From Inside EA: Buy Xbox 360 and/or Wii - NOT PS3

In the wake of my somewhat incendiary post on EA, I discovered an interesting comment on the blog FreeRepublic.com from Dr. Andrew Garrett, a game developer for EA. By way of background, Dr. Garrett is a major dude, having joined EA in early 2003 as part of a major hiring spree. Here is a quick bio that was posted on the blog MegaGames in the wake of a spate of senior EA hires from Hollywood:

Dr. Andrew Garrett: Joins EALA from Dragonstone Software, where he developed scientific engines for moving hair and clothes on game characters, and artificial intelligence routines for more than 35 creatures in the Dragon's Lair 3D game.

So, here is the comment Dr. Garrett made this afternoon (it is comment #12):

I make video games, currently working for Electronic Arts on the latest Command & Conquer. Last year, the prediction was that Sony would win the next-gen war, that the PS3 would be the dominant console, just like the PS2 was.

That is no longer the case. The extremely strong performance of the Wii, combined with the miserable performance of Sony has revised pretty much everyone's expectations. Right now, most of us here think the 360 will be on top for this generation, with the battle for second place between Sony and Nintendo (and that's a major shock, as we'd nearly written Nintendo off for the non-handheld market.) Most of us still think Sony will beat off Nintendo, simply due to the older graphics on the Wii, but it's not a sure thing.

My opinion - get the 360 and/or the Wii. Skip the PS3 unless there's a big change in the near future.

Drew Garrett

Now, let's remember, folks, I AM NOT A FANBOY OF ANY STRIPE. Here is a comment I posted a few days back in response to some heated (and almost angry) comments following from Tuesday's post that should clarify my position on EA, single stock investing and my approach to single stock posts:

Hi Dave, thanks for commenting. I knew this day would come, when somebody would blow a microchip on my blog. First of all, Dave, deep breaths. Ok.

Now either you've never read Information Arbitrage before or you haven't been paying attention, but I don't give a shit about ERTS per se or any other single stock I write about. I don't own single stocks, nobody in my company owns single stocks, I don't have material influence over any company that deals in views on single stocks. Are we clear? No conflicts, right?

Information Arbitrage, when writing on single stocks, is strictly a reflection of data and perspective that is extracted from the vibrant Internet dialogue. Period. All I do is "connect the dots" and use data and my own prose to express what I am seeing. No axe to grind, no agenda, no nothing except my desire to leverage my company's tools to contribute to the body of knowledge around single stocks some people care about.

And as it relates to my being "Kreskin," well, if you've read my earlier posts on Sony, Electronic Arts and Nintendo, the Internet HAS gotten it pretty right. Read: not me, pal. I take zero credit. The Internet. It was the Internet that back in May raised the issue of the blue laser diode shortages that would inevitably hurt the supply of PS3s come Christmas season. It was the Internet that highlighted the reactions at E3 concerning the Wii, getting the ball rolling on the excitement that carried through launch. It was the Internet that shined a bright light on the issue of the disparity in development costs between PS3/Xbox 360 and the Wii, further upping the stakes for game developers focused on the first two platforms. That's not me talking, Dave. It's the Internet.

You don't have to like what I'm reflecting. You can think its full of shit. And that's ok. But don't point your finger at me, Dave. Because I really don't care. Stomp your feet and argue your points on your blog. And hopefully you'll be persuasive and change the tone of the discussion.

Best, Roger

So anyway, I thought my readers would find Dr. Garrett's comment both interesting, insightful and consistent with everything I've been talking about for the last three months. And he is an insider. I am just, well, me. So if you don't trust my opinion, maybe you'll trust his.

 

The author does not hold a position in the securities of these companies.

Comments

[Danrarbc]

"and when the novelty wears off, there going to have a less powerful platform for competition in ongoing development (didn't learn from the Cube, apparently.)"

You do realize the Cube was the middle console hardware-wise last generation right? It wasn't underpowered at all, it just wasn't as powerful as the Xbox

"The X360 is expensive, carries a lot of obnoxious DRM, and is still a PC-in-a-box."

No more DRM than any other console (that's part of what makes a console, the closed platform-ness and piracy protection of them). And the 360 is every bit as custom as Wii and PS3, there's nothing off-the-shelf or pc-in-a-box about it unless you want to count the DVD drive or hard drive. It's nothing like the first Xbox in that regard.

[Yaser Anwar]

Its interesting reading all these thought-laden comments about various issues in all consoles.

In my (gaming junkie) opinion, all three consoles have an, if I may say, edge, which will make consumers buy their consoles.

Like the games I mentioned in my last comment, some of them will be coming of exclusive partnerships with each particular console, all come with a legion of fans.

Fans who will buy the console just to play that particular game (of course that's a little exaggeration, as they will buy them for some other features and games too, but you get the point).

If you play the PS3 and switch to Wii, its like going from PS1 to Atari, the difference is huge (IMO). However, the Wii engages you on a different level and its a great concept, which is appropriately priced.

As time goes by and Sony recognizes the issues (they probably already do) mentioned here and more, they will drop the price. I think a 100-150$ or more drop in price will spur a lot of interest.

You have to keep in mind 90% of the population buying PS3s have no clue about their issues, for them its "wow, I finally got my PS3! Now I can watch Blue-ray yada yada yada."

Another issue that matters a good deal also is: 1) Can I get a mod chip? "I don't want to buy all those expensive games".

In gaming, much like life and business, perception matters a lot too.

Last issue I want to talk about, which relates to the mod chip is, fake games. I had an interesting convo with a fake game seller back in Dubai, who told me: 360 was the easiest to make knockoffs of and Wii came in second. PS3- tough due to some technological stuff in the new console, but sooner or later the hackers will get past it.

I think once that prob gets sorted, we will see more people buy PS3z too, because nobody wants to spend 59$ per game.

P.S. Griffin- GOW is cool dude (Call of Duty for me!), but not enough to make me want to buy 360 :)

[Innatech]

All of these companies are looking a little shaky to me. The unexpected success of the Wii has buoyed Nintendo, but things were looking ugly there a little while ago--and when the novelty wears off, there going to have a less powerful platform for competition in ongoing development (didn't learn from the Cube, apparently.)

The X360 is expensive, carries a lot of obnoxious DRM, and is still a PC-in-a-box. I'd agree that it will likely win this round of the console wars, and that's not a good thing in light of its continuously uninspired design and everything-and-the-kitchen-sink approach. It'll push the industry in the wrong direction.

The PS3--well, it's a mess. That subject has been pretty well beaten into the ground in this space, so I'll just add that Sony as a whole is really falling apart. It is not the company it was ten or fifteen years ago. Their only prominent product line that still commands the kind of respect most of their stuff used to receive is the Bravia series of LCDs. They are too encumbered as a corporation to compete in an agile and responsive way. Witness the absence of a Sony MP3 player, which could have leveraged the massive success of the Walkman/Discman, but was deemed too laden with conflict due to the existence of Sony's music publishing businesses.

EA--with the exception of Maxis, which they are smart enough to have allowed to (mostly) operate independently, EA is another company suffering from its own success. With the exception of a few key products, more and more of what they turn out is formulaic, bug-laden, and generally mediocre.

IMHO, none of these companies are particularly attractive targets for investment at the moment.

[fuzzy075]

HE HAS A JOB BECAUSE THEY MAKE GAMES. Now unless Hes not an EA Employee (Dr. Andrew Garrett).. Or maybe its a FanBOy POser. :) My advise to EA is make QUALITY GAMES and maybe.. just maybe i'll buy another EA game and i'll stop bashing your brand to customers and my friends. BEST BET IS BUY ALL THREE CONSOLES like Yaser :)

[Griffin]

@Yaser Anwar: No Gears of War?

"This is why I bought all the three consoles:

1) Xbox 360 for: Halo, Splinter Cell, Rainbow Six & Counter Strike"

[o]

as a EA worker,
I can not understand why you write such things,
even if you are right,
you are shooting yourself in the legs.

after all EA (as other publishers.) want to sell as many games to many consols as possible.

posting something like that in the net, can cause a lot of touble.

one more thing, you right about the fact that the ps3, right now, is not something I would have bought.

but let's give it some time,
after all it sells 2M consolos, and it has nothing to offer ,
simply black box, and it sell 2m,
imagine what will happen when there will be a good game on the horizon.

[Yaser Anwar]

This is why I bought all the three consoles:

1) Xbox 360 for: Halo, Splinter Cell, Rainbow Six & Counter Strike

2) Wii: Besides the point it was the "hot and wicked cool" tool to have, it engages my pals and myself on a totally different level than Xbox or PS3. You will find these two reasons resonate amongst many Wii owners.

3) PS3: Blue-ray, better graphics than 360 and Wii (IMO) & for: Metal Gear Solid, Tekken & Resident Evil 5.

Coming back to the stocks, with excellent releases coming across all platforms, I'd say give Gamestop a consideration.

Growing over 30%, FPE 20, and 2$/cash.