How Electronic Arts Lost $1 Billion Last Fiscal Year

Electronic Arts used to be the biggest third-party publisher in the gaming industry. They weren't shy about it either since they often used their power and influence to artificially boost their own software sales. Recently, however, Electronic Arts has been in rough waters. They lost their claim as the biggest third-party publisher to Activision due to financial problems. In fact, they lost $1 billion during their latest fiscal year. So what happened to the once mighty Electronic Arts? Let's take a look at several factors.

Declining Sports Sales
Most of the success for Electronic Arts can be attributed to their EA Sports brand. The third-party publisher saw the potential of virtual sports game early and capitalized on it. The fact is that they are the premier publisher when it comes to sports video game, from Madden NFL to NBA Live to Fight Night.

The yearly releases eventually lead to brand fatigue for many gamers, however. This is because it is becoming increasingly harder to see the improvements between the newest versions of Madden NFL compared to last year's edition. Paying full price for small enhancements simply isn't worth it for many. As a result, sports sales saw a small decline that contributed to the $1 billion lost for Electronic Arts.

New Intellectual Properties Not Paying Off
Partly because of the declining sales in their sports game, Electronic Arts decided to invest on brand new intellectual properties. For 2008, they released Dead Space and Mirror's Edge. Despite both games receiving positive press, only Dead Space sold moderately well for Electronic Arts.

The big problem is that new intellectual properties are more expensive to develop than your average sequel, which already contains plenty of assets to build around. Not to mention that these titles have a harder time selling when competing with more established franchises. So while the hardcore gamers appreciate the effort by Electronic Arts, the bottom line has been less than encouraging. Because of the lack of success from their new intellectual properties, Electronic Arts ended up losing $1 billion despite gaining some respect from hardcore gamers.

Nintendo Wii Troubles
Perhaps the biggest mistake from Electronic Arts that lead to them posting a $1 billion loss in their latest fiscal year has been their miscalculations on the Nintendo Wii. Electronic Arts weren't able to take advantage of the record-setting system as their games selection did not stir up any excitement. Because of that, most of the investments on the Nintendo Wii have been unsuccessful, causing a huge deficit that contributed to the $1 billion loss.