EA Re-Thinking How You Spend Your Gaming Money

Pirated copies of The Sims 3 temporarily rattled EA. Burnout Paradise DLC came too late. And Battleforge is now part of the hardest market in gaming. So said EA's CEO to Kotaku in a conversation about games and … money.

As the head of EA, John Riccitiello can talk games better than most CEOs, and he can talk finances better than most gamers. Given the myriad tactics EA has been employing to sell its games and keep its games from being stolen lately, I had to talk to him last week at E3 for an update about the economics of playing.

I started with the most dramatic price-change EA may have ever made on a video game, the drop of real-time-card-battle game Battleforge from full-priced PC game when it launched in April of this year down to free in late May, supported by for-pay microtransactions. I asked him how that was working out. "Revenue's up," Riccitiello said, before gathering himself for a more thorough answer.

"I feel like you're sort of asking me how the party's going, but the party starts at nine and it's 10 to nine," he said. "I don't have enough good data to give you a great answer. I would say that, as a packaged goods product competing with high-end PC games, it's a highly-polished experience that provides really good core-gamer-satisfying experience. As an intellectual property, it has an exceptionally narrow audience of people willing to pay $49 for that. … It was a product that, if this was a model shop, it's the group that builds ships in a bottle. It's a really small audience, and we found them. Not that many of them. As a free to play game, it's got 25x the production values of anything out there that's comparable."

EA's hope is that games like Battleforge, which got solid reviews can thrive with the support of microtransactions, gamer-purchases for items and add-ons. Riccitiello said that EA's free-plus-microtransaction games, which also include the Korean version of FIFA, have shown the ability to generate more money per user than they'd get from those users had they been full-priced games. Of course, not every user buys items in those free games. But those who do, spend lots.

Free-to-play games present an economic model for games that Riccitiello said EA can't miss, despite its challenges: "There's probably no harder platform to build and deploy for than free-to-play," he said, noting that there's far less structure for that market than there is for the full-priced console gaming. "You don't know what device [gamers are] going to play on and how they're going to want to participate. If you don't refresh the community, the pricing, the assets on a daily basis, they're going to get bored. It's a complicated process, but it's good. ... I think ultimately we can't get in the way of what the consumer wants, because the consumer wants different business models."

On the other side of things, EA has shifted from the pricing experiment of offering downloadable content for the early 2008 racing game Burnout Paradise from free to for-money. The game was launched in a January and, in April, July and Septemberhad, had free DLC consisting of new multiplayer modes and the ability to race motorcycles, among other things. The game's next major update, released 13 months after the game's launch, was the first one that EA charged for: a new Party Mode re-mix of the game,. Subsequent DLC packs, including a new island which was priced just this week, have been for pay.

Riccitiello says EA learned that that roll-out plan for Burnout's DLC was not ideal. Knowing what the company knows now, he said, "that heavy-duty downloadable content would have been available shortly after launch and would have bridged the original purchase of the game to downloadable content, some free, some pay from the outset. We essentially didn't do that. We went dark on the consumer and then came back, which is probably not the smartest way of keeping the community together. Going back to that party, we sort of turned the lights off and threw them out and then we started the punch bowl. Some of them came back. And then more of them came back and then a lot of them came back. People who pirated the game came back. I think this is an area where we're all really learning."

And speaking of pirates, no matter what EA charges for a game, there will be people who want to make EA's games free-to-play on their own terms. That's the nice way of saying what happened to The Sims 3 recently. "We got pirated three weeks before the game launched," Riccitiello said. "And we were really quite nervous about it. We had a lot of telemetry about what the pirates were doing because the launcher was in the version of the disc [that got out.]… There's a lot of Chinese and Polish among those consumers. We know what they're doing. And we finally concluded that we were very happy that almost a million people downloaded the Fight Night demo in the first couple of days we put it out. And in a weird sort of way, the behavior we're starting to see based on sell-through and registration [with the Sims 3] is that we really might have just put out a really good demo."

Riccitiello laughed at his own remark, because he doesn't quite mean it seriously. I pointed out that he might not want to hold his breath waiting for all those Sims 3 pirates to convert to paying customers. "I don't think they will, based on their geography," he said. The point he was making, he said, is that EA's concern over being pirated gave way to a new, more constructive thought: "We were like, 'I think they've demoed the game.' That's probably good. We probably should have posted it on our website."

What the Sims 3 pirates got — what all consumers of The Sims 3, in fact, are getting — is a game disc that doesn't include all the game's features. Only activating the game online gives players access to the game's second town and most of the community features vital to the franchise's vibrant community of content creators and sharers. That stuff, Riccitiello said, is the kind of approach he's happier to take than to load a game up with Digital Rights Management restrictions, as EA had done with Spore. "To quote [Valve founder] Gabe Newell badly, DRM won't work unless you add value."

What this all adds up to, according to Riccitiello, is an EA that is changing its fundamental nature and the manner with which its products connect to consumers. "I often described EA as a packaged goods company," he said. "In Fiscal 10 [EA's financial year, ending March 2010], we're still a packaged goods company that connects to a lot of online services and features. But it's still a packaged good at its core. I think while we'll have big packaged goods sales in Fiscal 11 and 12 — they'll be larger in this year and continue to grow — we're going to feel more like an online services company, with a disc as an enabler of service."

That, he said, is exactly what EA executed with The Sims 3. Get the game and watch it expand. In Riccitiello's terms — well actually one he got from his daughter, he said, — the game, once launched should feel connected and "alive."

That's where all this should lead, however we all pay for it.