If there is any market more confusing than enterprise software, it's the world of video games. Enterprise vendors are constantly trying to reinvent themselves to support new technologies to maintain their market positions and large game companies like EA are trying to evolve with the way consumers play games. And being the 800-pound gorilla in the space means that the company has a better chance than most in weathering a storm.
Accordingly, it appears that EA has begun to sound the death knell of game consoles, highlighting PC games and digital distribution as recent high-growth areas. Of course, this doesn't negate the fact the majority of revenue comes from console games, but instead attempts to cast EA as a market visionary.
Speaking during the EA's quarterly and annual earnings call, CFO Eric Brown said that the company's digital game distribution revenue has almost doubled year-over-year to $80 million. Digital direct revenue as a whole also grew to $400 million during the year ended March 31.
"This is a big year for us...In terms of distribution, the way we look at a lot what's happening in the future is, we've got probably a billion PCs out there in the world," he said, according to ShackNews. "Very rapidly the PC is becoming the largest gaming platform in the world, just not in a packaged-good product."
"As you look at what that means in terms of distribution of product, we think that's incredibly exciting because it's going to open the market to new demographics, new countries and new types of game play."
A few months back EA partnered with Valve for the distribution and management of select titles--a good strategy, but one that makes me wonder if EA has missed the boat entirely on being the giant of digital distribution. Considering it owns such valuable content, one would expect the company to be more aggressive in the space.
Company CEO John Riccitiello also said that EA plans to introduce two additional "online subscription services" later in the current fiscal year but didn't provide an explanation as to what games or services would be involved.
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As someone who got back into games heavily this year (to the point of where I had to cut myself off) I would say that the biggest gaming "issue" was DRM and the Spore debacle. As far as big changes to the whole landscape, I would say the Wii Fit is a monumental genre-changer.
My favorites from the list (20 is a lot):
3. You Don't Want DRM - You Want Services
2. Casual MMOs? For Kids!
5. The Inevitable User-Created Content Entry
9. Free To Play, Pay For Items
18. Games & Social Connectivity, Duh
Recession aside, gaming continues to be a bellwether technology segment and has been largely successful this year. I suspect next year will be a bit rockier for many studios as large public companies like EA and TakeTwo start to feel serious investor pressure which likely dry up M&A activities. Smaller studios will have a harder time getting funding and casual games will continue to proliferate but not be well-monetized.
Casual games (for the sake of argument, let's consider them Flash-based) have seen a rise in popularity but revenue has been disappointing due to the reliance on advertising, an area that only looks to be getting worse. Conversely, free-to-play games where you pay for add-ons have been growing with virtual goods becoming an integral part of the gaming ecosystem. My bet is for this trend to continue in 2009 and we'll start to see a backlash toward goods.
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Don't forget you can follow me on Twitter @daveofdoom or listen to me on the Open Sources podcast series.
I am sure that EA CEO didn't mean to sound this callous in a recent Q&A, but someone should remind him that everything he says will likely end-up somewhere online. The Spore launch was seriously broken and took away a great deal of customer goodwill.
Case in point, some comments from the Dow Jones/Nielsen Media and Money Conference (originally reported at PaidContent.org)
Riccitiello said he felt the controversy was blown out of proportion, but he does acknowledge the inconvenience to users that DRM creates. "We're still working out the kinks. We implemented a form of DRM and it's something that 99.8 percent of users wouldn't notice. But for the other .2 percent, it became an issue and a number of them launched a cabal online to protest against it. I personally don't like DRM. It interrupts the user experience. We would like to get around that. But there is this problem called piracy out there."
What he should have said was "we didn't do a great job at the launch, but thanks to feedback from our users we made the correction and now we're all moving forward."
And if he really doesn't like DRM then they should figure out another way to solve the piracy problem. A community/enterprise version approach akin to open source might be one way to get things started.
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