HiGame

Electronic Arts held its earnings call for the fourth quarter of its fiscal year 2016 yesterday, and shared its own thoughts on whether or not Microsoft and Sony are prepping new console designs, as well as information on how such plans might impact its own business. Historically, transitions between console generations have always been a bit rocky for game publishers. They must manage higher R&D costs associated with new platforms and modest initial sales due to an obviously limited install base. Then they must juggle additional costs related to supporting both older and newer platforms, until the last generation of hardware finally shuffles off to the great video game cabinet in the sky.

While EA obviously can’t comment on any launch plans Sony and Microsoft might be making, CFO Blake Jorgensen did share some insight on the potential refresh from EA’s perspective.

In terms of any mid-cycle upgrades, once again I can’t predict. But what I can tell you is that what was heard I think publicly from the console makers is they’re realizing that the compatibility issue across consoles is an important consumer issue. And as Microsoft has shown, they’ve tried to do with some backward compatibility on to older titles and new titles. I think that’s going to be an important part of what a mid-cycle might look like if there is one, which removes a lot of the risk associated with what we’ve seen historically with console cycles. We don’t spend a lot of time worrying about it, because we feel like our ability to develop for whatever new technology comes, the risk of that’s been minimized because we’ve moved towards one single engine, Frostbite. And we’re able to port that to whatever platform or point that to whatever platform is evolving or is upgraded.
In addition, our business model is so much more diverse now than it has been historically, that the notion of a console cycle becomes somewhat irrelevant in our ability to generate strong earnings and cash flow. So we’ll all be interested to see where Microsoft and Sony come out if they do something at E3 or sometime in the year to come, but we’re excited about the continued growth in the business and not afraid of a cycle change if that was to occur.

In other parts of the call, EA predicted a net sale of 25 million consoles this year (compared to 55 million consoles already in-market since 2013), implying continued robust demand. AMD’s remarks at its own conference call last month also implied strong sales through the end of the year.




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