Video games developer Electronic Arts expects rollout of new consoles to boost revenues

20 Aug, 2013

Electronic-ArtsVideo games publisher Electronic Arts Inc is banking on a boost from Sony and Microsoft's new consoles to bring the digital and physical media sides of its portfolio into balance.

Like other makers of traditional boxed video games, EA has struggled to keep up with a massive switch to online and mobile gaming. The segment is expected to grow to $14.4 billion in 2017, from $8.8 billion last year.

"We actually see growth this year in our plan for physical boxed games ... The concept that physical media is dead is completely erroneous at this point," EA's Chief Operating Officer Peter Moore told Reuters before the start of Gamescom, Europe's biggest gaming fair, this week.

"It is actually going to grow a little bit, certainly in our world."

Sony and Microsoft will start selling their latest consoles this autumn, intensifying competition ahead of the key pre-Christmas period.

Sony has priced its PlayStation 4 console $100 lower than rival Microsoft's new Xbox One, which is priced at $499.

Timely arrival

The arrival of the new consoles comes not a moment too soon for the video games industry as it tries to arrest the decline in revenues in recent years. Industry tracker NPD says that sales of video game hardware and software have fallen every month, on a year-on-year basis, since January 2012.

Research from consultant PricewaterhouseCoopers (PwC) suggests that the global market for video games will recover to $86.9 billion in 2017, up from $63.4 billion in 2012, with consumer spending on console games increasing to $31.2 billion in 2017 from $24.9 billion in 2012.

Mobile games, online offerings and new digital sales streams accounted for more than 76 per cent of revenue at Electronic Arts in the first quarter of this year, but the Xbox One and PlayStation 4 consoles should provide more balance.

"We are almost at a 50-50 split between digital and physical media," Moore said.

Electronic Arts has a long line-up of games, including shooter Battlefield 4 and new science fiction game Titanfall for the Xbox One and PlayStation 4.

"We see digital business on a global basis in this fiscal year growing 20 per cent. The packaged business on an industry basis is declining radically. We are in a position where we see growth year-on-year in both businesses," Moore said.

That optimism is reflected in EA's shares. They have almost doubled in value to about $26, from nearly $14 at the end of last year.