Video game giant Electronic Arts Inc. saw its revenue fall and losses grow in its fiscal first quarter as it released fewer games. Still, the results were significantly better than Wall Street expected.
The Redwood City, Calif., game publisher, second only to Activision Blizzard Inc. in the market, reported a loss of $78 million on revenue of $539 million. Both figures excluded certain factors, including deferred revenue from online subscriptions.
Online and digital games are the fastest-growing part of EA's business. Net digital revenue increased 52% to $188 million, thanks in part to the company's recent acquisition of social gaming publisher Playfish and its status as the No. 1 game publisher for Apple Inc.'s iPhone.
Revenue from games distributed in stores, meanwhile, plunged 53% to $298 million. EA released only six games at retail stores in the three-month period that ended June 30, compared with 10 a year earlier. The company's 2010 FIFA World Cup South Africa did well, selling more than 3 million units, but Chief Financial Officer Eric Brown said that sales for the most recent edition of Tiger Woods PGA Tour were down compared with last year's title, in part because of the continuing weakness of video game sales for Nintendo Co.'s Wii console.
"Even though Wii sales are down, we are seeing strong double-digit growth [in games] for the PlayStation 3 and Xbox 360, and that's really our sweet spot," Brown said.
EA's financial results were ahead of its previous guidance and Wall Street estimates, sending the company's stock up 4% in after-hours trading. The company has more often than not disappointed investors for the last few years with soft sales, which have led to layoffs and the closure of development studios. Its shares fell 32 cents, or 2%, to $16.18 in regular trading, off 9% from the beginning of the year and down 27% from its 52-week high.
The earnings news came as EA is facing a lawsuit recently filed by former Tampa Bay Buccaneers football player Tony Davis over the use of his likeness in Madden NFL football games. Davis, who is seeking class-action status for his suit, alleged that the publisher avoided paying for the likenesses of retired players such as him by slightly altering details of their digital doppelgangers in the game. The suit didn't specify damages being sought except to say they are "likely to be in the tens of millions of dollars."
An EA spokesman declined to comment on the litigation.
It's not the first time EA has been sued over its football titles. Several college players have litigated over the use of their likenesses in NCAA football video games. In addition, the NFL Players Assn. last year reached a $26-million settlement with retired players over the use of their likenesses in Madden NFL games.