Electronic Arts Q3 FY2013 Earnings Call and Star Wars: The Old Republic

Electronic Arts Q3 FY2013 Earnings Call and Star Wars: The Old Republic
EventHorizon1984
31 January 2013

The January 30th "Q3 2013 Electronic Arts Inc. Earnings Conference Call" had sparse information about the BioWare MMORPG Star Wars: The Old Republic.

Here are the first SW:TOR comments from Electronic Arts Inc CFO Blake Jorgensen:

• "Total Q3 non-GAAP net revenue was $1.18 billion which was approximately 9% below the midpoint of our guidance. Compared to the same period last year, net revenue was down 28% due to the tough comp of Battlefield 3 and the launch of Star Wars: The Old Republic."
• "Breaking the digital revenues down by type for Q3 shows the following. First, full game downloads contributed $44 million, down 57% compared to the same period last year. Full game downloads have typically been driven by PC products such as Battlefield and Star Wars, and this quarter we did not have any PC-centric titles. "
• "Extra content and free-to-play contributed $185 million, up 50% led by FIFA and Madden Ultimate Team and Star Wars: The Old Republic. These revenues relate to businesses on PC or consoles, where consumers pay for additional digital content -- including virtual characters, map packs and micro-transactions associated with browser based games or MMO’s – like Star Wars.  As a reminder, on November 15th we launched our free-to-play option for Star Wars: The Old Republic. Very early indications have been positive and we are pleased with the initial results but it is too early to know how successful this will be in the long term."
• "And last, subscriptions, advertising, and other digital revenue contributed $79 million, growing 18% over the same period last year. The current year includes a full quarter of Star Wars subscriptions, but it was offset by a decline in other licensing digital revenue."

Along with his observation on gamers:

• "these transactions are direct to consumers, helping us develop and foster our relationship with our gamers. This digital momentum continues to build and we see this as the future."

On the matter of EA (Electronic Arts, Inc.) subscription revenue:

• Peter Moore - Electronic Arts Inc. - COO
  "Digital revenue related to PC games, including full-game downloads, PDLC, social gaming and subscriptions grew at approximately 20%"

Will SW:TOR remain in EA's rotation?

• Brian Karimzad - Goldman Sachs - Analyst
  "I know you guys don't like to talk about individual game profitability, but I think we can all back into the fact that FIFA and Battlefield probably represent substantially all, if not more, of the profit of the Company at least over the last year or two."
• Black Jorgensen - Electronic Arts Inc. - CFO
  "I think we are going to continue to try to maintain a smaller slate of titles than we had historically. Does that go up or down one title or two a year? It depends."

Probably. EA has no problem quickly terminating a poorly performing game.

• Peter Moore - Electronic Arts Inc. - COO
  "Now turning to EA in the holiday quarter, we struggled with two challenges, the slowdown that impacted the entire sector and poor critical and commercial reception for Medal of Honor Warfighter. Medal of Honor was an obvious miss. The game was solid, but the focus on combat authenticity did not resonate with consumers. Critics were polarized and gave the game scores, which were, frankly, lower than it deserved. This one is behind us now. We are taking Medal of Honor out of the rotation"

And SW:TOR continues to generate revenue.

• Ryan Gee - BofA Merrill Lynch - Analyst
  "going back to the digital, it has accelerated substantially quarter over quarter, and even if you go back and factor in the Battlefield 3, 15% growth, what else is driving that deceleration?"
• Blake Jorgensen - Electronic Arts Inc. - CFO
  "The reminder is that full-game downloads are really PC-centric. And so when you have a title like Battlefield, which was a substantially bigger title than anything we had in this quarter, and you have a title like Star Wars that starts up -- so we had the startup of Star Wars in Q3 last year -- those two combined are primarily PC-based businesses, and that drove a huge amount of extra content -- excuse me, full-game downloads during the quarter.
  
  So if you look at the slides that we distributed with our earnings package, on page nine can see it pretty clearly -- $103 million in Q3 full-game downloads versus $44 million in this quarter. Almost all of that is driven by Battlefield and Star Wars startups in that quarter.
  
  The other is just pure math, right?  We are now north of $400 million a quarter in digital business."

But we'll see what happens next quarter.

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