Mirror’s Edge and NFS Undercover Hurt Electronic Arts Profits

Electronic Arts is one of the biggest videogame publishers in the world, competing for number one with Activision Blizzard, which was only created this year. Still, the current economic situation and the big number of AAA titles released in 2008 mean that the company has seen some of its flagship titles flounder and sell less than initially thought.

Colin Sebastian, an analyst with Lazard Capital Markets, is well versed in the evolutions of the videogame industry. He believes that both Mirror’s Edge and Need for Speed Undercover have been under performing. He says that “Specifically, we believe several EA titles are tracking below plan at retail this holiday, including Need for Speed Undercover (with disappointing reviews), new franchise Mirror's Edge, and Rock Band 2”. The result might be that the publisher will be in a position to cut some of the franchises and even lay off more staff, after around 10% of employees were fired earlier this year, as Electronic Arts’ results were below standards.

On the bright side, Sebastian states that videogames like Dead Space, FIFA 09 and Left 4 Dead, made by Valve, are selling well and could offset the problems with the other titles. Still, the analyst says that “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”.

The big problem is the fact that Rock Band 2, which is developed by Harmonix, seems not to be meeting sales targets. The music franchise is one of the biggest earners for Electronic Arts and if people really get tired of playing music games, then the publisher will be hard pressed to find another intellectual property that can attract the same number of sales.