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Nicholas Lovell
Home   >   Analysis and Opinion   >   Analysis   >   EA to lose $17m in profit from GAME’s Demise?

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EA to lose $17m in profit from GAME’s Demise?

By on March 12, 2012

At a Wedbush investor conference last week, John Riccitiello, CEO of Electronic Arts, said:

“One of the challenges that we have this quarter is we did flag a risk on one of the major European retailers having trouble, costing us sort of mid-single-digit EPS [earnings per share]. “That now looks like all but a certainty. It was a risk a month ago. Now it looks like a fact, although we’re still praying for the lenders to get rational and keep them in business. You probably know who I’m talking about.” (via the FT)

Electronic Arts has 331.39 million shares in issue. If the impact on EA’s EPS is $0.05 (i.e. 5 cents), that implies a profit impact of $0.05 x 331.39 = $16.6m.

(To me, “mid single digit” impact means between $0.03 and $0.08, making the range of the impact between $9.9 and $26.5).

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I don’t think that is the long term impact: once GAME is removed from the channel, EA will find new routes to market, and this impact is more from the unexpected speed with which GAME has come off the rails.

Yet losing $17m in profit (approx 3% of the guidance for EA’s profit in 2012) is not a negligible amount.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com