JR: EA “dropped the ball,” but has best IP in the industry

Wednesday, 16 February 2011 00:21 GMT By Brenna Hillier

EA CEO John Riccitiello has said the firm has emerged from a transitional period with both the strongest core portfolio in the trade and increased digital focus.

“If you go back seven years, we were the leader,” the CEO said, giving a speech at the Goldman Sachs Technology and Internet Conference in San Francisco.

“And we dropped the ball. Our IP deteriorated, our costs went up, and we didn’t really have an answer for the rise of digital.”

Riccitiello said that prior to the “transition” of the “PlayStation 3 era,” EA had eight core intellectual properties, but a few years later, was left with only three.

“Need for Speed ended up flat on its back,” he offered as an example. “That annual sequel thing got to us.

“That was a very tough business run. We just didn’t have the portfolio.”

“We have the strongest intellectual property portfolio by far in the games industry today.”

But now the CEO feels the company has rebounded with several new properties – BioWare’s chief among them – and a resurgence in the core packaged game market.

“We have the strongest intellectual property portfolio by far in the games industry today,” he said.

“The core market for high definition gaming is a huge and fast-growing one.

“It’s a great business, it’s growing, and it’s where IP is created that spreads out onto other platforms,” he explained, citing FIFA, Need for Speed and Mass Effect as examples of titles with ex-console spin offs.

As well as resurrecting a flagging portfolio, EA’s decision to push for the digital dollar – as suggested by the company’s recent financials – is a key strategy.

Riccitiello mentioned a “dramatic” number of changes to the company based on the key phrase “transformation and turn around” based on “pure products”. The publisher’s return to a market-leading position was spear-headed by digital growth and reduced production costs.

Riccitiello on: EA Partners as a platform

“Our most important asset is turning ourselves into a platform,” Riccitiello said.
“Our technology base – all those users, all those registrations.”

EA’s Gun Club is an example of the publisher’s ability to connect directly with its userbase, becoming a destination in and of itself for gamers.

“In a way, we’re booming a media network ourselves,” the CEO explained. “We’re going to use that platform effectively not just for our own content but for the best of third party content.”

Going digital

“We’ve built the leading position,” Riccitiello said, referring to the company’s online, mobile and social gaming presence.

He compared the console scene – dominated by Activision, EA and platform holders – to the digital world, where “half a dozen companies, several players and… the riff-raff” all have a stake, but that for EA, digital is “the fastest growing part of our business, and we’re one of the fastest growing businesses in the industry today.”

Riccitiello said if you add up the man hours recorded in online gaming, the figures are staggering.

“But what’s surprising is that it’s starting to monetise.”

“People seem to like paying for games,” he added, comparing the booming games industry with other media struggling to survive the internet age, such as newspapers.

According to Riccitiello, micro-transactions are proving the most rapidly growing non-traditional revenue model – and nobody saw that coming.

“Play first pay later – that’s a very compelling model for today’s gamer,” he said.

Ricitiello answered a query on the “catalogue” question – the failure of games to continue monetising after sale, and the loss of earnings to the second-hand market.

“The alarm that went off for us two or three years ago is largely gone,” he said, after mentioning EA’s Online Pass system and continuing downloadable content as counter-tactics.

EA is now seeing “significant revenues post-release”, as games “stay in the tray longer”.

Riccitiello on: the cost of production

“For major titles, we’re – if not the – low cost producer, pretty well right there,” Ricitiello said of EA’s in-house development.

The company has a “religion of cost” designed to ensure games are profitable, but still meet and exceed industry standards of quality.

“I feel really good about what our teams have been able to do.”

Dead Space as core IP

When listing the publisher’s core properties, Riccitiello explicitly excluded Dead Space from the list.

“It will probably take Dead Space 3 to get into that 5 million core,” he said.

He did confirm the recently released Dead Space 2 is selling like hot cakes, though, after early reports of double first week sales on the original.

“Sell-in numbers can be a little misleading,” he mused, preferring to talk “sell-through” figures: Dead Space 2 has seen “100 percent growth” on its precursor in “a number of weeks”.

Motion controls

“Sell-in numbers can be a little misleading.”

Riccitiello was cagey on the subject of both Microsoft and Sony’s entries into the motion wars, describing Kinect and Move as quite literally “peripheral” to the core high definition gaming business.

“It’s horses for courses,” the CEO said, adding that adoption of either “new interface” would be very “genre-driven” and unlikely to encompass major sellers like shooters, RPGs and strategy games.

On the subject of EA’s own forays into the market with EA Sports Active: Kinect Ricitiello was disarmingly honest.

“We got clocked,” he admitted.

“EA Sports Active Kinect is one of the best experiences on Kinect; it’s a good experience,” he said, blaming the exercise title’s under performance on the bundled heart rate monitor.

“We learned there was no appetite in the holiday market for that premium price,” he mourned.

Riccitiello on: FPS

“It’s no secret: I want market leadership in first person shooters.”

EA had “established” the FPS market, but lost its lead during the transitional years.

The CEO blamed the dying off of the Medal of Honour franchise on sequelitis. Referring to the “annual franchise problem”, Riccitiello said sequelitis results in developers being unable to “take the time to re-engineer the underlying code,” and that this leads to consumer fatigue.

Going for World of Warcraft’s throat

“I was once a World of Warcraft player,” Riccitiello commented, adding that he had played most MMOs and had great respect for the market leader, but that EA is “going right at it” with Star Wars: The Old Republic.

“Bioware is probably the highest-rated average developer in the history of games and the history of RPGs – which is a pretty good foundation,” he said.

The CEO commented that “lots of products” have tried to emulate World of Warcraft’s “faux-British dark fantasy” feel without success, but The Old Republic repackages dark fantasy in a familiar sci-fi skin.

“We think that’s just enough innovation,” he explained, suggesting players swap swords for lightsabers and steeds for spaceships. “Lots of people want to live out that Star Wars universe,” he added.

Moreover, The Old Republic is “the first talkie” against Blizzard’s “silent movie”, referring to the MMO’s full voice acting.

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