NEW YORK (Reuters) - Electronic Arts Inc (ERTS.O) expects to cut its slate of video game titles by as much as 40 percent next year as the company continues to invest heavily in its small but fast-growing digital and online businesses.
EA is making a big bet on mobile and Internet-based games, as sales of traditional packaged titles -- which generate about 75 percent of EA's revenue -- continue to slump across the industry.
But EA Chief Executive John Riccitiello told the Reuters Global Media Summit on Monday that investors have still failed to grasp the vast potential of digital gaming.
"I think we're at the classic hump where we've told people where we're going. There's evidence we're going to get there, but Vegas isn't putting money on it because we're only in the fourth inning," Riccitiello said.
Shares of EA and other video game publishers have struggled over the past year, amid investor pessimism about the direction of the industry.
EA expects to publish roughly 35 traditional packaged games this fiscal year, down sharply from more than 50 last year, and Riccitiello expects that number to fall next year as well.
"I don't think it goes to 10 or 15 or even less than 20, but there's some number probably between the low 20s and the high 20s that's right," he said.
Analysts say EA's prolonged turnaround effort is starting to bear fruit. The company has slashed costs and headcount, and has begun issuing more cautious forecasts.
Investors are eagerly anticipating next year's launch of "Star Wars: The Old Republic," a multiplayer online game that EA hopes will rival Activision Blizzard Inc's (ATVI.O) "World of Warcraft," which has 12 million subscribers.
EA has kept details about "Star Wars" close to the vest, although analysts say the company is spending in excess of $100 million to develop it.
Riccitiello declined to provide any forecasts for "Star Wars" but said the feedback so far has been "astonishingly positive."
"Why couldn't we get 3, 4, 5 million (subscribers)?" Riccitiello said.
DIGITAL GROWTH
The vast majority of EA's revenue still comes from traditional packaged games, but sales of digital, downloadable and mobile content rose 30 percent last year to $570 million, or about 15 percent of total sales. The company expects to see another 30 percent gain this year, which ends in March 2011.
Watch Arts Online
EA is making a big bet on mobile and Internet-based games, as sales of traditional packaged titles -- which generate about 75 percent of EA's revenue -- continue to slump across the industry.
But EA Chief Executive John Riccitiello told the Reuters Global Media Summit on Monday that investors have still failed to grasp the vast potential of digital gaming.
"I think we're at the classic hump where we've told people where we're going. There's evidence we're going to get there, but Vegas isn't putting money on it because we're only in the fourth inning," Riccitiello said.
Shares of EA and other video game publishers have struggled over the past year, amid investor pessimism about the direction of the industry.
EA expects to publish roughly 35 traditional packaged games this fiscal year, down sharply from more than 50 last year, and Riccitiello expects that number to fall next year as well.
"I don't think it goes to 10 or 15 or even less than 20, but there's some number probably between the low 20s and the high 20s that's right," he said.
Analysts say EA's prolonged turnaround effort is starting to bear fruit. The company has slashed costs and headcount, and has begun issuing more cautious forecasts.
Investors are eagerly anticipating next year's launch of "Star Wars: The Old Republic," a multiplayer online game that EA hopes will rival Activision Blizzard Inc's (ATVI.O) "World of Warcraft," which has 12 million subscribers.
EA has kept details about "Star Wars" close to the vest, although analysts say the company is spending in excess of $100 million to develop it.
Riccitiello declined to provide any forecasts for "Star Wars" but said the feedback so far has been "astonishingly positive."
"Why couldn't we get 3, 4, 5 million (subscribers)?" Riccitiello said.
DIGITAL GROWTH
The vast majority of EA's revenue still comes from traditional packaged games, but sales of digital, downloadable and mobile content rose 30 percent last year to $570 million, or about 15 percent of total sales. The company expects to see another 30 percent gain this year, which ends in March 2011.
Watch Arts Online
