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EA's mistake foreshadows future pain

When EA announced disappointing earnings late last week, the company was quick to offer up plausible excuses for their failure to make their financial goals. Chief among culprits is the basic fact that there simply weren't enough Xbox 360s in consumer homes, resulting in shortfalls in the sales of EA's next-generation titles.

In the words of EA CEO Larry Probst (pictured at right) during a conference call with analysts: "Our expectation was that more units of XBox 360 hardware would have been delivered to the market in that time frame both in North America and Europe.... I think we really underestimated the impact of consumers sitting on the sidelines and not spending dollars in anticipation of getting their hands on the next-generation console."

If the biggest (and arguably savviest) publisher in the games industry can err so badly, chances are good that other companies also misforecast this transition period as well.

EA's blunder therefore foreshadows pain that other game companies might be feeling right now. The companies that we'd expect to be hardest hit by similar underestimation are those that might have been relying most heavily on the ongoing stream of revenues from current-generation consoles (particularly the PlayStation 2). How bad will it get before the installed base of next-generation platforms is sufficient to sustain cash-starved game developers and publishers?

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