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Why goodwill matters


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daigakuinsei

daigakuinsei
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Just thumbed through EA's annual SEC filings.

EA paid roughly $680 million for the holding company that owned BioWare.  Of that purchase price, roughly $400 million was in "goodwill."  This is basically the store of value that you can't capture from physical assets (IP, consumer loyalty, etc).  

Because of the way EA must calculate goodwill, a serious hit to consumer loyalty could have bigger impacts on EA financial statements than just bad sales.

Moreover, EA recognizes this in their "Risk Factors" section.  They are also moving to developing fewer titles but with more sales, which means they may be more willing to "fix" a big-money game because more is riding on long-term commercial success and continued consumer goodwill.