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75. Re: Op Ed Mar 3, 2013, 13:41 Creston
 
Beamer wrote on Mar 3, 2013, 12:20:
But to what end, Creston? Why in the world would EA not want to be making money? Why?
No, seriously, why?

That is not what I'm saying, Beamer. I'm not saying that EA is deliberately tanking or throwing money away. (They are throwing money away, but that's because they are run by an incompetent idiot. Sadly, this is true for many, MANY corporations these days.) They are making revenue, obviously. Which is money coming INTO the company, from which they are able to make salary payments and buy new computers and pay FICA and all that stuff. And spend ungodly obscene amounts on a marketing budget which I'm pretty sure is just wasted money.

If they were to simply put that revenue on the books and let the IRS tax them over it, they'd owe many hundreds of millions of dollars a year. This isn't any different from your or my personal situation: I have income, and over that I owe income tax. If I was to straight up calculate income tax over what I've earned, I'd owe a pretty decent chunk of money.

However, I get to deduct certain things. My interest paid over my mortgage, for example. And there's several others, some of them pretty obscure. For example, since I refinanced into an FHA loan this year, I had no idea that my initial chunk of PMI payments at closing were deductable. Fortunately I asked my brother in law, and he did know it, which changed my tax liability from owing 600 bucks to getting around 900 bucks back.

EA obviously has similar deducations. But unlike a person's ability to deduct something, a company has so ungodly many things they can claim a deduction or a tax credit for, that as long as you get creative enough, you can whittle away massive amounts of revenue into a "cost" or an "expense" bracket to the extent where, even though you made plenty of revenue, your net profit, which is what you owe taxes over, is shown to be below zero. And it's an absolutely tangled web of ridiculousness. If a company operates in multiple states, and one state has a more favorable tax exemption, or more favorable rate, than another one, you can employ all kinds of clever bookkeeping to gain advantage of said exemption/rates. (I don't know whether that applies to EA directly, it's more meant as a general example.)

Many cities and countries around the world now offer tax credits for software developers. So all a company has to do is claim that developer A in town B, which gets tax exemption C, has done work on titles X, Y and Z, and the revenues associated with those titles can claim those credits/exemptions/whatever.

The fact that developer A didn't do much beside make the title menu for game X is irrelevant. The law states that you're allowed to take that exemption/credit, so they take it.

This is why publishers have 19 different studios around the world. You don't think it'd be cheaper to just have all these guys working in the same building? Of course it would be. But then they don't get to use all these sweet little deals that governments keep throwing at them.

Add all those instances up, and a corporation with smart accountants (and almost all of them have smart accountants) can (ab)use it so well that they wind up owing zero dollars in taxes, or even get quite a bit back. There are corporations in the US with 40+ billion dollars of revenue, and then their net profit is like 1.1 billion. If that truly was a simple, straight-up number, it would mean their profit margin is around 2.5%. Not even your kid's lemonade stand at the corner of the street could operate on a 2.5% profit margin! But there are plenty of companies who, according to the books, that's what they're running on. (or far less.)


But EA, as a whole? Why wouldn't it want to?

Of course it WANTS to. EA wants to have 300 trillion dollars in revenues each month. Where do I say that EA doesn't want to? But they can deduct so many things legally that their "win/loss" situation appears far far worse than it really is.

Obviously they haven't done well, but according to the list you produced, they've lost 2.4 billion dollars since 2007. If that truly was ACTUAL losses, EA would have long been bankrupt already. They are nowhere near big enough to eat that and keep running as always. Instead, it's losses on paper, after all the deductions and amortizations etc have been claimed. I have no doubt that they have genuinely lost money, but it's nowhere near THAT bad.

Creston

This comment was edited on Mar 3, 2013, 13:49.
 
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