January 29, 2003 4:33 PM PST

'Sims Online' off to slow start

Initial sales of "The Sims Online" have been less than expected, executives from publisher Electronic Arts acknowledged Wednesday.

About 82,000 players have registered for the game since its debut Dec. 17, EA executives said during a conference call to discuss third-quarter financial results. EA originally forecast it would have 200,000 players registered by the end of its current fiscal year, March 30.

"The Sims Online" is the multiplayer online version of the smash PC game "The Sims," in which players assume the role of animated characters and guide them through everyday life. The offline game has sold more than 8 million copies, to rank as the biggest-selling computer game of all time.

EA expected similar results for the online version, which requires players to buy the boxed software and pay a $10 monthly subscription fee to access online content.

Game industry observers and EA executives have touted "The Sims Online" as the ultimate test of whether online gaming, currently dominated by fantasy role-playing games, can attract a mass-market audience. Inside EA, the game was seen as the main tool for pushing the company's money losing EA.com online business to profitability during the next fiscal year.

Initial sales have been "disappointing," however, according to EA executives. The game has ranked near the bottom of research firm NPD Funworld's weekly sales chart for the past few weeks, below several older editions of the offline version of "The Sims."

EA executives said the company was taking a number of steps to boost interest in the game, including cutting the price of the boxed software from $49 to $39, effective next week. Additional content also is being added to the game to give players more to do.

"The level of content we'll have in this product by April, we'd like to have had that at launch," Chief Operating Officer John Riccitiello said during the conference call. "We probably made an error in expectations. We feel great about the intellectual property, and we expected the transfer to an online model to be a quick hit in the marketplace."

CEO Larry Probst said EA is committed to the game and believes it can be a success. "I think it's important to realize this is a marathon, not a sprint," he said. "We're committed to making this a huge success, and that's about constantly updating and refreshing the content."

Despite the weak liftoff, EA still reported record earnings and revenue for the third quarter, which ended Dec. 31 and included the critical holiday shopping season. The company reported net income of $250.22 million for the quarter, or $1.69 a share, compared with $132.29 million and 92 cents a share in the same period a year ago. Analysts polled by research firm First Call had expected net income of $1.57 a share.

Total revenue was $1.23 billion, compared with $833 million a year ago.

EA said in the earnings statement it expected pro forma earnings to be between 27 cents and 35 cents a share for the fourth quarter, on revenue of $420 million to $460 million. For the fiscal year 2003, it projects earnings of $2.37 to $2.45 a share and revenue of $2.44 billion to $2.48 billion.

In a separate announcement, EA said it had filed a shelf registration statement with the Securities and Exchange Commission, allowing it to issue $2 billion in new stock shares. The news prompted market speculation that EA was planning major acquisitions and that it may join the list of possible suitors for French media conglomerate Vivendi's game assets. EA shares were down $1.70, to $49.27, in after-hours trading.

Chief Financial Officer Warren Jenson said during the conference call that the company had no current plans for stock issuance or acquisitions, but needed the shelf registration so it could respond to business opportunities quickly. "This provides us with housekeeping ability; that's what shelf is for," he said.

 

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