Gaming Content - EA Shifts Strategy
EA finally goes multiple revenue mode with announcement of new spinoff of Battlefield series that is easier, downloaded from internet, last 15 minutes and adopts the cartoon motif that TF2 and others now use.
It was a matter of time and good to see as this opens up new platform content which before now was troublesome to use at best. |
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The Video Game May Be Free, but to Be a Winner Can Cost Money
By SETH SCHIESEL
Published: January 21, 2008
Ever since John Riccitiello took over last year as chief executive of Electronic Arts, the video game industry bellwether, he has promised to revitalize the company with new games and new ways of reaching consumers. Now, that may be happening.
John Riccitiello has said E.A. would try new approaches.
In a major departure from its traditional business model, E.A. plans to announce Monday that it is developing a new installment in its hit Battlefield series that will be distributed on the Internet as a free download. Rather than being sold at retail, the game is meant to generate revenue through advertising and small in-game transactions that allow players to spend a few dollars on new outfits, weapons and other virtual gear.
At a conference in Munich, the company intends to announce that the new game, Battlefield Heroes, will be released for PC this summer. More broadly, E.A. hopes the game can help point the way for Western game publishers looking to diversify beyond appealing to hard-core players with games that can cost $60 or more.
E.A.’s most recent experiment with free online games began two years ago in South Korea, the world’s most fervent gaming culture. In 2006, the company introduced a free version of its FIFA soccer game there, and Gerhard Florin, E.A.’s executive vice president for publishing in the Americas and Europe, said it has signed up more than five million Korean users and generates more than $1 million in monthly in-game sales.
Players can pay not only for decorative items like shoes and jerseys but also for boosts in their players’ speed, agility and accuracy. Mr. Florin said that while most users do not buy anything, a sizable minority ends up spending $15 to $20 a month.
With Battlefield Heroes, E.A. hopes to bring that basic system of “microtransactions” to Western players, along with increased advertising. Mr. Florin said the licensing agreements around the soccer game prevent E.A. from inserting in-game advertisements from companies that are not already sponsors of FIFA, the international soccer federation. By contrast, E.A. already owns the Battlefield franchise and will be free to insert whatever advertising it wants.
The game industry is booming worldwide, largely on the strength of two trends: a demographic expansion of the gaming population beyond the traditional young male audience and the rising popularity of online play.
Electronic Arts, once the industry leviathan, has not taken full advantage of those shifts. Meanwhile, one of E.A.’s main competitors, Activision, is riding high on the strength of the mass-market Guitar Hero series and has agreed to merge with Vivendi’s games division, which makes the world’s most popular online game, World of Warcraft.
With Battlefield Heroes, E.A. is trying to capitalize on both trends at once. Not only will Heroes be distributed online, but also it is meant to provide a simpler, more accessible entertainment experience than the relatively complex earlier Battlefield games. The combat-oriented series has sold about 10 million copies since the 2002 debut of the franchise’s first game, Battlefield 1942.
“The existing Battlefield games are fairly deep; you have to be pretty good or you’ll die pretty quick,” Mr. Florin said Friday in a telephone interview from Geneva. “Now we’ve toned down the difficulty, shortened each game session to 10 or 15 minutes and made the visual style more cartoony.”
Strategically, Mr. Florin said the game was a step toward figuring out how to generate multiple revenue streams from a single intellectual property, a maneuver Hollywood has mastered.
“I’ve always envied the movie industry when they put a film out in the cinema, then they go to retail with a different business model and then to pay television and then free TV,” he said. “They have the same content reaching different audiences with different models, and we could never figure out a way to do that. Now with higher broadband penetration, we can use the technology to reach a broader audience.”
Not to mention the fact that popular games distributed online can be more profitable than games sold at retail, a prime driver of the Activision-Vivendi deal. Across China and South Korea, where online games dominate the market, game companies are generating profits far beyond their Western counterparts’ returns.
“The Activision-Vivendi deal changes the landscape for how investors will look at game companies, and that puts pressure on everyone else,” Ben Schachter, an Internet and game company analyst at UBS Securities, said Friday.
“Before it was a battle for a few operating margin points here and there,” Mr. Schachter said, “but when you look at the Asian companies like Shanda or something like World of Warcraft, you talking about a 40 percent operating margin business, which is just in a different league from the U.S. companies. So the U.S. publishers like E.A. have to be looking at those models with envious eyes, and those companies will have to experiment.”
Mr. Florin declined to name names but did say that if Battlefield Heroes is a success, E.A. would soon look to create free downloadable versions of some its other marquee games as well.
Perhaps the prime candidate would be the company’s flagship Madden series, for which sales have slowed. Traditional versions of Madden are extremely complicated, but a simplified downloadable version would be expected to appeal to millions of more casual players.
Posted by staff at January 21, 2008 11:08 AM