EA’s good earnings eclipsed by loss of Star Wars game subscribers
A drop in the number of subscribers for Star Wars: The Old Republic triggered a 10% slide in shares of Electronic Arts Inc. in after-hours trading Monday, overshadowing news of a better-than-expected quarter for the Bay Area game publisher.
EA, which in February said it had 1.7 million active subscribers for The Old Republic, reported that the figure fell to 1.3 million at the end of April. Although “active subscribers” doesn’t translate exactly to paying subscribers because it includes people using a 30-day free trial, it is a good gauge for how many people have bought the title and are actively playing it online.
The Old Republic, whose combined development and marketing budget totaled well over $150 million, is the most expensive title ever produced by EA and is among the costliest games of all time to make.
EA had projected that the game would “approach break-even” at 1 million paying subscribers on an operating basis — that is, the cost of running the online game and developing new content for it, not including the initial cost of creating the game.
Before the Redwood City, Calif., company released its quarterly report Monday, its stock gained a penny to close at $15.13. Immediately after the report, EA shares plummeted nearly 10% to $13.64 in after-hours trading. The stock partially recovered several hours later, climbing back up to $14.31.
For its fiscal fourth quarter, which ended March 31, EA posted net income of $400 million, or $1.20 a share, on $1.37 billion in revenue, driven in large measure by Mass Effect 3, FIFA Street 4 and Kingdoms of Amalur: Reckoning. A year earlier, it recorded profit of $151 million, or 45 cents, on $1.1 billion in revenue.
EA Chief Executive John Riccitiello downplayed the importance of The Old Republic within the company’s overall financial picture.
“Star Wars’ performance is very much in line with our original assumptions,” Riccitiello said in a call with analysts. “It’s in our top 10 most important brands, but it’s not in our top five. I understand that [the drop in subscribers is] generating a lot of interest. I don’t think it warrants as much as we’re seeing now.”
Executives devoted the bulk of their presentation to EA’s digital revenue stream, which grew 47% in the last fiscal year to $1.2 billion. That represented nearly 30% of EA’s annual revenue of $4.1 billion, up from 23% a year earlier.
“The key is digital revenue,” Riccitiello said. “We’ve changed the company from Tower Records to iTunes … from Sears to Amazon.”
