Electronic Arts (NASDAQ: EA), a powerhouse in digital entertainment and games, is making some strategic shifts. After the market closed last Wednesday, EA announced a big shake-up. They plan to reduce their workforce by 5% (around 670 employees) and are also tweaking their game development priorities. This includes stopping the development of a Star Wars shooter game by Respawn, sunsetting some mobile games, and shutting down Battlefield support studio Ridgeline Games.
Why is EA doing this? Well, it looks like they are trimming down to double down on their most popular and successful game franchises. It is about getting leaner and focusing more on the stuff that works for them, like their game titles, outside of sports.
Sure, it is tough to see game projects get canned and studios closed, but EA believes this is the smart move for the long run. They are looking at a future where fewer, big-hit games get most of the playtime, and they want their games to be those hits.
Even with these changes, EA’s not just cutting costs but also investing where it counts. They’re still all-in on their big games like Apex Legends and the Star Wars: Jedi series. But, they are being careful with Battlefield, a major series for them. EA’s making some big changes in how they’re developing the next Battlefield game, and while that’s a bit risky, they have got some experienced heads in charge.
Financially speaking, these moves mean EA will spend some cash now to save more later. They are looking at up to $165 million in costs for all these changes by the end of 2024. But in the grand scheme, EA is betting this will lead to more profit and cash flow.
What does this mean for investors? EA is feeling pretty good about their future. If the strategy pays off, we should see bigger profits down the line where they could make more money from fewer, better games.
In short, EA is getting its house in order, focusing on what they do best, and aiming for a future where their games are the big winners in the gaming world.
Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of the company mentioned.
