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Post by Deleted on Jan 22, 2019 23:27:12 GMT
Yes, net profit.
Your statement that, "Net profit is defined by a number of variables including operating expenses and is by no means of any relevance to revenue" is not correct.
EA Financial Summary
You start with total revenue. Subtract cost of revenue (costs to publish their games), which gives you gross profit.
From that you subtract operating expenses (things like the cost of running their divisions, R&D).
From there, you have operating income, which when you add misc income items (like interest), you get pre-tax income.
The tax guys gets their share, leaving net income.
So net income (profit) is what is left after subtracting expenses from revenue. That is pretty darn relevant.
EA Profitability
Like you said, EA has relatively low debt, their revenue is increasing over time (but so are expenses) and while profit took a hit in 2017 (after peaking in 2016), it rebounded some in 2018 and may well improve in 2019, especially with changes to the US corporate tax rate.
I'm not a fan of EA, but quite a few folks have said some fairly wild things about EA's profits. In some cases claiming that EA's profits could fund the entire AAA game industry without dipping into their stash (I'm not sure what all of that meant … it was a pretty wild claim). Or in some cases, conflating revenues that a game publisher can "pocket all that", with profits. Or not understanding the difference between gross profits (85% was the number presented) with net profits (20%) … which largely involves subtracting out operating expenses and taxes from gross profits … which you need to do.
I think a lot of the issue is accounting jargon … like you pointed out, I should have said "net" when referring to profit and I didn't … the jargon makes it difficult for most people to understand what is going on with a company's financials. But in some cases, it involves folks just saying stuff. And of course, sometimes it's a bit of both.
EA has earned a lot of criticism. But making stuff up about their levels of profit is not of much use, other than stroking the mob.
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Post by akots on Jan 23, 2019 0:44:29 GMT
Net profit by definition is NOT used to fund anything. Any content that is currently in ongoing development is operating expense largely. So, Net profit numbers are irrelevant with regard to financing/creating any new content or maintaining the existing content. Company can increase net profit at any time to meet the expectations by reducing operating expenses. Or company can increase sales/revenue leaving operating expenses intact. Or can do both at the same time.
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Post by PapaCharlie9 on Jan 23, 2019 3:09:07 GMT
You think most people don't realize that? The crux will be what constitutes "long." And, upside of being a live service, they could tweak the definition of "long" either way. True, if not enough people are buying because they are grinding the most popular items, they could tweak the grind to make it longer or reduce the frequency of drops, but that cuts the other way too. If not enough people are getting things through grind and the negativity and complaints get to be detrimental to the whole business, they could shorten the grind. Personally, I don't get the mtx mentality at all. Seems like a crazy way to make money, but shrug, Fortnite. I've been playing Fallout Shelter on and off since it was first launched, never been tempted to buy an mtx. Happy to grind out everything, even if it takes calendar weeks or months, since I play it casually anyway, while waiting in an airport or whatever. From those who are overtly optimistic about Anthems MTX approach....no....I dont believe most people get that. Twist it any way you want but a GaaS at its core is not player first/friendly but rather publisher/revenue first. I must have expressed myself poorly, because I was trying to agree with you. Either direction benefits the business, was my point. Again, afaic this is stating the obvious. Of course all mtx works this way. Is this a surprise to anyone? I tried to illustrate that with my Fallout Shelter example. For an *avid* player, waiting calendar weeks or months to complete something is excruciatingly painful, but I couldn't care less.
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Post by PapaCharlie9 on Jan 23, 2019 3:33:53 GMT
Net profit by definition is NOT used to fund anything. Any content that is currently in ongoing development is operating expense largely. So, Net profit numbers are irrelevant with regard to financing/creating any new content or maintaining the existing content. Company can increase net profit at any time to meet the expectations by reducing operating expenses. Or company can increase sales/revenue leaving operating expenses intact. Or can do both at the same time. LOL, you say that like all they have to do is snap their fingers and poof, operating expenses reduced by 50%! Meh, I mean, everyone is kind of right about this. Operating income or EBITDA are more for comparing the financial performance of similar companies. Net income is for paying dividends or building a war chest. The funding of new operations, like making a new DLC or expansion for an existing game, can come from a number of sources, including that war chest, or by canceling or shutting down some other part of operations and redirecting that money to the DLC, or what's left after one-time charges. Maybe that's what you meant, akots? But there's no denying EA makes a fuckton of money, and whether its 27% of 20% margin, that's obscene by any standard. That's pharma and big investment bank level profit margin.
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Post by majesticjazz on Jan 23, 2019 4:00:47 GMT
If EAware/Anthen was truely player first, then there would be not MTXs and all items could be obtained through light to moderate grinds. How would they continue to update and add to the game with free content updates and DLC without the MTX's?
DING! DING! DING! And thats the point.....they cant. A GaaS lives or dies on MTXs which is why EAware trying to act like Anthem will be light on MTXs is a cover and bait that I will not bite. The structure of the game will encourage....not discourage players to buy MTXs. Why would they make a game that does not entice MTX purchases cause like you said....they need that revenue to keep the game alive.
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Post by monkeylungs on Jan 23, 2019 4:10:44 GMT
I am not outright against the mtx's so long as they are not gambling. I'm hoping Bioware will have a 'fair' system in place where you won't 'need' the stuff from the in game store to be relevant in the game.
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Post by akots on Jan 23, 2019 4:55:36 GMT
LOL, you say that like all they have to do is snap their fingers and poof, operating expenses reduced by 50%! Well, they shut down/repurposed the Montreal studio after MEA did not sell as expected. The move did not take long at all, something like 3 months IIRC. This essentially obliterated any meaningful ongoing support for MEA as well despite clearly made previous public commitments. Imagine some sudden burst in sales and it is a win-win situation for EA. Well, they discounted MEA right around then, so must have got something extra out of nothing. ...making a new DLC or expansion for an existing game, can come from a number of sources, including that war chest, or by canceling or shutting down some other part of operations and redirecting that money to the DLC, or what's left after one-time charges. I'm not sure about cash reserves aka war chest. Cash reserves might be used for acquisition of assets or covering liabilities and it may be a bit wasteful to pull something out of there to fund what can be classified as operating expense.
But there's no denying EA makes a fuckton of money, and whether its 27% of 20% margin, that's obscene by any standard. That's pharma and big investment bank level profit margin. Big pharma needs a lot of cash for risk mitigation and for acquisition. IDK why EA might need that much money. This seems a bit shady IMHO as their risk is reasonable. Another global conspiracy IMHO is that they actually want to pay more taxes as their major investors are mutual funds. This whole margin thing seems to be very obscure at least in case of EA. Or still, maybe, it is for risk mitigation just in case if shares start sliding.
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Post by Andrew Lucas on Jan 23, 2019 7:38:49 GMT
Actually, I'm happy that Bioware had the chance to make a new IP that they actually wanted and took a break from the Dragon Age and Mass Effect cycle, it must be really tiresome to only live around these two things as a creator. I hope they do well and everyone wins, these guys haves been creating part of my favorite fictional characters in years by now. I won't be there day one, but eventually once given the opportunity. Here's for a successful launch.
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Post by PillarBiter on Jan 23, 2019 8:01:24 GMT
I am not outright against the mtx's so long as they are not gambling. I'm hoping Bioware will have a 'fair' system in place where you won't 'need' the stuff from the in game store to be relevant in the game. I agree. As uch as people dislike MTX's, they are a method of supplying us with more (good) content as well, so I can't wholly be against it.
What I AM against is random lootboxery. That's just theft in my opinion. But if you know what you're buying and that doesn't affect MY game, hey go nuts. It's your own responsibility, and actually, we should be thanking you since you allow Bioware to continue to support anthem.
Also, one last thing. You are all acting as if the money which comes from the base game sales is only meant to cover creation costs. It isn't, this has undoubtedly been calculated to be able to support the game for the near future, while MTX's are more of a long term plan.
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Post by saandrig on Jan 23, 2019 12:15:26 GMT
I am not outright against the mtx's so long as they are not gambling. I'm hoping Bioware will have a 'fair' system in place where you won't 'need' the stuff from the in game store to be relevant in the game. I agree. As uch as people dislike MTX's, they are a method of supplying us with more (good) content as well, so I can't wholly be against it. My issue is how much of the MTX profit will actually go back to the development of the game. A prime example is SWTOR which still generates a decent profit but seems only a small fraction of it is invested back and the game is a step away from maintenance mode. And even when SWTOR was at it's best it wasn't that well funded judging by the content quality and schedule.
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Post by majesticjazz on Jan 23, 2019 12:48:04 GMT
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Post by Pounce de León on Jan 23, 2019 12:53:11 GMT
Nickel and diming is just as bad as lootboxes.
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Post by OdanUrr on Jan 23, 2019 12:58:09 GMT
Disney should never have given EA an exclusive license for Star Wars. They should've handled licensing same as LucasArts.
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Post by PapaCharlie9 on Jan 23, 2019 15:31:26 GMT
Big pharma needs a lot of cash for risk mitigation and for acquisition. IDK why EA might need that much money. This seems a bit shady IMHO as their risk is reasonable. EA risk is a lot higher than other businesses with similar financials. Well, maybe not banking these days. Not sure what you are comparing to. Pharma certainly does have risk, as well as super-long product development cycles, but so does entertainment software. Any multi-million dollar product development by EA could be a total flop in the market and fail to recoup costs, let alone make a profit. So I'd want a war chest of cash to repurchase shares on the open market after the inevitable stock dive. Has EA done a stock repurchase since SWBF2? I'd be shocked if they haven't. The other risk is unpredictable spikes/drops in quarter to quarter revenue. Wall Street hates that shit. Thus, live services and recurring revenue sources that smooth out revenue across the fiscal year. No more spike on a big AAA release in one quarter, fuck all the next quarter, because the other big AAA game they meant to release got delayed into the following quarter.
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Post by Pounce de León on Jan 23, 2019 17:21:58 GMT
Big pharma needs a lot of cash for risk mitigation and for acquisition. IDK why EA might need that much money. This seems a bit shady IMHO as their risk is reasonable. EA risk is a lot higher than other businesses with similar financials. Well, maybe not banking these days. Not sure what you are comparing to. Pharma certainly does have risk, as well as super-long product development cycles, but so does entertainment software. Any multi-million dollar product development by EA could be a total flop in the market and fail to recoup costs, let alone make a profit. So I'd want a war chest of cash to repurchase shares on the open market after the inevitable stock dive. Has EA done a stock repurchase since SWBF2? I'd be shocked if they haven't. The other risk is unpredictable spikes/drops in quarter to quarter revenue. Wall Street hates that shit. Thus, live services and recurring revenue sources that smooth out revenue across the fiscal year. No more spike on a big AAA release in one quarter, fuck all the next quarter, because the other big AAA game they meant to release got delayed into the following quarter. You cant just collect cash and then throw it at the market to buy back shares as you please. Ever heard of insider trading? You can go to jail for that.
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Post by Talon on Jan 23, 2019 17:44:42 GMT
If that's true, then it's horrible, and disappointing, and pretty typical of EA. But here's the thing. If Anthem fails, EA isn't going to be the one hurt, BioWare is. So, even though I ultimately wish that all the energy and tech from Anthem had gone into MEA's development, it didn't. That's over. Now, I hope that Anthem does well, because I want them to continue as a studio, I want to see DA4, and the return of Mass Effect. It seems pretty obvious by this point that EA, for whatever reason, has some issue with Star Wars games, not just KOTOR. I'll be playing Anthem, even though I'm no superfan of looter shooters, and from what I've seen, it should have more depth than that. I was originally skeptical of it, so, fingers crossed.
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Post by monkeylungs on Jan 23, 2019 18:12:38 GMT
No KoTOR 3 might have a little to do with Disney as well. Don't they want everything to be canonical at this point?
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Post by smilesja on Jan 23, 2019 18:25:06 GMT
Ehhh it’s probably because Disney is still creating their canon and don’t want BioWare and EA to do anything yet.
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Post by samhain444 on Jan 23, 2019 19:03:15 GMT
No KoTOR 3 might have a little to do with Disney as well. Don't they want everything to be canonical at this point? Yep..."Star Wars" isn't EA's IP to do with as it sees fit. KOTOR3 would have excited the fanbase but Disney may not care about expanding on the past as much since SWTOR has been providing that content since 12/2011.
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Post by majesticjazz on Jan 23, 2019 20:21:08 GMT
If that's true, then it's horrible, and disappointing, and pretty typical of EA. But here's the thing. If Anthem fails, EA isn't going to be the one hurt, BioWare is. So, even though I ultimately wish that all the energy and tech from Anthem had gone into MEA's development, it didn't. That's over. Now, I hope that Anthem does well, because I want them to continue as a studio, I want to see DA4, and the return of Mass Effect. It seems pretty obvious by this point that EA, for whatever reason, has some issue with Star Wars games, not just KOTOR. I'll be playing Anthem, even though I'm no superfan of looter shooters, and from what I've seen, it should have more depth than that. I was originally skeptical of it, so, fingers crossed. The Bioware that I do not failed no longer remains. Anthem succeeding will be the perfect boost to EAs ego and would really validate their new approach to gaming. Bioware no longer is the premiere RPG developer as CD Projeck Red has taken that mantle from him as well as many other developers are are now telling great story driven RPGs. Hoping that Mass Effect 1 to fail back in 2007 would have been catastrophic.....but not now since we have other alternatives to go to. I mean, Bioware asside, why should gamers be pro-EA? Especially as a Star Wars fan, why should I hope their products succeed? What value, progress and innovation are they bringing to the industry?
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Post by akots on Jan 23, 2019 20:25:38 GMT
You cant just collect cash and then throw it at the market to buy back shares as you please. Ever heard of insider trading? You can go to jail for that. Not really, a company can certainly buy its own shares in most cases. Buy back serves quite a few purposes and is standard practice. www.quora.com/Why-does-a-company-buy-back-its-own-shares
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Post by smilesja on Jan 23, 2019 20:26:51 GMT
So what if Anthem succeeds? It’s likely because gamers and reviewers find it a good game. Damned if you do damned if you don’t I suspose.
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Post by majesticjazz on Jan 23, 2019 20:31:05 GMT
Ehhh it’s probably because Disney is still creating their canon and don’t want BioWare and EA to do anything yet. Oh please just stop. You do not give a prominent publisher exclusive rights to use your product and only allow then to produce one brand (Battlefront) because they are still creating their canon. I mean really, just stop.
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Post by smilesja on Jan 23, 2019 20:34:16 GMT
Ehhh it’s probably because Disney is still creating their canon and don’t want BioWare and EA to do anything yet. Oh please just stop. You do not give a prominent publisher exclusive rights to use your product and only allow then to produce one brand (Battlefront) because they are still creating their canon. I mean really, just stop. Do you even know the reason why they didnt want BioWare to produce more KOTR? It’s likely because Disney didn’t have a direction of where they wanted to take the past yet. As stated above, EA isn’t in control of the IP as one might think.
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Post by majesticjazz on Jan 23, 2019 20:41:54 GMT
So what if Anthem succeeds? It’s likely because gamers and reviewers find it a good game. Damned if you do damned if you don’t I suspose. I dont fault gamers liking Anthem. Its the precedence that is set if Anthem succeeds. Note, Anthem succeeding depends on how long it can sustain an active player base. Selling hot out of the gate means nothing for a GaaS. Eight months after release when most players are at end game (or Elder Game) is where Anthem will make its money. If November comes and the player count has dropped significantly, then how successful was Anthem? Look, you want Anthem (and by extension EA) to succeed. You can do that. However I hope Anthem fails because of EA and their "agenda". Im sorry, I just cannot support EA. Everything they touch becomes ruined. Their mishandling of the SW license is a prime example. If you want EA to succeed and value their presence within the gaming industry then thats on you.
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