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EA Management's Credibility Is "Nonexistant Right Now"

by Matthew Kato on Feb 11, 2010 at 05:54 AM

Electronic Arts' management is being slammed after the company recently announced holiday sales which didn't meet expectations. "Management's credibility is nonexistent right now," says Patrick Becker Jr., whose Becker Capital Management holds about a million EA shares.

A article charts current CEO John Riccitiello's failures and future challenges as the company tries to navigate out of 11 straight quarters of reported losses and a stock price that has declined 68 percent in the same time frame under Riccitiello's watch. According to the article, EA is having trouble as it moves into digital games distribution and other markets such as the free-to-play and social networking spaces. Riccitiello, of course, is more upbeat about the company and his future with it, noting that EA has already made progress on these fronts. "You see a six-foot hole we're in. I'm telling you that we were in a 20-foot hole and we've climbed 14 feet out of it."

According to the article, EA currently generates around 80 percent of its revenue from selling traditional boxed copies of its games at brick-and-mortar retail stores, but that the company faces a challenge in both combating secondhand sales and transitioning to the new frontier of digital gaming without abandoning what is already propping them up. To start the transition, EA purchased social networking games creator Playfish late last year, and it launched the browser-based, free-to-play Tiger Woods online game which makes its money on micro-transactions. A similar FIFA soccer title is also in the works.

EA's current situation isn't just about some of its games not doing as well as it hoped. How companies deal with digital distribution and people's ever-changing tastes in games (and how they experience them) is something that all publishers must figure out for themselves. It will be interesting to see if EA can navigate its way clear of this crisis and how others do or don't follow its lead.