To address the problem, the board focused on corporate and creative measures, initiating “a big push in terms of efficiency, better ‘owned’ IP, creation and delivery, more of a focus on operations,” says Brown. Last summer the company restructured its business around four divisions: EA Games, EA Sports, EA Casual and a separate division for its popular Sims franchise. It gives the group a fresh framework, says Brown, and introduces new priorities for him as CFO. “To the extent that we can enable and enforce autonomy and agility while maintaining all the advantages of scale, common systems [and] common reporting, we’ll get the maximum operating leverage,” he says. It could be a long journey. In the fiscal year to April 2008, revenue rose but the company reported a $454m loss. The board expects to report a profit for next year, although its losses continued into the first quarter.
Mauricio at Arete Research says launching 14 brands in one year is risky given marketing costs. Conversely, Brown claims EA’s line-up is “the best I think we’ve ever had.” The CFO says that the company balances its portfolio to ensure it has an offering for almost every type of player: gamers who like the idea of Littlest Pet Shop are a different demographic from those eager to buy a game called Face Breaker.
The company is also using M&A to buy brands. At the time Brown spoke with CFO Europe, EA was in the middle of a $2 billion takeover bid for Take Two Interactive Software, the company behind the wildly popular Grand Theft Auto series. EA’s hostile tender offer expired in mid-August after being extended several times since February, but the companies have since entered confidential talks that could lead to a deal.
In all, it’s an exciting time for Brown to return to the EA fold. He left a COO post at one of its California studios in 2000, then was CFO of two software firms before returning to EA as finance chief earlier this year. The company’s focus on quality is the same, he says, but opportunities in the casual and online markets have changed the game for finance chiefs. When a new title takes off today, “there are multiple ways to expand that and monetise it,” he says. One such new revenue stream is in-game advertising, which the company has been working on for almost two years. In the latest instalment of racing franchise Burnout, for example, players speed past billboards advertising clothing brand Diesel and vehicles emblazoned with the Gillette logo.
Another new revenue model has been developed with an online football game that EA launched in collaboration with FIFA in South Korea. It’s free for gamers to play, but they must pay for extras such as new kits for their virtual footballers. Brown won’t confirm whether the company makes more from these micro-transactions than it would from selling the game as a packaged product, but claims that FIFA Online generates about $1m a month of revenue, split between several parties including the football association. In its latest results, EA’s overall digital revenue — downloads, micro-transactions, in-game advertising and the like — rose by more than 25% to $342m.