Reuters Summit-EA sees fewer titles; digital rising

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By Franklin Paul and Alexei Oreskovic

NEW YORK, Dec 1 Electronic Arts Inc ERTS.O sees a future where its online and mobile games are as critical as "Madden NFL" and other console games as the company focuses on building core franchises and winnows its number of titles, said Chief Executive John Riccitiello.

EA currently publishes more than 50 titles and plans to cut that back to about 40 next fiscal year to focus on quality games. Riccitiello said he could see EA publishing even fewer titles going forward.

"Thirty wouldn't shock me at some point in the future," Riccitiello said at the Reuters Global Media Summit in New York on Tuesday.

The video game software industry is starting to look beyond 2009, as overall sales so far have slumped, defying previous claims that the sector is resistant to tough economic times.

Gaming has grown into a $15 billion business in the United States, according to PricewaterhouseCoopers, thanks to the popularity of consoles made by Microsoft Corp (MSFT.O), Sony Corp (6758.T) and Nintendo Co Ltd 7974.OS.

Riccitiello noted that the zombie shooting game "Left 4 Dead 2," marketed and distributed by EA, sold 2 million copies in its first two weeks, joining other big hits, Activision Blizzard Inc's (ATVI.O), "Call of Duty: Modern Warfare 2" and Ubisoft's "Assassin's Creed II". [nN27327062]

But the industry's blockbusters are few and far between, and more consumers are playing games like "Bejeweled" on mobile phones and home computers, and enjoying free-to-start games like "Farmville" on networking sites like Facebook.

With that shift in mind, EA in November acquired social media game maker Playfish for $275 million in cash, plus other considerations. Playfish makes a range of games that can be played on social sites like Facebook and which can be produced for a fraction of the cost of more elaborate packaged games.

"We're the world's leader in packaged goods games, we make more of them than anybody," Riccitiello said. We're not suggesting that business is going away ... (but) there's this other thing that's growing."

Riccitiello said there will always be a market for packaged games like its "Madden NFL" franchise, but sees digital games growing to account for half the industry in 2010 from 40 percent now.

"It's our goal for that business to be as important as, and over time maybe more important than, our packaged goods business," he said.

Redwood City, California-based Electronic Arts has been cutting costs and paring its catalogue of titles as it seeks to adapt to the changing game market. Last year, the company had more than 60 packaged game titles.

Last month, EA posted a $391 million net loss in its fiscal second quarter and announced plans to cut about 1,500 jobs, or 17 percent of its workforce. The job cuts follow layoffs of 11 percent of EA's workforce last year.

But Riccitiello stressed that the planned cuts were not the result of previous strategic misteps, but rather a move that better position the company for the future. That "means fewer titles, and needing less personnel against that side of the business," he said. "We thought of it as an offensive, positive step towards the evolution of our business."

(Click on tinyurl.com/ycrxe7v for more of his comments on the restructuring)

Shares of the company have fallen 28.6 percent from their 52-week high of $23.76 in June.

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(Additional Reporting by gabriel madway in San Francisco, Editing by Tiffany Wu, Bernard Orr)

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