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Op Ed

Clifford Unchained - Nickels, dimes, and quarters. By Cliff Bleszinski.
If you donít like EA, donít buy their games. If you donít like their microtransactions, donít spend money on them. Itís that simple. EA has many smart people working for them (Hi, Frank, JR, and Patrick!) and they wouldnít attempt these things if they didnít work. Turns out, they do. I assure you there are teams of analysts studying the numbers behind consumer behavior over there that are studying how you, the gamer, spends his hard earned cash.

If youíre currently raging about this on GAF, or on the IGN forums, or on Gamespot, guess what? Youíre the vocal minority. Your average guy that buys just Madden and GTA every year doesnít know, nor does he care. He has no problem throwing a few bucks more at a game because, hey, why not?

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77. Re: More Big Picture Details Mar 3, 2013, 15:03 RollinThundr
 
HorrorScope wrote on Mar 2, 2013, 13:59:
Creston wrote on Mar 2, 2013, 11:49:
HorrorScope wrote on Mar 2, 2013, 11:13:
If EA is so right about micro-transactions, why can't the company make a profit? To some, their consistent losses would state they are wrong all the time about something, reminded every quarter of that to.

I work at a large company to, I'd shutter to think what we would be slashing if we actually lost a lot of money instead of made a lot. We're already squeezed and making more profit per quarter than ever.

How do companies stay in business losing 10's, 100's of millions a quarter? There are quite a number of them, I never really got it. Do they just pile up debt like countries? JCP lost 427 million last quarter, that is probably like 10 years worth of profits in good times for them, so why even bother? GM rec'd like 20 billion a couple years ago, how can your books be that far off without lying for decades about your financials?

They just lose money on paper. They don't actually lose money, they would have been out of busy for a long time by now. No company the size of EA can lose money for ten years straight and still keep running. (You can if you get REALLY big, like GM. GM CAN do so, because they just cry for more money when it runs out. American Airlines is exactly the same.)

It's called Creative Accounting, or "Arthur Andersen 101." By not making a profit, they don't have to pay taxes, AND they don't have to pay dividends.

Realistically the IRS should do something about this kind of horseshit, but the government gets too much grease money to make corporations pay their fair share. Much easier to tax the average citizen more to make up for the difference.

Creston


Now I won't say you are wrong at all, because bottom line I do not know if it's a paper loss or not and your beliefs are not all that uncommon. But then we don't want to hear from others in rainbow land:
Since their public they have to report accurate financials.

Because what you are saying is not only are they not, it's not even close. Instead of hundreds of million in losses (approaching a billion) it's actually making money. I mean really if that is true there has to be an investigation. As Marv from Sin City would say "that's a whopper". Sarbanes oxley right out the window along with another 1/2 dozen laws.

And if true, who in their right mind would own their stock? You own stock in a company that wants to lose money aka it's not going to produce the results you want. Are you that stupid?

All these mofo republican ran corporations and their tax whining aren't even paying their taxes any way, that is why we are bankrupt. Over spending is but just a smaller part of the issue, that spending was budgeted/planned for by everyone paying their share, fair or not. When they don't pay their taxes this isn't gov't over-spending it is tax evasion. My how we spin our webs.

We're bankrupt because we spend too much. Tax all those rich "republican" business owners (because apparently there's zero rich democrats *cough all of hollywood cough*) 100% and we still wouldn't dent our deficit. 15 trillion. And climbing.
 
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76. Re: Op Ed Mar 3, 2013, 14:41 Quboid
 
Julio wrote on Mar 3, 2013, 13:06:
Dev wrote on Mar 3, 2013, 02:07:
I was tempted to do something like that too. But then I realized, it won't matter to him. He preemptively even says its a reasonable statement just in case anyone actually does search out statements.

You're right, he's not worth the effort.

Fair enough, it must take quite a lot of effort to keep on being wrong this long.
 
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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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74. Re: Op Ed Mar 3, 2013, 13:06 Julio
 
Dev wrote on Mar 3, 2013, 02:07:
I was tempted to do something like that too. But then I realized, it won't matter to him. He preemptively even says its a reasonable statement just in case anyone actually does search out statements.

You're right, he's not worth the effort.
 
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73. Re: Op Ed Mar 3, 2013, 12:20 Beamer
 
Creston wrote on Mar 2, 2013, 19:57:
Beamer wrote on Mar 2, 2013, 14:28:
While it's possible to have a division lose money on paper, it is impossible to have an entire publicly held organization do so. Simply put, EA cannot cook the books without someone going to jail, or more likely, mysteriously dying before going to jail like with Enron and Worldcom.

They are not "cooking the books." These are completely legal loopholes that they are exploiting. I am not saying EA is like Enron and is literally stealing money. They are simply reporting things in a legally acceptable way so that they do not appear to be making a profit.

The idea that corporations can't do this anymore would make every CPA in the country laugh. It sure my brother-in-law laugh when I asked him about it, and he's in charge of his accounting firm.

Creston

But to what end, Creston? Why in the world would EA not want to be making money? Why?
No, seriously, why?

We all kjnow why movies don't - because too many people are in it for royalties. If a movie doesn't make a profit, then they do not have to pay those royalties.

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

The fact that it hasn't has utterly tanked its stock price. Back in 2005 it was worth almost $70. It's $18 now, and that's because it reported a profit in 2012. In the years prior it just sunk and sunk. Now, if you're someone like Peter Moore, who owns about half a million shares, that's 25 million dollars less than he should have.

Their long-term debt is also tied to their stock price. Acquisitions they make are pegged to it. Avoiding being acquired is pegged to it.

Here's EAs net income from 2002-2011 (it was positive in 2012)
102M

317M

577M

504M

236M

76.0M

-454M

-1.09B

-677M

-276M

These losses are a recent thing, it's tanked the stock price, and no one is sitting around planning this or happy about it. It's a very bad thing and it's cost many jobs.
 
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Music for the discerning:
http://www.deathwishinc.com
http://www.hydrahead.com
http://www.painkillerrecords.com
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72. Re: Op Ed Mar 3, 2013, 12:13 Quboid
 
Dev wrote on Mar 3, 2013, 02:07:
Julio wrote on Mar 2, 2013, 23:51:
Quboid wrote on Mar 2, 2013, 20:15:
I've heard he called PC gamers whiny entitled pirates but when I asked this person for a source, none was forthcoming.

Here's 10 seconds worth of checking on google, the first bunch of links that came up. I'm sure there's better out there, but whatever, it's not like its hard to find CliffyB calling PC gamers whiny pirates.

First One

Second One

Third One

I was tempted to do something like that too. But then I realized, it won't matter to him. He preemptively even says its a reasonable statement just in case anyone actually does search out statements.

Quboid wrote on Mar 2, 2013, 20:15:
It's hardly an unreasonable comment

Well, it is, but that's not the point. I didn't say anything pre-emptively (not that that's necessarily a bad thing), I was talking about the unverified point that had already been made.

Whether he is mean to PC gamers isn't the point, I didn't Google him because I don't care about him. My point is that some of those who do have an opinion are reading things which aren't there.
 
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71. Re: Op Ed Mar 3, 2013, 09:59 Redmask
 
Quboid wrote on Mar 2, 2013, 20:15:
Again, you read but you do not comprehend.

I didn't say that I don't understand why he is considered to be a certain way. I said I haven't seen any of this first hand. All the reports I've seen have been second hand and therefore unreliable - you admitted exaggerating, I assume the other reports are inaccurate too.

I've never looked into it because frankly, I don't really care about him. I've heard he called PC gamers whiny entitled pirates but when I asked this person for a source, none was forthcoming. It's hardly an unreasonable comment, albeit one that a professional shouldn't make and one that certainly doesn't apply to everyone.

That's a pretty convenient out for you that isn't fooling anyone.
 
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70. Re: Op Ed Mar 3, 2013, 09:40 PHJF
 
Valve even said they raked in a ton of cash from micros for TF2. They said they made more in a few weeks with the game being free than they have total with the game in retail....

The difference is TF2 is a long-established game with a significant player base, Valve is a long-established developer with a positive community relationship, and Valve is reasonable enough to have mostly restricted rare items to cosmetics. They aren't (yet) issuing "season passes" for fucking products that aren't even IN STORES.

I love how every shitbag publishing head wants every game to be a service so developers can provide "an ongoing experience with fresh new content" for every which product, and then inevitably if a game breaks X sales it's "oh hey let's ship a sequel ASAP and abandoned last year's model".
 
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69. Re: Op Ed Mar 3, 2013, 02:51 xXBatmanXx
 
EA sux, cliffy sux, microtransactions suck. Not as bad as DLC 'addons' do though.

They work, and they makes millions. Valve even said they raked in a ton of cash from micros for TF2. They said they made more in a few weeks with the game being free than they have total with the game in retail....
 
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In this present crisis, government is not the solution to our problem; government is the problem. / Few men have virtue enough to withstand the highest bidder.
Playing: New dad
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68. Re: Op Ed Mar 3, 2013, 02:07 Dev
 
Julio wrote on Mar 2, 2013, 23:51:
Quboid wrote on Mar 2, 2013, 20:15:
I've heard he called PC gamers whiny entitled pirates but when I asked this person for a source, none was forthcoming.

Here's 10 seconds worth of checking on google, the first bunch of links that came up. I'm sure there's better out there, but whatever, it's not like its hard to find CliffyB calling PC gamers whiny pirates.

First One

Second One

Third One

I was tempted to do something like that too. But then I realized, it won't matter to him. He preemptively even says its a reasonable statement just in case anyone actually does search out statements.

Quboid wrote on Mar 2, 2013, 20:15:
It's hardly an unreasonable comment

This comment was edited on Mar 3, 2013, 02:19.
 
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67. Re: Op Ed Mar 2, 2013, 23:51 Julio
 
Quboid wrote on Mar 2, 2013, 20:15:
I've heard he called PC gamers whiny entitled pirates but when I asked this person for a source, none was forthcoming.

Here's 10 seconds worth of checking on google, the first bunch of links that came up. I'm sure there's better out there, but whatever, it's not like its hard to find CliffyB calling PC gamers whiny pirates.

First One

Second One

Third One

 
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66. Re: Op Ed Mar 2, 2013, 22:36 Glykon
 
Heh, as if we dont all know that for any intelligent person there are at least 10 idiots...
Problem is, try to figure out what a complete idiot will do next; you can hire hordes of suit idiots and they will just waste your money
 
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65. Re: Op Ed Mar 2, 2013, 20:15 Quboid
 
Creston wrote on Mar 2, 2013, 19:53:
Quboid wrote on Mar 2, 2013, 13:58:
You're welcome to your own opinion, you're not welcome to your own reality. And no, I don't find that statement to be REMOTELY funny.

Well, maybe next time you say that you don't understand why someone is always being considered to be a certain way, yet you don't know the history of that person, you might get it.

Creston

Again, you read but you do not comprehend.

I didn't say that I don't understand why he is considered to be a certain way. I said I haven't seen any of this first hand. All the reports I've seen have been second hand and therefore unreliable - you admitted exaggerating, I assume the other reports are inaccurate too.

I've never looked into it because frankly, I don't really care about him. I've heard he called PC gamers whiny entitled pirates but when I asked this person for a source, none was forthcoming. It's hardly an unreasonable comment, albeit one that a professional shouldn't make and one that certainly doesn't apply to everyone.
 
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64. Re: Op Ed Mar 2, 2013, 19:57 Creston
 
Beamer wrote on Mar 2, 2013, 14:28:
While it's possible to have a division lose money on paper, it is impossible to have an entire publicly held organization do so. Simply put, EA cannot cook the books without someone going to jail, or more likely, mysteriously dying before going to jail like with Enron and Worldcom.

They are not "cooking the books." These are completely legal loopholes that they are exploiting. I am not saying EA is like Enron and is literally stealing money. They are simply reporting things in a legally acceptable way so that they do not appear to be making a profit.

The idea that corporations can't do this anymore would make every CPA in the country laugh. It sure my brother-in-law laugh when I asked him about it, and he's in charge of his accounting firm.

Creston
 
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63. Re: Op Ed Mar 2, 2013, 19:53 Creston
 
Quboid wrote on Mar 2, 2013, 13:58:
You're welcome to your own opinion, you're not welcome to your own reality. And no, I don't find that statement to be REMOTELY funny.

Well, maybe next time you say that you don't understand why someone is always being considered to be a certain way, yet you don't know the history of that person, you might get it.

Creston
 
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62. Re: More Big Picture Details Mar 2, 2013, 19:51 Creston
 
HorrorScope wrote on Mar 2, 2013, 13:59:
Now I won't say you are wrong at all, because bottom line I do not know if it's a paper loss or not and your beliefs are not all that uncommon. But then we don't want to hear from others in rainbow land:
Since their public they have to report accurate financials.

Because what you are saying is not only are they not, it's not even close. Instead of hundreds of million in losses (approaching a billion) it's actually making money. I mean really if that is true there has to be an investigation. As Marv from Sin City would say "that's a whopper". Sarbanes oxley right out the window along with another 1/2 dozen laws.


You're not understanding what I'm saying. I am not saying they are flatout lying in their financialsóof course they aren't. The FTC and the IRS would skewer their ass in a second if they did that.

But there are so many loopholes in how you can report things, in how you can amortize them, in what you can claim as costs vs expenses etc, that any decently smart accountant can put all these deductions on paper and turn a few hundred million dollars of profit into a few hundred million dollars of losses.

Add into this the fact that seemingly every government is now practically THROWING money (in the form of tax breaks) at whatever game developer, and see that big publishers open studios everywhere around the world just to catch those tax breaks, and it's not that hard to see that this is just losses on paper. As in: everything cleverly filed in the proper loophole bracket so that profits turn into losses.

For a great example in a slightly different field, look at what Hollywood did to Peter Jackson. He was supposed to get royalties for the Lord of the Rings movies. However, according to Hollywood's accountants, none of the LotR movies ever made a single dime's worth of profit. And there's fuck-all he can do about it, because it's all... Clever Accounting / Arthur Andersen 101. And yes, Beamer, before you complain, Hollywood is different from EA, and it's perhaps not the best applicable example.


And if true, who in their right mind would own their stock? You own stock in a company that wants to lose money aka it's not going to produce the results you want. Are you that stupid

Well, A) EA's stock has fallen to like 15 year lows, so not that many investors are really happy with EA anymore, and B) why would anyone own stock in a company that consistently posts loss after loss after loss? Seriously, go look up the last quarter EA actually posted a profit. I think it was in 2002 or thereabouts. So either these people are just throwing money away, OR, they realize that these losses are just paper losses, and EA is actually a fairly sound company that just does business the way the government encourages them to.

As for the republican bit, the democrats are just as happily allowing corporations to dodge taxes. This isn't a party-deal. This is a simple case where it's much easier to just get taxes from the population, because their accounting skills aren't nearly as clever.

HorrorScope wrote on Mar 2, 2013, 14:10:
Creston wrote on Mar 2, 2013, 12:10:
Since this is about the most active EA thread right now, can someone who uses Origin check something for me?
Thanks in advance.

Creston

Getting 22 mbps/sec, which is actually 2 more than my limit!

Thanks for checking it for me. I guess I'll open a ticket with EA, who will undoubtedly either ignore it (fun reference: My original Dragon Age ticket is STILL open!) or tell me to "shut down any other programs that might be eating up your internet" even though resmon shows that only origin is even running and it's running at half my bandwith. Sigh.

Creston

This comment was edited on Mar 2, 2013, 19:59.
 
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61. Re: Op Ed Mar 2, 2013, 14:59 Dev
 
Beamer wrote on Mar 2, 2013, 14:28:
Do you know what else is true in Hollywood?
Yes. That they started out as a bunch of IP pirates. Its the only reason why hollywood is on the west coast rather than the east coast.
 
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60. Re: More Big Picture Details Mar 2, 2013, 14:50 Beamer
 
Dev wrote on Mar 2, 2013, 14:35:
I agree with your overall point, but a minor nitpick, the music industry also does hollywood type accounting.

They're not the only ones that do, but again, they're parts of a greater corporation, or they're privately held.

It's 100% illegal for an entire publicly held corporation to cook the books like that, and investors will react.

EA actually made money last year. They'd lost money the two or more years prior to that. How do they stay in business? They were losing $200MM-$600MM per year. They have 2.5billion in liquid assets. Their stock utterly tanked in this time, rapidly diminishing their value. But they were never in real danger, because they're sitting on so much cash and so many short term investments. They also issued half a billion in long term debt this year.
They're not an extremely healthy company right now, by any means. They're legitamitely floating between losing money and making money. The stock, as mentioned, has tanked. But there are signs of a turnaround, and they have time to right that ship.

We will see what happens if (when) the new consoles tank.


 
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Music for the discerning:
http://www.deathwishinc.com
http://www.hydrahead.com
http://www.painkillerrecords.com
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59. Re: More Big Picture Details Mar 2, 2013, 14:35 Dev
 
HorrorScope wrote on Mar 2, 2013, 14:16:
Dev wrote on Mar 2, 2013, 14:07:
Actually what the big companies do is make plenty of profit on paper and in reality. Then they just do a perfectly legal double irish with dutch sandwich, and pretty much not pay any of it to the gov.

Apple and Google are just a couple examples, there's plenty more.

The difference is the two examples you post are making and reporting plenty of profit and their stocks reflect that. Where as EA shows huge losses on there public quarterlies aka on paper.
Obviously. Which more than likely means they are actually losing money in reality (not just paper). There's no upside to a company trying to lose money on paper instead of the double irish with dutch, especially if its a company with a lot of IP. One of the differences between a losing money (even if you believe its just on paper) and making money company is stock prices, which makes a huge difference to a ton of things. Not the least of which is stock options and bonuses to CEOs. So they have personal making tons of income reasons to show profit.

Beamer wrote on Mar 2, 2013, 14:28:
Please stop saying "only loses money on paper."

People tend to say that a ton because it's true in Hollywood. Do you know what else is true in Hollywood? The companies are divisions of other companies.
I agree with your overall point, but a minor nitpick, the music industry also does hollywood type accounting.
 
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58. Re: Op Ed Mar 2, 2013, 14:28 Beamer
 
Please stop saying "only loses money on paper."

People tend to say that a ton because it's true in Hollywood. Do you know what else is true in Hollywood? The companies are divisions of other companies.

EA is not. It's a publically held company required to report its finances in extreme detail according to GAAP. While it's possible to have a division lose money on paper, it is impossible to have an entire publicly held organization do so. Simply put, EA cannot cook the books without someone going to jail, or more likely, mysteriously dying before going to jail like with Enron and Worldcom.
 
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Music for the discerning:
http://www.deathwishinc.com
http://www.hydrahead.com
http://www.painkillerrecords.com
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