BBC NEWS | Technology | Game profitability ‘under threat’ basically just says what my Age of the Dinosaurs talk said, only now it’s a news item.
It’s interesting to see this in the wake of the shake-up at EA that happened over the last few days: long-time CEO Larry Probst is moving out of that role. John Riccitiello, who was managing partner at Elevation Partners (the private equity firm that put together the Bioware/Pandemic deal) is returning to EA to become CEO.
Some of the news articles have stated that this is due to EA not developing enough new internal IP. Given the internal politics at EA, this is almost certainly not the only reason, but the rumblings out of EA for a while have been that they need to refocus on developing fresh new content rather than relying too much on licenses. Licenses, of course, cut your profit margin in exchange for built-in marketing value.
Even the analysts are pointing out the issues with the rising costs, at this point.
Not only does the company face industry-wide “near-term market issues related to the console transition period and new console launches,” said Sebastian, but, more importantly, “the rising cost of video-game development and trends in software ASPs,” or average selling price, will be hurdles for EA to overcome throughout 2007.