The Video Game May Be Free, but to
Be a Winner Can Cost Money
Ever since John Riccitiello took over last year as chief executive
of Electronic Arts, the video game industry bellwether, he has
promised to revitalize the company with new games and new ways of
reaching consumers. Now, that may be happening.
In a major departure from its traditional business model, E.A.
plans to announce Monday that it is developing a new installment in
its hit Battlefield series that will be distributed on the Internet
as a free download. Rather than being sold at retail, the game is
meant to generate revenue through advertising and small in-game
transactions that allow players to spend a few dollars on new
outfits, weapons and other virtual gear.
At a conference in Munich, the company intends to announce that the
new game, Battlefield Heroes, will be released for PC this summer.
More broadly, E.A. hopes the game can help point the way for
Western game publishers looking to diversify beyond appealing to
hard-core players with games that can cost $60 or more.
E.A.s most recent experiment with free online games began two
years ago in South Korea, the worlds most fervent gaming culture.
In 2006, the company introduced a free version of its FIFA soccer
game there, and Gerhard Florin, E.A.s executive vice president for
publishing in the Americas and Europe, said it has signed up more
than five million Korean users and generates more than $1 million
in monthly in-game sales.
Players can pay not only for decorative items like shoes and
jerseys but also for boosts in their players speed, agility and
accuracy. Mr. Florin said that while most users do not buy
anything, a sizable minority ends up spending $15 to $20 a
month.
With Battlefield Heroes, E.A. hopes to bring that basic system of
microtransactions to Western players, along with increased
advertising. Mr. Florin said the licensing agreements around the
soccer game prevent E.A. from inserting in-game advertisements from
companies that are not already sponsors of FIFA, the international
soccer federation. By contrast, E.A. already owns the Battlefield
franchise and will be free to insert whatever advertising it
wants.
The game industry is booming worldwide, largely on the strength of
two trends: a demographic expansion of the gaming population beyond
the traditional young male audience and the rising popularity of
online play.
Electronic Arts, once the industry leviathan, has not taken full
advantage of those shifts. Meanwhile, one of E.A.s main
competitors, Activision, is riding high on the strength of the
mass-market Guitar Hero series and has agreed to merge with
Vivendis games division, which makes the worlds most popular
online game, World of Warcraft.
With Battlefield Heroes, E.A. is trying to capitalize on both
trends at once. Not only will Heroes be distributed online, but
also it is meant to provide a simpler, more accessible
entertainment experience than the relatively complex earlier
Battlefield games. The combat-oriented series has sold about 10
million copies since the 2002 debut of the franchises first game,
Battlefield 1942.
The existing Battlefield games are fairly deep; you have to be
pretty good or youll die pretty quick, Mr. Florin said Friday in
a telephone interview from Geneva. Now weve toned down the
difficulty, shortened each game session to 10 or 15 minutes and
made the visual style more cartoony.
Strategically, Mr. Florin said the game was a step toward figuring
out how to generate multiple revenue streams from a single
intellectual property, a maneuver Hollywood has mastered.
Ive always envied the movie industry when they put a film out in
the cinema, then they go to retail with a different business model
and then to pay television and then free TV, he said. They have
the same content reaching different audiences with different
models, and we could never figure out a way to do that. Now with
higher broadband penetration, we can use the technology to reach a
broader audience.
Not to mention the fact that popular games distributed online can
be more profitable than games sold at retail, a prime driver of the
Activision-Vivendi deal. Across China and South Korea, where online
games dominate the market, game companies are generating profits
far beyond their Western counterparts returns.
The Activision-Vivendi deal changes the landscape for how
investors will look at game companies, and that puts pressure on
everyone else, Ben Schachter, an Internet and game company analyst
at UBS Securities, said Friday.
Before it was a battle for a few operating margin points here and
there, Mr. Schachter said, but when you look at the Asian
companies like Shanda or something like World of Warcraft, you
talking about a 40 percent operating margin business, which is just
in a different league from the U.S. companies. So the U.S.
publishers like E.A. have to be looking at those models with
envious eyes, and those companies will have to experiment.
Mr. Florin declined to name names but did say that if Battlefield
Heroes is a success, E.A. would soon look to create free
downloadable versions of some its other marquee games as
well.
Perhaps the prime candidate would be the companys flagship Madden
series, for which sales have slowed. Traditional versions of Madden
are extremely complicated, but a simplified downloadable version
would be expected to appeal to millions of more casual
players.
Source: http://www.nytimes.com/2008/01/21/technology/21game.html]
Official website: http://www.battlefield-heroes.com/