Electronic Arts Staying Mobile

Investors in Electronic Arts have had little to be enthusiastic about lately.

Sales and earnings at the video-game software giant have slipped amid a rough transition to new game technology. Meanwhile, the company has delayed a number of key titles and drawn mediocre reviews on others.

But EA did give shareholders and analysts something to cheer last year when it decided to acquire mobile-game publisher Jamdat -- a move that instantly catapulted EA into the leading position in a fast-growing business.

Of course, not everyone was happy with the deal. EA spent about $680 million to buy the company, paying a nearly 20% premium over the company's former market price to do so. And EA announced earlier this month that it plans to invest hundreds of millions of dollars more to develop the wireless business. The announcement, which investors seemed to frown on, came even as some rivals, notably THQ(THQI Quote), reported that their wireless businesses were slowing down.

At the recent E3 video-game convention last week, I met with Mitch Lasky, the former CEO of Jamdat, who is now the senior vice president in charge of EA's mobile-games division.

TheStreet.com: How much money can be made in the wireless-games business?

Mitch Lasky: You're selling these [games] for less than $5, typically. I think that the average is probably less than $3. ... With prices that low, it takes you a while to recoup your investment, because to deploy broadly ... can cost hundreds of thousands of dollars, and trending toward the high end of the hundreds of thousands of dollars. The thing is, once you earn out, it's an awesome business.

Part of the reason Jamdat was so profitable as a stand-alone company was the presence of things like bowling and Tetris, which had covered their development costs so long ago, there was almost no incremental cost to distribute them. They were being electronically distributed. The incremental bandwidth cost to transfer it from our servers through to the networks was fractions of a cent. ... It was almost all profit at that point. So, it can be an amazing business at scale.