Yesterday I noted that Electronic Arts joined the ranks of publishers across all industries trying to embrace the internet and decrease exposure to retail. Today EA addressed the timing of its announced layoffs and acquisition of PlayFish by emphasizing the point:
“It’s no coincidence that we simultaneously announced a cost reduction in connection with the acquisition of PlayFish, because that represents, in our mind, a very important shift to digital direct,” said EA SVP and CFO Eric Brown, speaking at the BMO Capital Markets 2009 Annual Digital Entertainment Conference in New York Thursday.
The parallels here between interactive and publishing (and other industries), even including emphasis on free-to-play and freemium models, are unmistakable:
Like other publishers, EA is becoming increasingly focused on downloadable games and extra content. Brown said that the download-only PlayStation 3 and Xbox 360 title Battlefield 1943 has sold 1.2 million units to date across both platforms. Half of those sales were in the game’s first week.
DLC trends at EA will continue to snowball. Dragon Age, a packaged and digital game developed by EA subsidiary BioWare, is selling “very well” and will receive regular DLC through the next “12 months-plus,” Brown said. Giving consumers the option to spend more than the $50 or $60 can be advantageous for game makers. “You can find extra demand customer by customer,” he said. And that goes for microtransactions too in free-to-play games.
And of course distribution plays a key part in this move (despite the soft-selling in the quote, which was probably added to keep partners and suppliers from freaking out):
“What you build sells through. There’s no physical good that has to be handled, printed, transported, et cetera, so you pick up this real efficiency gain in terms of the sales return allowance. So overall it’s slightly more beneficial to us as the publisher.”
You could map this to any content-driven industry:
For EA going forward, the four key principles of its business are to drive hits, expand digital services, “aggressively manage costs,” and continue focusing on the Nintendo Wii. But digital services — DLC, subscriptions, free-to-play, PC browser gaming, advertising — is clearly where EA sees its future.
“I think it’s important that everyone understands that the definition of the interactive sector needs to include online. It can’t be associated with the more limited definition of packaged goods through retail. Online is indeed a high-gross segment,” he said.
The internet is killing the retail content-distribution channel. Everything else is a variation on that truth. Whatever industry you are in, whatever content you create or sell, you are going to be affected by this truth.
— Mark Barrett