EA President Frank Gibeau Speaks at USC: The New Game at EA

On November 8, 2011, Frank Gibeau, President of EA Worldwide Studios, spoke to a sizable crowd of USC students at the School of Cinematic Arts where he provided a lot of great observations and insights about where video games are heading in the next few years. The key point that I got out of the talk is that games are drifting away from content delivery on one platform to a more integrated approach on multiple platforms so that gamers can constantly engage with the product anywhere, anytime and turn that into a key strategic advantage.

What’s going on in the video games industry.

The first portion of his talk focused on the direction of the game industry. Frank Gibeau noted that before, it was all about consoles, but in the last five years, the world has seen new platforms emerge, from smartphones, to browsers, to tablets, to social platforms like Facebook. With new platforms come new challenges, but also vast opportunities. So while analysts are noting how the growth of consoles are slowing down, when video game growth is measured outside the console myopia, the industry is experiencing double-digit growth. People are getting into games more, new demographics, like the elderly and women, are emerging, and the scope of the market is expanding.

These changes are illustrated nicely on a slide that Frank Gibeau showed us. Before the emergence of new platforms came about, game companies focused solely on consoles, which meant catering to a 200M market. But when you move to smartphones, the number jumps to 400M. Social networks raise it to 1.2B and when you factor PC/Internet users, the number becomes 1.5B potential users, which represents a huge opportunity that can be tapped into. Video game companies haven’t exploited the full potential of these new platforms and that’s something that’ll be interesting to see unfold in the next couple of years.

Gibeau then turned to EA’s release of The Sims Social, which has become the fastest growing Facebook game with 10M users every day. Comparatively speaking, there are more people playing The Sims Social than there are people reading traditional newspapers like the New York Times and LA Times combined. With this success, Gibeau sees that social platforms have the capability to create experiences that are unique and market-breaking, presenting new areas for game companies to explore and grow into.

But the more important idea he discussed was the growth of expanding beyond traditional gaming systems and models which he illustrated using EA’s Need for Speed franchise. EA’s analytics showed that hardcore gamers are playing everything, anywhere. To adapt, gaming studios need to expand the breadth of their IP to capture all the types of games a potential gamer would be interested in. Before, the teams were siloed and weren’t trying to be lateral. So EA Sports would not try to expand, Maxis would be doing its own thing, and Bioware would work on their own projects. This model will have to change and different game genres have to be added on to an existing IP in such a way that it gets aligned into a vision so game companies can take advantage of opportunities.

Companies that can adapt to this will succeed, and EA looks to take the lead. Currently, its competition is also siloed to certain platforms. EA is the only company with a strong presence in consoles, social networks, PC clients, and mobile.

With so many platforms to integrate means creating a new content model that will give customers what they’re asking for. One idea is to build prototypes that offer gamers a persistent experience while allowing EA to track their users so that EA can provide them with the best experience possible. The example Gibeau gave us was the ability to take a FIFA game from the console, play a mobile version that still keeps track of your stats and teams, and maybe even engage in a fantasy soccer league game on a browser. This is just the tip of the iceberg of possibilities. The trick would be to figure how all the various components of an IP will work together on such disparate platforms.

In sum, EA’s mantra can be best expressed through the line:

“We create worlds that our customers can play in anytime, anywhere, and any device.”

At this point, Frank Gibeau talked about EA’s dozen global brands which give EA strength since it encompasses so many competencies, from sports games to action games to simulation games, but he tied it back to the overall goal of audience interactivity and experience by removing barriers to customer spend. Distribution models like retail, downloadable content, and microtransactions give gamers a great deal of latitude to love the game and chase the hobby as much as they could possibly want. Before, gamers would purchase a game, and the transaction would end there. With the advent of downloadable content and microtransactions, customers are not limited by a spending cap, allowing companies like EA access to more revenue.

These changes alter the metrics that EA looks at when it measures how successful games are. Games are now measured by how quickly they can acquire customers, how engaged gamers are, and the avenues it can take in monetization. The tool they’ve been using towards that end is Autolog, which has been used with Need for Speed as a social platform for gamers to share their experiences with friends, track their gaming history, and be informed of updates. EA’s Need for Speed World, also on Autolog, opened up new markets, especially in Brazil, Russia, India, and China and will give EA more information to work with so that they can figure out how to approach further monetization.

After all, microtransactions and downloadable content have become lucrative. In looking at customers, EA divides them into specific categories. There are the “whales.” This category’s average revenue per user (ARPU) can be upwards of thousands of dollars a game. In other words, they are so fanatically loyal that they go above and beyond in their spending to customize their game experience to their liking. Gamers categorized as “fully monetized” allow EA to engage in perfect price discrimination; they’ve spent up to a level they find comfortable and will spend no longer. Finally, there are the “free riders,” non-payers who play the freemium games. While they aren’t necessarily a source of revenue, companies like EA are figuring out how to get them to contribute to customer acquisition by encouraging them to spread news and be a fan.

And yet, as a traditional gamer, I can’t help but feel a bit uneasy about these developments. The ability to track users already strikes me as being fairly creepy (I have an adverse reaction to letting third party apps on to my Facebook profile), but the approach to microtransactions is something else entirely. An Insert Credit article effectively lays out why I find the concept of freemium games so brilliant and so insidious! In a nutshell, the goal is to rope in gamers by coming up with an attractive premise that will induce customer trial and come up with a reward formula/algorithm that will keep the gamer locked in. And they will be locked in; people in general are susceptible to the sunk cost fallacy, what with all the anecdotes you hear about people being unable to tear themselves away from Farmville and quit. That getting people to buy into such a system of game rewards and play constantly to the point where this business model will thrive is not in doubt. The question becomes whether this is the model we want to see dominate our future.

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