EA could cut franchises and jobs
According to Lazard Capital Markets analyst Colin Sebastian, Electronic Arts may be on the lookout to cut back on both franchises and jobs due to the underperformance of its titles at retail.
Said Sebastian: "While the video game industry continues to show some resilience in the face of a very challenging consumer environment, strength does not appear to be across the board, and we believe that several EA titles are underperforming expectations at retail."
"Specifically, our checks indicate that sell-through trends of key holiday releases Need for Speed Undercover, Rock Band 2, and Mirror's Edge remain mixed, which may reflect some fatigue overall in the music and racing genres. We believe further cost and franchise reductions are likely," he added.
"Importantly, we believe EA is continuing to review its cost structure and franchise base, and it is possible that management will announce further cuts in headcount and the development pipeline (including existing franchises) over the coming quarters."
This goes without mentioning titles that did sell well which includes Dead Space, FIFA 09 and Madden. These unit-moving monsters aid in the ability to offset lower selling franchises, which facilitate development of unique IP’s such as Mirror's Edge. Unfortunately, lagging franchises such as Need for Speed: Undercover are taking far too long to just die off. We're also pretty positive EA didn't expect Rock Band 2 to sell as little as it did in comparison to the original.
While EA may be hitting somewhat of a rough patch, it’s certainly not worth losing any sleep over - they're not exactly going off the deep end ala Midway, and still have the opportunity to leverage their other properties and market plans.