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Electronic Arts, Take-Two Report Weaker Results for Latest Quarter

Companies in the video game sector have reported sluggish sales in recent weeks with some positive news in the digital area.

Earnings reports from video game publishing giants Electronic Arts and Take-Two Interactive Software on Tuesday suggest that video game industry trends remain sluggish. Both companies reported losses in the latest quarter.

EA reported a loss of $130 million for its fiscal first quarter, worse than the $123 million loss from the year-ago period. But when using generally accepted accounting principles, it posted earnings of $201 million, down from $221 million. The company also reported $491 million in revenue, down from $521 million a year ago for the same quarter. The reported loss was better than analysts had been expecting, but the revenue was slightly worse.

The company is said to be suffering from sluggish revenue in its packaged goods segment and declining subscriptions for Star Wars: The Old Republic.

However, the company presented promising news on the digital front, reporting $342 million in digital revenue, representing a 64 percent boost in downloadable content, social gaming, and other online fare. EA, which just appointed Blake Jorgensen as its new CFO, has had a sagging stock price, down about 50 percent in the past year. 

"We continue to make progress in our goal of becoming the leading digital entertainment company," said Frank Gibeau, president of EA Labels. "Approximately two-thirds of our non-GAAP net revenue in the first fiscal quarter was in digital."

As for Take-Two, analysts were girding themselves for bad news.

The company reported a loss of $110.8 million, compared with a loss of $8.7 million from a year ago. As for revenue, Take-Two said in its fiscal first quarter it took in $226.1 million, a decrease from $334.4 million in revenue a year ago.

"Although our first quarter results were below expectations due to lower-than-anticipated sales of Spec Ops: The Line and Max Payne 3, the outlook for our slate of upcoming releases is stronger than ever,” said Strauss Zelnick, chairman and CEO of Take-Two, highlighting Borderlands 2, NBA 2K12 and BioShock Infinite as titles with strong expectations.

Overall, the video game market has been sluggish in recent months. NPD Group reports that U.S. retail sales of video game software fell 29 percent in June to $700 million from a year earlier, the seventh consecutive month of declines. The hardware market is also suffering. Both Microsoft's Xbox and Nintendo's Wii consoles shipped fewer units in the previous three months, according to the companies' most recent earnings reports.

The market could be experiencing a big shift from console games and software towards digital gaming. Take-Two reported a 33 percent increase in digitally delivered content.