Commentary

EA: A Market Trend?

by Josh Lovison , August 7, 2009

Electronic Arts is shaking things up and leading by example. The video game company seems to be evolving a new approach to game publishing, one that promises a cross-platform distribution model fortified against piracy.

The game worth looking at closely for following this trend is "The Sims 3." The title launched but a few months ago, and has now seen over 3.7 million copies sold, outstripping the previous bestseller "The Sims 2." What's interesting about these sales is that they follow a torrent (pun intended) of pirated downloads from a leaked version of the game prior to release. Rather than lamenting the piracy, EA execs suggested that internally, they shifted the viewpoint to seeing the leaked version as an "extended demo." The reason behind this was the sheer volume of additional content exclusive to registered users that didn't ship on the retail disk.

EA has instead approached the Sims franchise as a content portal to additional downloads, some of which were free, and others for pay. They are now adding this same model to the iPhone version of "The Sims 3," making use of in-app commerce enabled by the iPhone 3.0 software release. This brings up the other facet of EA's burgeoning model that's extremely compelling: cross distribution.

Of the mainstream gaming companies, EA has the strongest presence in the iPhone AppStore. Their higher profile casual games in the past year ("Spore" and "The Sims 3" respectively) have both seen iPhone versions released. EA's mobile division has seen a 14% increase in Q1 revenue, despite the down economy, and a 20 percent decrease year over year for the company as a whole.

Is this a one-off success story, or indicative of a larger trend? My guess is the latter. Micro-transactions have been seeing many successes, from Sony's PlayStation Home to "The Sims." Cross-platform distribution had been driving the success of some of the social, casual game publishers like Zynga and Playfish, many of whom link the various game versions into a singular experience using Facebook Connect.

What will be really interesting will be the marketing opportunities this new model will create. If games are increasingly becoming content portals in and of themselves, this opens up the potential for contextual advertising, sponsored content, or branded content within the space. By the very nature of an integrated content marketplace, "house ads" will exist in droves, announcing new items or discounts. So the user experience baseline will already be open to ads, based on the marketplace framework.

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4 comments about "EA: A Market Trend?".

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MONIROM S., August 7, 2009 at 2:35 p.m.
Insightful commentary from a company who seems to have read Chris Anderson's "FREE: The Future of a Radical Price"
In this book large portions of a chapter were devoted to the specific benefits of piracy — in reaching an audience not inclined to purchase software legally due to interest or economic status. By including the fringe, if the product is stellar and addictive, it becomes a "must buy" for that individual if/when he/she can afford it.
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David Thurman from Aussie Rescue of Illinois, August 10, 2009 at 8:26 a.m.

Let's see, iPhones are what 14-16% of the phone market? What about the other 80+%? Doesn't sound like a smart business plan to me.

Josh Lovison from Josh Lovison Consulting, August 10, 2009 at 8:07 p.m.

David,

It's considerably less than 14% of the phone market. Try 1% of the global market (over 4 billion mobile subscribers). I'd estimate it's around 7% of the domestic market when the iPod Touch is included.

But in terms of gaming systems - at over 45 million units, that's just 7 million shy of the total number of Wiis worldwide, with one less year on the market.

It's all a matter of perspective.

Aatish Salvi from QuickHit Inc., August 11, 2009 at 8:47 p.m.

Nice article.

As a developer of online, free-to-play sports games, it’s probably not surprising that I think physical game boxes are doomed. For one - they can't be virally distributed unless you want to sell each one with a stack of stamped envelopes. For another - online games that require connecting to a server to play are piracy-proof. Users simply can’t play unless they have a valid account. So if pirates want to steal and re-distribute my client? I’m all for it. It'll save me the bandwidth cost of getting it to my user.

In terms of cross-distribution, it comes with a caveat. If you have a multi-player game on the iPhone with users simultaneously relaying messages back and forth, it’s not the game publisher who has to deal with the exchange of all that data – it’s cell phone companies. The carriers get annoyed about bearing the bandwidth cost of all that communication. They usually solve this problem by just dropping your connection every few minutes if you’re overusing. Building a strategy football game with a turn-based play style is one way we chose to avoid that problem.

Like Josh, I’m a huge fan of the notion of monetizing games through integrated advertising. We’ve found that using this model we can create a high-quality product that’s free-to-play. I’ll admit that making a sports game makes this a lot easier. Can’t imagine trying to find a place to integrate a “major fast food chain” into a world about dragons and elves.