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EA wants Facebook's users, $3 billion in digital sales

Visitors walk past the exhibition stand of Electronic Arts at the Gamescom 2010 fair in Cologne
Visitors walk past the exhibition stand of Electronic Arts at the Gamescom 2010 fair in Cologne

By Liana B. Baker

NEW YORK (Reuters) - Electronic Arts Inc may never recover its Silicon Valley swagger. But maybe it doesn't have to, its top executive says.

Three years after EA went from being one of the hottest kids on the video games block to industry also-ran, the leaner, more focused company now hopes to take on Zynga and make $3 billion in revenue from digital game sales in the next few years.

Chief Executive John Riccitiello told Reuters in an interview his company survived a "near-death experience," three years ago when its profit shrank, game quality was poor and it lacked an Internet presence.

"We were once a swaggering success in the Valley and then we were suddenly an afterthought," he said of the Redwood Shores, California-based company's position in 2007, when game sales started to slip worldwide.

The CEO said that swagger may never fully return, but through cost cutting, slashing the amount of games it makes and publishing top games on Apple devices, EA has re-emerged as company that is setting its sights on social gaming phenomenon Zynga.

It is within shooting distance. Zynga, which filed with regulators for an initial public offering of up to $1 billion in July, receives the bulk of its revenue from making games for social networks, notably Facebook.

In just five weeks, EA's "Sims Social" game on Facebook attracted more than 53 million monthly active users, more than the company had expected and second only to Zynga's CityVille, which has more than 73 million monthly users, according to AppData, a firm that tracks social games data.

The goal is to one day surpass Zynga's users on Facebook. For now, AppData shows Zynga still dwarfs EA's user base on Facebook with 267 million users to EA's 94 million.

EA's comeback story, as well as job creation and tax policy, will be the topic of Riccitiello's speech on Thursday in front of the U.S. Chamber of Commerce in Washington.

Riccitiello said EA is now one of the few game companies, including China's Tencent, that will generate more than $1 billion this year in digital game sales.

He said the next step will be for EA to be the first video game company to make $3 billion in digital revenue -- sales made other than from the sale of traditional discs.

FROM GAMES TO COSTUMES

Digital revenue comes from everything from extra content gamers can download onto their console games -- such as on Microsoft's Xbox -- to the sale of virtual goods (like costumes) for a user's avatar in a Facebook game.

"We'd like to be the first to get to $3 billion in digital revenue," Riccitiello said, adding it could be in the "next two or three years."

To be sure, EA still has a way to go before it can reach that figure. The CEO said the company is only a third of the way done in its digital plans.

As for its console games, the part of its business which generates the bulk of its revenue, he said this holiday season will be crucial to see whether changes to that division have worked.

EA is chasing after Activision Blizzard's crown in first-person shooter games. EA's "Battlefield 3" video game is coming out in October, a month before Activision releases "Call of Duty: Modern Warfare 3," which is expected to shatter sales records.

"We don't think we can outsell them this time but we think we can knock them by 20-30 market share points, a gigantic chunk. On a market share basis, we are going to hurt them good," Riccitiello said.

The burning question on Wall Street is when EA's massively multiplayer -- so called because it hosts multiple players simultaneously in a single, common game world -- role-playing game "Star Wars: The Old Republic" will come out.

EA has poured millions of dollars and put years of labor into the game. The company has said the game would launch during the holiday season.

Riccitiello declined to comment on a release date. But he said pre-orders for the game were in the "hundreds of thousands" and above the 200,000 level the company's finance chief had mentioned to Reuters in July.

(Reporting by Liana B. Baker; Editing by Tim Dobbyn)

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