To armchair quarterbacks and couch-potato commandos, Electronic Arts (EA) is their Picasso. EA is a leading global interactive entertainment software publisher with popular titles such as Battlefield, FIFA, Madden NFL, The Sims, and Bejeweled. The company also distributes third-party titles such as Rock Band and Valve Software's Left 4 Dead, and it publishes games based on other media franchises such as Star Wars. EA develops its games for consoles from Sony, Nintendo, and Microsoft, as well as for PCs. EA also serves mobile devices and provides online social games, including Hasbro-licensed games such as Monopoly, via websites Pogo and Playfish. Electronic Arts was founded in 1982.
The company operates development studios in North America, Europe, Asia, and Australia. North America is its largest single market, accounting for about 40% of sales. Sales outside the US and Canada make up 60% of it business.
Sales and Marketing
As EA's business becomes increasingly digital, more of its products and services are being purchased over the Internet through Origin, the company's direct-to-consumer platform, or through digital downloads from third-party retailers or via mobile application storefronts. The company also sells packaged games to retailers, including mass merchants ( Wal-Mart), and consumer electronics stores ( Best Buy), and specialty game shops ( GameStop). In fiscal 2014 (year-end March) direct sales to GameStop stores accounted for 13% of EA's total sales. The company, however, increasingly looks to mobile and third-party e-commerce marketplaces, and more so its own e-commerce platform, Origin, which also offers titles from other publishers such as SEGA.
Whether digital or physical, product revenues still drive the business, but EA's digital focus also means growing service revenue (40% of sales). Service revenue includes games and content that require hosting support for the essential game experience, as well as recurring subscriptions.
In fiscal 2014 EA's sales slid 6% to $3.5 billion. The decline in sales -- for the second consecutive year -- was blamed on weakness of the Mass Effect, Madden NFL, Medal of Honor, The Sims, and FIFA Street franchises, partially offset by increased sales of the Battlefield, SimCity, and Crysis franchises, as well as The Simpsons: Tapped Out. Continuing its upward trend, sales of digitally distributed games increased more than 25% while sales of packaged games fell by the same amount. Sales in North America declined 11%, while sales in the rest of the world fell 1%. Profits sank to $8 million, down 91% from the $98 million it made in 2013.
To stabilize the business after two years of declining sales, EA underwent a restructuring in 2013 that involved in a workforce reduction of 1,000 people, terminating licensing agreements, and closing several offices. The company has also narrowed its product portfolio to reduce costs and focus on only developing games that have hit potential. For example, in 2011 it published 30 titles, but 2014 saw 11, and in 2015, it will release 10 titles.
As EA pursues a digital approach, its structure morphs along with it. The company also reorganized its operations in 2014 to go from five labels (EA Games, EA SPORTS, BioWare, Maxis, PopCap, and All Play) to three (EA Studios, Maxis, and EA Mobile). EA Games, EA SPORTS, and BioWare were combined into EA Studios to allow for one collaborative environment through the use of common technologies and shared development frameworks. Maxis still develops the Sims franchises at its US studios, and the EA Mobile division includes PopCap Games (Bejeweled, Plants vs. Zombies, Zuma) and its social and mobile studios such as Playfish and Pogo.