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Electronic Arts Inc. (ERTS) Message Board

  • Rab_Nesbitt Rab_Nesbitt Jul 25, 2000 9:28 AM Flag

    Sony losing money too, game sales down

    The Japanese consumer electronics giant is
    expected to post a group net loss of up to 930.1 million
    U.S. dollars. An article on the Associated Press wire
    suggests the fate of the electronics giant hangs on how
    fast it can see a restoration in its battered game
    sector, which in fiscal 2000 generated more than 30
    percent of its total operating profit. The sector is
    burdened with high costs, slow initial returns from the
    March launch in Japan of its PS2 console and sluggish
    game sales. A mere two games are now being sold per
    console, down from expected sales of around four, due to a
    shortage of attractive games.

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    • You expect a game that is in development for
      anywhere between 2-5 years to be completely in the black
      in the initial quarter of not only its release, but
      its consoles release. That isnt how it works. If a
      game costs 3 million, and only makes 2 million in the
      first quarter due to lack of supply, the stock market
      will understand that the next quarter will not only
      put it in the black, but that demand will keep
      pricing at the highest margin. What i think will push the
      stock is the very buzz about the game. When something
      is red hot, price to earnings doesnt mean jack
      squat, its future earnings that are important.

      I
      hope this answers the question.

    • I saw Madden at E3 and it looks great, should
      play great too. GameDay was nowhere to be seen and as
      the article suggests that's almost always because
      it's not ready. And if it's not ready then it's
      certainly not in any shape to beat Madden after just a few
      months development. I heard informally at the show that
      they weren't even showing GameDay behind closed doors
      and that's an even worse sign. IMO, Madden will crush
      Gameday on PS2 both in quality and sales. Also it's no
      secret that SCEA has all sorts of development problems
      with layoffs in LA and morale issues and departures
      from the San Diego 989 studio.

    • >Remember that in Japan there's
      an
      >average of 2 games sold per owner,
      >so if the same
      average holds
      >here...
      That's a mighty big
      assumption there Rab. First you note that there will be
      around 59 games available at the U.S. launch, then you
      use the Japanese "tie ratio" (2) to arrive at a
      calculation for average units sold. One of the reasons the
      tie ratio in Japan is so low is that so few good
      games are available, that won't happen in the
      U.S.

      Also, I doubt that EA's titles are only going to be
      selling 100k units each. I didn't buy EA stock because it
      makes average games, most of EA's games are excellent
      and they far exceed average sales.

      Aren't you
      also forgetting Europe, EA is very big over there. Do
      you think Fifa 2001 on the PS2 will sell only
      100k?

      But of course you and I will never agree Rab, because
      you are focused on the short term, and I am a long
      term investor. In an earlier message you asked me why
      I held on to my EA shares if I thought that EA was
      probably overvalued for the short term. Obviously one
      reason to hold is to avoid taxes, especially with the
      high tax rate where I live (Canada). Also, the price
      of a stock reflects not just the current reality,
      but also future expectations, which I believe are
      great for EA. If I sold shares (or even worst shorted
      "overpriced" stock), I would have sold some my biggest winners
      (Oracle, Cisco and Intel).

    • Has great potential, but not a sure thing. Could
      help EA.com.

      Did you see this from ign "Off The
      Record":


      "We don�t put too much credence in this floater, but
      this one did catch out attention. Apparently, Sony�s
      Gameday 2001 for the PlayStation 2 is an amazing
      creature. It�s so damn good looking that it "blows away"
      Madden.............
      Supposedly, 989 Studios is rumored to be
      perhaps permitting EA to release Madden NFL 2001 for PS2
      first, before Gameday 2001 on PlayStation, because of
      EA�s new love for PS2, all things Sony, and no things
      Sega. Has 989 Studios bowed down to EA in the football
      battle? Never. If anything, the competition has pushed EA
      into making Madden better than ever. And unlike 989
      Studios� basketball franchise, NBA FaceOff, which has been
      shaky and even absent in recent years, Gameday has
      always come through. Whatever the truth may be, we know
      this for sure, Madden is definitely arriving at
      launch. <<
      http://ps2.ign.com/news/22505.html

    • "license to print your own
      currency"?

      Depends on the cost and duration of the deal, factors
      neither of us know about. Bear in mind most cultural fads
      are fading by year five (e.g. Pokemon, beany babies,
      etc.) and Potter is already in year three. The earliest
      EA could get a title out, _if_ they get the license,
      will be close to year five. And if they have to sign a
      multi-project and/or multi-year deal then EA could be left
      holding an expensive property that's out of style.

    • >>Remember that in Japan there's an average
      of 2 games sold per owner, so if the same average
      holds here that's 6 million software sales divided by
      roughly 60 games which is an average of 100,000 units
      each.<<

      Rab, since when have entertainment softare titles
      divided up their sales equally across the spectrum? I
      think few people will argue with the assertion that 90%
      of the sales comes from 10% of the titles, and that
      EA is confidently poised to be in the top 10% of the
      PS2 sales for the next year.

      >>Last
      year's PS1 EA Sports titles sold up to 3 million units
      each<<

      I wouldn't be surprised if a lot of folks who goes
      home empty-handed after trying to buy a PS2 this year
      will still go on to purchase a PS1 version of EA's
      Madden, NHL, NBA, or FIFA this holiday season. (If not
      all of the above.)

    • You once again dodge the question. With 59 games out and 3 million PS2's, how is any profit made never mind a substantial one? Can you answer that?

    • First off, there you go again comparing the
      japanese market to the us market to come up with the
      buying pattern of the us market yet amazingly, you dont
      include the millions of units that have sold in japan
      when you talk about total units sold. How is that
      possible? You can't be this blind on purpose. Stop trying
      to make your argument, and just look at what is
      happening.

      If you are correct in all that you say,
      it will not matter because if this product is
      selling out in a day, wall street will understand and
      erts will fly. I want companies that have problems
      keeping up with demand which is exactly what erts is
      going to be faced with.

    • That is exactly why people should not get too
      excited abiut the US PS2 launch. Sure it is good long
      term news but the earning for the likes of ERTS will
      be bad until next summer. The hype still could push
      ERTS higher.

 
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