By Mike Williams
EA’s stock recently hit a 52-week low of $11.28 per share, but CEO John Riccitiello has no idea why the company is being hit so hard in the market this year. Inan interview with CNBC’s Julia Boorstin, Riccitiello explained that investors are confused about the industry’s current transitionary period.
“After many years of stellar growth, we more recently got into a place where I think investors are having a hard time understanding where growth in the industry is coming from. We’re at a point where the new console generation has not yet been fully announced, so people don’t know what’s coming there,” said Riccitiello.
“And they’re unclear about ongoing growth in the Facebook platform for gaming and mobile. So we’re sort of in a transition period from an investor perspective.”
“It makes absolutely no sense to me, but fair and unfair doesn’t have anything to do with it when it comes to a stock. There is a perception among investors that the game industry is tough to invest in right now. They’re looking for the winners and they’re looking for the catalysts. I think those will take place over the next twelve months,” he added.
When asked about flagging NPD numbers, Riccitiello said it had little to do with the company’s current business.
“Investors and the analysts that cover the industry have a history of focusing on NPD. Just five years ago, people said that the PC business was in a radical state of decline because NPD said it was down 10 per cent, 20 per cent, 30 per cent, year-in and year-out. The fastest growing platform for video games today is the PC, but it’s growing through subscription, through microtransactions, through download,” he explained.
“Publishers like us are able to grow because we’re transforming the way we deliver products to the consumer. What’s making it hard for investors to see through how to invest the game industry is they’re reading NPD, which is just the disc. We’ve got 40 per cent growth on our digital business. Investors are looking at things like NPD, and they can’t square that with their understanding of the business. Aggressive investors right now have a great opportunity.”
Riccitiello also disagreed with the idea that it’s easy to jump into mobile and social spaces. He agrees that user acquisition is the most difficult part of existing in the space.
“I would argue that that’s one of the worst thoughts I’ve seen in the gaming industry. Yes, it costs less to produce a game for a social platform or mobile. It costs vastly more to find an audience,” he said.
“When you’ve got 10,000 applications going up on a mobile network, standing out in that crowd is incredibly hard. If you don’t have the network power of an EA or Zynga on social, it’s virtually impossible for a consumer to find the product. Ditto with mobile. What we have is the benefit of brands like Madden, FIFA, Battlefield, Medal of honour, and Need for Speed.”
The full fifteen-minute video interview with Riciitiello can be found over at CNBC.
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