricing stucture that's currently in place (which usually doesn't occur within a platform's first 2 years on the market btw).

When Nintendo wanted to bring GBA MSRPs down $10 in 2002, they dropped license fees to accomodate that decrease and take the burden off publishers. This is essentially the opposite of what Sony was suggesting but it got the desired result (GBA 3rd party games universally went from $39.99 to $29.99).

Actually since the sliding royalty scale was implemented by Sony around 8 years ago on PS1 it has been in place. It has been in place for the entire lifecycle of the PS2. By dropping the MSRP by $10 they are actually dropping the wholesale price by about $5 so to say they had to eat $10 is incorrect. The PR back and forth was from EA saying that they were keeping their titles at full price because they could. One of the driving factors for EA to lower their price on PS1 was that Gameday went to $39.99 and they did not want to give Sony the advantage in a race for market leadership that was very close at the time. With no one pushing their key titles there was no reason for the drop in price. Now perhaps finally there is.

Nintendo learned from the horrible mistakes they made with N64 that they need to be more forgiving with the royalty fees so that publishers did not get stuck with vast amounts of very expensive carts for titles that performed below expectations.

 

[dskillzhtown]

According to this news article it did....

woah, "Electronic Arts says it sold more than a million copies of "The Sims 2" within the first 10 days of its release."

I am thinking Urbz probably will do well on the console side as well.

I guess EA is going to have to drop the sports line down to $30 or $35 next year. It seems that is the only place they are taking a serious hit. Either way, it will be interesting to see what EA does in reaction.

 

[jarrod]

Actually since the sliding royalty scale was implemented by Sony around 8 years ago on PS1 it has been in place. It has been in place for the entire lifecycle of the PS2.

Absolutely untrue in PS2's case. Budget pricing wasn't an option until 2002 (for GC/Xbox/GBA it was 2003).

By dropping the MSRP by $10 they are actually dropping the wholesale price by about $5 so to say they had to eat $10 is incorrect.

Regardless of particular amounts, Sony still expected publishers to eat costs while Nintendo didn't. And guess which strategy managed real results?

The PR back and forth was from EA saying that they were keeping their titles at full price because they could.

EA, THQ, Atari and other vocal publishers also didn't want to eat the costs SCEA was suggesting and their public statements reflected that. Keeping pricing level for premuim releases wasn't the only concern here... and it's funny we never heard these concerns when the GBA universal price drop occurred.

Nintendo learned from the horrible mistakes they made with N64 that they need to be more forgiving with the royalty fees so that publishers did not get stuck with vast amounts of very expensive carts for titles that performed below expectations.

Well, those mistakes really started showing on SFC/SNES... it was N64 where Nintendo started feeling their effects though. A lot of that had to do with media costs too, which makes Nintendo's universal GBA drop all the more commendable.

 

[ChrisReid]

I agree. NFS:U was one of the biggest titles of the holidays last year.

There are other bigger games, of course, but the sequel to one of last season's most popular games certainly has potential to be a "blockbuster" in its own right.

Yeah, Underground 1 did 7 freakin million. Underground 2 will be huge.. and a month before Gran Turismo 4. Online play too.

 

[Wario64]

NFSU2 should do well this year. I'm not expecting the game to sell as much as the first one, however. There's alternatives to racing games this year...SRS, Midnight Club 3, Burnout 3, Outrun 2, and Gran Turismo 4.

LOTR The Third Age should do pretty good too. I can see people buying Third Age and the Return of the King EE together.

Then there's Goldeneye 2 and Def Jam Fight for NY. Urbz might do well but who knows

Yeah, Underground 1 did 7 freakin million.

You sure about that?

 

[Subitai]

NFSU2 should do well this year. I'm not expecting the game to sell as much as the first one, however. There's alternatives to racing games this year...SRS, Midnight Club 3, Burnout 3, Outrun 2, and Gran Turismo 4.

LOTR The Third Age should do pretty good too. I can see people buying Third Age and the Return of the King EE together.

Then there's Goldeneye 2 and Def Jam Fight for NY. Urbz might do well but who knows




You sure about that?

Trust me, he would know.

The other thing is that NFSU has still been selling better full price than GH GT3 for the last year.

I foresee a lot of casual GT3 owners that are going to go with NFSU2 over GT4.

I have a feeling that Outrun 2 isn't going to have any effect and be lucky to make 100k before the end of the year. Sega arcade ports just aren't popular on Xbox.

 

[SolidSnakex]

Sony's already start TV ads for GT4, 2 months in advance of its release. They're very serious about it staying the #1 racing franchise. It'll likely get the "Jak" marketing campaign. Which means you can expect to see GT4 ads from now till this time next year.