Business of Gaming: EA's Q1 2014 Financial Report

By Dog of Thunder, 3 years ago
Earlier today, EA released their Q1 2014 financial report, and it contained some incredibly interesting bits of information regarding the current direction of the gaming industry as a whole. With new consoles set to appear on store shelves in just a few months, this report is one of the last we can expect regarding exclusively the Xbox 360 generation. Can we get any insights from this report regarding the upcoming console war between Microsoft, Sony, Apple, and Google? How about how much EA earned on each console, including their largest market, the PC?

It's time to put the cold reality of the video game industry into perspective through the lens of the current top-earning North American publisher, Electronic Arts.

Electronic Arts Q1 2014 Financial Results

The report starts off by celebrating EA's strong showing at E3, particularly Respawn Entertainment's Titanfall, which won eight industry awards and DICE's Battlefield 4, which took home 14 industry awards. Battlefield 3 remains popular, with over 4 million gamers now signed up for Battlefield 3 Premium across all consoles.

The largest gains for Q1, however, did not come from the home consoles. EA's mobile titles, in particular Real Racing 3 and The Simpsons: Tapped Out, both iOS titles, helped drive the companies mobile division to an outstanding gain of 64% compared to Q1 of 2013. EA reports that Real Racing 3 has been downloaded over 45 million times from the iOS App Store and has achieved an average of 2 million daily users since March of this year. No numbers were given regarding The Simpsons: Tapped Out, but EA cited the mobile title as having its best quarter since it launched on the App Store back in August 2012.

The second largest gain came from the PC market, which increased 8% from Q1 2013. EA's Origin service, their PC-based digital games service, eclipsed the 50 million registered users mark this past quarter and also has 22 million mobile users currently signed up with the service. FIFA Online 3 alone accounted for $70 million during the past quarter, claiming the title of South Korea's top online sports title in the process. With the combination of the PC market growth and mobile market growth, EA's digital games sales were higher than their retail sales for this past financial quarter.

Sales on the Xbox 360 and PS3, when you include digital and retail sales, were higher than the other divisions but suffered year-to-year losses. This is expected as the industry is ramping up for an end to the current 8-year console generation, which unlike the previous generation, has no clear-cut winner. EA's sales figures for the Xbox 360 and PS3 were virtually identical for the past fiscal year. This is unlike last generation, which was won by the Playstation 2, which oddly enough, accounted for 6% of EA's sales during the second fiscal quarter of 2013. A console is truly dominant when 13 years after its release, it accounts for 6% of the net revenue for the largest video games publisher in North America.

All told, this was a positive financial report from EA, which bodes well for the current state of the industry as developers and publishers position themselves for a new console generation.

The unfortunate news for EA that was released today will not be reflected in a financial statement until the end of 2014's second fiscal quarter.

Jury rules in favor of original Madden programmer

Madden creator Robin Antonick was the man responsible for the earliest iterations of the franchise on the Commodore 64, AMiga and Apple IIe. In 2011, he sued EA for improper usage of code he developed for the original PC versions of Madden in the later console versions. In particular, Mr. Antonick cited the six-month programming window of the Genesis' version of Madden, which EA claimed was done by one programmer, as impossible without usage of Mr. Antonick's code. The crux of the lawsuit is that usage of Robin Antonick's code means that he should have been paid a royalty for every sale of the title. A jury agreed with Mr. Antonick and awarded the original Madden programmer a judgment of $11 million. Versions of Madden released from 1990 to 1996 were found to be similar enough as to be "virtually identical," down to the lines of code which were analyzed by a forensic programmer and displayed for the jury as part of the trial.

With this legal victory, Robin Antonick plans on suing EA again for Madden royalties stemming from franchise sales past 1996, as the original lawsuit was limited in its scope.

Taking the good with the bad, EA stock rose today and ended with a net gain of 8% over the previous day's closing. Here's hoping for more financial good news from other publishers as we expect more financial reports to be released in the coming weeks. If you are interested, a .pdf document of EA's financial report is available under the "External Link" heading at the bottom of this article.