Electronic Arts is still a staunch supporter of the PlayStation 3, but the firm said Wednesday that slow sales of the console are a prime reason for shrinking operating margins.
During a quarterly conference call, CEO John Riccitiello addressed why EA's operating margins in its publishing business have slimmed significantly compared to the same point in the previous console cycle, from 20 percent to 5 percent.
"Point blank, this cycle is developing quite differently than the last cycle. The next-gen hardware build is going a little more slowly." He said that last cycle, EA was on the PS2 in a "gigantic way," and of course that platform ended up leading the market.
"This time, there's been some unexpected strength with the Wii and the PS3 hasn't - yet - performed as well as we expected it to. That probably has a bigger impact than any other factor on our margins."
Riccitiello believes that big games like Halo 3 and Grand Theft Auto IV from competing game makers will actually be a "double positive" for both EA and the overall industry.
"Great software sells hardware," Riccitiello said. He said he expects these titles to have a "dramatic" effect on Xbox 360 and PS3 hardware sales.
"We feel great about that," he said.
August 2, 2007