Electronic Arts plans to cut back its slate of boxed retail releases by 40% next year so it can invest more heavily in its fast-growing mobile and online freemium games business, according to Reuters. Currently, sales of boxed retail video games account for about 75% of EA’s revenue, but overall sales in that sector of the industry continue to slump. Stock prices of Electronic Arts and other retail-oriented game publishers have struggled accordingly over the past year, which EA CEO John Riccitello says is due to investors not yet understanding the magnitude of the revenue opportunity in online freemium games.
EA plans to publish only 35 retail titles in the current fiscal year, which is down from 50 in 2010. Riccitello says that the number will continue to fall next year to somewhere “between the low 20s and high 20s that’s right.” EA’s biggest launch next year will be the subscription-based, BioWare-developed Star Wars: Knights of the Old Republic (KOTOR) MMORPG. EA hopes the new MMO’s popularity will rival that of competitor Activision-Blizzard’s World of Warcraft, which serves 12 million registered users.
In Ricctello’s comments, he mentions wanting to see between 3 to 5 million subscribers for KOTOR. It’s a curiously low figure, given the MMO’s rumored development price tag of $100 million. Last year, digital revenue like subscription fees and virtual goods sales accounted for $570 million in revenue for EA, or about 15% of the company’s total revenue. EA expects total digital revenue to grow 30% year-over-year this year, to about $740 million. EA will spend roughly $1 billion on research and development this year, with about half of that going into its online games business.
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