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EA Challenged By Profit Decrease

David Utter
Expert Author
Published: 2005-05-04

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The largest maker of video games acknowledged a 91% drop in profit for the first quarter of the year.

Christmas has definitely ended for Electronic Arts.

The maker of the Madden NFL football franchise and Medal of Honor games saw net income fall to $8 million USD from $90 million a year earlier.

Pricing may be having an impact on gamers as the economy has not proven very rewarding since the dot-com bust. Many chafe at the usual $49.99 price of a new release.

The popularity of used game stores, and the ability to rent titles from chains like Blockbuster, offers less costly channels for people to try or buy titles.

2005 will be a transitional year for game companies everywhere. Microsoft, Sony, and Nintendo have plans to release new consoles, which means EA and others have to work with new developer kits for each console.

About a year has to pass before a company like EA has sufficient experience with the new console to really take advantage of its features. Upgrades in processing power mean more realistic physics can be used in games.

And if the console is capable of more, then gamers want more from the game companies. Better sound, sharper graphics, and smarter AIs have to be programmed by developers.

But that first year of new consoles can be tough on the game companies. EA forecasts a loss of 22 to 28 cents per share in the current quarter.

One important acquisition EA completed was the purchase of Criterion Studios and its RenderWare technology. The RenderWare development platform and studio of applications figures prominently in the biggest names in gaming, including EA.

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About the Author:
David Utter is a staff writer for WebProNews covering technology and business. Email him here.

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