I am an EA shareholder, and I am ready to sell my shares. I’m afraid for my investment, even though my portfolio is diversified, because the run-up on EA stock over the past three years is nearly over. Analysts are predicting a crash during the next-generation of console gaming; I don’t agree, but I do see a transformation of the console landscape for software publishing. Unfortunately, EA is the largest mountain on this landscape, and they are so bloated right now they won’t be able to move out of the way in time.

Almost every EA title has underperformed, both critically and financially, in the past twelve months. Title after title, whether it is a new license, movie tie-in, or sports iteration, has lasted about as long as it takes to read the review that pans it. The only exceptions have been its Madden franchise, since it’s basically a monopoly; and ironically two PC titles, Battlefront 2 and The Sims. Where it could have excelled – in new consoles like the Xbox 360, PSP and DS – the titles have been exceptionally poor and, more importantly, left an indelible mark with consumers. The much-lauded association with Marvel produced the coaster Marvel: Rise of the Imperfects, failed on every console it was launched.

I’m sure the argument many people may have with me is that EA is consistently the top publisher, and had been throughout 2005. True, if you look at any given week at the NPD sales charts, there’s not one week where an EA title isn’t in the top five, either for PC or console. What is alarming is the consistent amount of “misses” the company has been releasing, as well as the sharp decline of sales for individual games after their initial release.

Expensive and exclusive licenses are receiving sub-par releases, and sooner or later this will catch up with EA the way it did with Acclaim. Consumers will see the next Harry Potter title and dismiss it because it is released on the name of the license rather than the quality of the game. Harry Potter is an obvious example, but what about Madden? Without competition, and yearly releases which what amounts to nothing but a roster update, it could follow the same fate.

Games are particularly difficult to develop on new consoles, but regardless consumers expect quality from an EA title. Developers are having trouble grasping the PSP and load times and framerate issues have marred a somewhat valid attempt at first generation software. It is somewhat easier to develop for the Xbox 360, although high definition requirements bring their own difficulties to the development life cycle. Nonetheless, EA released an entire suite of scaled-down titles that, gameplay-wise, are inferior to their last-generation sibling, albeit at a price point that is ten dollars more. Burning consumers like this does not make good business practices.

But what is probably most important is that the future looks bleak for EA. Aside from Black, there isn’t a high-profile IP in the queue. How long will the company rule the roost with the next James Bond, Lord of the Rings, or Tiger Woods title? This is where I see the restructure to occur. As EA becomes too big to change its business strategies, other publishers will form alliance with smaller developers to produce more diversified titles and, more importantly, IPs for the next generation of gaming. EA has realized this by expressing interest in Ubisoft, and in their hostile takeover of Battlefield developer Dice, but it will be too little too late. Also, developers are already leaning away from using RenderWare, replacing it with the Unreal Engine as the middleware of choice for the next generation. This means aside from the Burnout series and potentially Black, their investment of Criterion won’t be justified.

It will be a slow, painful change at the top for EA. They certainly have enough cash to cruise on autopilot for the next year or so, but as the next generation of consoles emerge, you can mark my words there will be a new number-one publisher. Until then, I’ll be waiting in the wings with my investment money.