EA 'leaning heavily' into big franchises with record R&D spending

Electronic Arts spent more on research and development in FY2021 than it ever has before, big spending will continue in FY2022.

Published Wed, May 12 2021 1:31 PM CDT   |   Updated Wed, Jun 9 2021 10:47 AM CDT

Electronic Arts plans to spend big on research and development as it "leans heavily" into its biggest mega-budget franchises.

EA 'leaning heavily' into big franchises with record R&D spending 19 | TweakTown.com

EA is gearing up for a huge FY2022 with guidance of $7.3 billion net bookings and an all-time high of $6.8 billion in revenues. A slew of live service-powered digital games will spark this growth, including a myriad of annualized EA Sports titles like FIFA, Madde, NHL, and the new PGA Tour, as well as heavy-hitting billion-dollar shooters like Apex Legends and Battlefield.

These new games will also be cross-gen releases that launch on both PS4/Xbox One as well as next-gen PS5 and Series X platforms for maximum exposure, availability, and monetization potential. This acceleration is made possible by higher R&D spending from EA, which reached its highest point in history in FY2021.

EA 'leaning heavily' into big franchises with record R&D spending 21 | TweakTown.com

EA's R&D spending is proportional to its net revenues for the period; the more revenue it makes, the more it spends on R&D. FY2021 was a record period for revenues so it was also a record year for R&D spending.

According to EA's financials, the company spent a total of $1.7 billion on R&D, which includes significant optimizations in its internal Frostbite engine technologies as well as sever infrastructures and other experimental tech as part of its SeeD division (machine learning, AI, etc.).

Typically EA spends about 25% of its total-year revenues on R&D. The more EA makes, the more it spends on R&D. In FY2021, however, EA spent 33% of its total-year revenue values on R&D, the highest ratio of spend-to-revenue in the last 10 years.

EA 'leaning heavily' into big franchises with record R&D spending 20 | TweakTown.com

EA's R&D spend vs revenue ratio on a quarter-by-quarter basis. Q4'21 had the highest quarterly R&D spend in history and a 46% ratio.

EA also spent nearly half (46%) of Q4'21's revenues on R&D (roughly $468 million).

Remember that R&D isn't just for heavy-hitting premium releases. EA is embracing a huge new three-part plan that puts emphasis on mainline games, mobile ports, and new engagement/business models. This R&D spend is used across all facets of its business.

FY2022 is expected to deliver record $6.8 billion net revenues and we should expect this year's R&D spend to likewise increase to record highs.

More on EA's FY2021 earnings call:

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Derek joined the TweakTown team in 2015 and has since reviewed and played 1000s of hours of new games. Derek is absorbed with the intersection of technology and gaming, and is always looking forward to new advancements. With over six years in games journalism under his belt, Derek aims to further engage the gaming sector while taking a peek under the tech that powers it. He hopes to one day explore the stars in No Man's Sky with the magic of VR.

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