8:14 AM on 11.17.2007
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Nex
Earlier today (yesterday?) reader-cum-tipper Aerox sent us a link to this Associated Press piece discussing EA's second quarter earnings. Or, more specifically, EA's second quarter losses. It seems that the gaming behemoth lost $195 million dollars during the quarter due to "how it accounts for sales of online-enabled games, now recognizing the sales on a deferred basis over an estimated service period."
Not having easy access to their financial records -- or the green visor and helpful Chinese grad students necessary to read them -- I can't definitively say this is the sort of thing a company tells its shareholders to keep them from taking up the torches and pitchforks and going all Mary Shelley on its reanimated ass, but it does seem somewhat coincidental. We've been hearing reports of how EA's position as the top dog of third-party gaming has been lost to Activision for quite some time now, and if they are indeed doing even worse than we've been hearing, you have to imagine that EA's offices are filled with analysts and accountants screaming and running through the halls while vainly searching for metaphorical life boats in case the metaphorical ship begins literally sinking and they somehow all drown in the middle of Northern California. I can't imagine the shareholders would be very pleased they had invested in a company able to capsize while on dry land, so EA has probably got the spin machines spinning like young girls still amused by turning in rapid circles until they become dizzy and fall on the ground.
Then again, if my fictional scenario does come to pass, I'd like to think at least a few of the shareholders would be impressed by the pure surreality of the whole thing. At least until they realize they've lost tons of cash, and the laws of physics no longer apply. That sort of thing makes for a really bad weekend.
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Contest:
You would think they'd cover the spread
Spending loads of cash to buyout popular game companies that in turn make flops because they are associated with us(EA).
^Sample "mission statement" of EA expand and encompass division.
with regards to Rock Band. I just wanted to throw it out there that it may not be the end all saviour for EA, considering they've made a multiplayer game, your unit sales are going to be divided into a fraction of what a single player game would be.
Example: Four Gamers pitching in fifty bucks each to buy one copy of rockband, or two gamers at one hundred. It will spur the idea of "I don't need to buy rock band becuase i have a friend that has it, and he's always trying to find people to play with."
Who wants to play rockband alone anyways ?
For example, let's say you bought one copy of Madden for $60 in January. For the sake of this argument, you will be able to play this Madden game online until the next January. Instead of counting a $60 sale in January, they will account for it as a $5 each month for the next 12 months.
I took a few accounting classes in college and there are quite a few generally accepted ways to account for things like this. EA is most likely making this large change in the hopes that this will make their books look better in the future, even though they're posting a loss today.
Hell they can't even treat their own employees decently, as I remember when word leaked out about the way they work their game devs to death.
But to see an example of how they take over a great franchise and make it shit, play Sim City Societies. Do Not Want.
On the other hand, I'm curious as to what they meant by online-enabled video games... do they mean games with leaderboards and multiplayer, or what I would suspect, online games that generate revenue from subscription fees. Although I'm not aware of any MMO games belonging to EA, the description of the loss suggests that the problem lies in premature recognition of such fees.
Losses from accounting method changes are extremely common, especially since implementation of Sarbanes Oxley Act in 2002. Its a shame EA took so long to realize that they were accounting for these revenues inappropriately, but it's better to recognize the problem later rather than never. That is, unless you despise EA.