John Riccitiello, the CEO of Electronic Arts, is up on stage and I'm a bit late as the previous presentation ran long. I'm gonna jump right into it.
12:25 PM - EA will be announcing more details later today with American McGee and a
new IP new game in the Alice universe? We'll bring you more later.
On sequels, "great new games can also come" from sequels. John believes that sequels can be just as innovative as new IP's. Wait, EA was the company that launched tons of new IP's last year. Did I stumble into an Activision presentation?
What goes into titles like FIFA and Madden every year aren't just roster updates. He believes sports games can be just as innovative as well.
Conclusion: sequels are good. Analysis: the economy could send EA back to the sequel shop. He feels that companies should decide what's important, invest in that, cut the rest.
The presentation itself was short, but now he's turning it over to Q&A.
Q: Is the American McGee game another Alice game?
A: Yes. It'll be for PC & Console. Official announcement later today.
Q: Could you talk about some of the missteps in 2008 for EA?
A: Some of the new IP's didn't take off. When you miss, it's easy to point to broader economic issues, but not take a look internally. They noticed a lot of issues internal to EA, especially with how they brought new IP's to market. Secondly, the company was too big in several places. They chose to make pretty hard calls to bring costs down and revamp how they bring titles to market.
Q: What are your comments on the difference between PC and console gaming?
A: What is most interesting, when looking at NPD numbers, is that PC gaming is on a decline. PC business is a growth business, but it doesn't show up at retail. This is how Blizzard makes money with World of WarCraft. It's a small portion that shows up at retail, but the majority is subscription. New models like micro-transactions and subscriptions make this possible. John's judgment is that the PC market is actually growing faster than the console market, but in a different way.
He's also seeing convergence between different types of platforms. EA has mobile applications that enhance the experience in the full game. They are feeling more connected than ever before and this is coming across to consumers. John look forward to when Nintendo, Sony, and Microsoft open up their software backends so that developers and publishers can start direct relationships with consumers. Shout out to Gabe Newell!
Q: How are you going to experiment with new business models, but lower costs?
A: It didn't help that we invested in a tough year, but the strategy holds. We're still going to invest in smart sequels and take a look at new IP's that delight us and our consumers. They also believe in gaming as a service and direct consumer models. They put the smart projects at the top and made cuts below that line. It was tough to make cuts, but John believes they've gotten through them.
Q: What will it take for a new IP to elevate itself to the next level?
A: Successful franchises were, at some point, a new IP. What is true about almost all of them is that they started small. Call of Duty started small. Grand Theft Auto started different and much smaller. It's so easy to put a property out there, forget it, and drive it into Oblivion (another good franchise). Keep the teams together and continue to invest. They had good success with Dead Space and Spore that can be built into properties. Things like Mirror's Edge resonated with people's imaginations, but didn't perform well at market. They can learn from that and make it better. Other unnamed properties aren't worth bringing back. They can learn from what worked and keep it. See what didn't and lose it.
Q: Do you see EA investing in other regions in the world?
A: You've probably seen jobs leak to places like India and China. It's a painful reality, but it's tough to compete with paying someone elsewhere for 10% of the cost. The government is telling companies to keep jobs in the US, but without those low-cost jobs internationally, the games wouldn't even be made. It's more like: 'hire 100 people in China to be able to hire 30 people in America.'
We're looking for the best talent in the world and want to work with all of them, but games take so long to make and cost so much to make, low-cost economies can help bring entire costs down and keep jobs in other areas.
Q: Can you share some insights on future technology to focus on in the next 12-24 months?
A: That's a big question. As a starting point, companies like EA are increasingly becoming virtual. They are far more open to partnering with technology providers. Games have gotten so complex and expensive that it helps to get help from other providers.
To pick a couple of technologies, looking at the iPhone and iTouch, that could be the beginning of where a lot of portable gaming is going. This technology approach challenges the industry the same way that digital downloads affected the music industry. Now, EA is seeing that they have to learn how to make content for that platform for much lower costs than tradtional mobile games.
For consoles, online gameplay is up over 400% on some of EA's console titles. There are a whole set of skills that aren't in high supply in the industry. With gaming as a service, skills that bring that experience direct to consumers will be helpful.
It's also important for third-party developers to be able to interface with a larger production or development. It helps when a third-party technology provider can deliver something that works out of the box with the larger product.
Q: Even though the industry is continuing to grow, why are we seeing so many layoffs?
A: The industry is growing, but the only thing going faster than the revenue is the cost. The industry got bloated and needed cuts. It's also gotten to be more complex. Looking at EA 5 or 7 years ago, they were a company that made multi-million console games. They brought those same skills into a world where the consoles are so very different. EA used to think that PC gaming was only for the hardcore, but now some of the most innovative titles are being built in Flash for casual gamers.
The industry has to reorganize to fit the 2009 market. It was built for the 1999 market. In 2008, the industry was a square peg in a round hole. They had to shave the edges off.
"The economic crisis is a blessing for the gaming industry." A lot of riff raff is going to go bankrupt. The top companies will no longer have to compete with junk. The industry got too fat. I think the audience is going to rush the stage. This is a room full of game developers.
The audience is expanding with the gaming industry, unlike music or movies. "Never waste a crisis." John doesn't like recession, but he sees it as a way to trim the fat off of the industry.
That's it for the Q&A and John's presentation. Lunch time!