EA's vision to become more like Apple and Amazon
Electronic Arts Chief Operating Officer Peter Moore sees its Origin online platform as a way to directly connect with consumers, similar to Amazon's store or Apple's iTunes. He also draws comparisons to Macy's too.
In Electronic Arts' mind, the company isn't any different than the likes of Apple or Amazon.
That is, if EA's online gaming platform, Origin, takes off with consumers. EA Chief Operating Officer Peter Moore believes it's a way to plug in directly to the home similar to Apple's iTunes or Amazon's online storefront. Clearly, Origin is much more limited; beyond games, iTunes and the App Store offer music, videos, and different kinds of apps, while Amazon sells virtually anything on its site. But the concept of creating a direct connection with individuals remains valid.
"Our platform will directly go after the consumer," Moore said in an interview at the company's spotlight event in New York. "We don't see ourselves as different than Amazon...or Apple."
Origin, launched in June, plays a crucial role in the video game publisher's ongoing transition from traditional physical games to potentially more lucrative digital ones delivered over the Internet.
By cutting out middlemen like big box retailers or video game stores and reducing the need for physical discs, packaging, and shipping costs, EA could stand to drive a higher profit off its digital content. Some of its iOS games, for instance, may cost 99 cents to a few dollars, but they cost less to produce and distribute and add up after a while.
Furthermore, Origin's open philosophy means competitors can sell their games through the platform, creating another potential revenue source. But in doing so, the company is entering into direct competition with Steam, which similarly sells games through the Internet.
So far, digital goods have been kind to EA. In the third quarter, the company drummed up more than $1 billion in revenue from that area, a quarter ahead of its projected schedule. Driving some of that growth was Origin, which accounted for $100 million in revenue.
"That's not too shabby of a start," Moore said.
Last week, the company reported a fiscal third-quarter loss considerably narrowed from a year ago, helped by a modest gain in revenue and the profitable digital goods. Excluding one-time financial items, the company reported a profit that exceeded Wall Street expectations.
Moore declined to provide any financial targets for Origin, but he said he expected growth to ebb and flow based on the success of individual targets. During the holiday period, the company benefited from the success of titles such as Battlefield 3 and Star Wars: The Old Republic. In fact, 40 percent of sales for SWTOR came from Origin. The PC game has sold 2 million units and boasts 1.7 million active users.
Origin isn't without its share of controversy. Moore said there were a lot of erroneous reports spurred on by competitors, including concerns that EA was sharing its customers' data, planted spyware in the online platform, and was hoarding exclusive games away from rival Steam.
EA's biggest mistake with Origin was the lack of communication and not doing enough to educate consumers on what the service really offered, Moore said.
"There was a naivete in communicating what people were looking at," he said. "Some rivals that didn't want to us introducing Origin also stoked the flames."
Looking ahead, Moore sees the bigger opportunity emerging from its open platform characteristics. There are already 21 publishers signed on to distribute games through Origin, from THQ and its recently released Saints Row: The Third, to Warner Brothers Interactive's Batman: Arkham City.
Moore didn't disclose the financial terms, but presumably EA gets a cut of each game sold on Origin, which would follow a similar model to what Apple's App Store and Google's Android Marketplace employ.
Moore compared EA and its platform to retail giant Macy's. While Macy's sells its own line of clothing, it will also have apparel from many different brands that both compete and rely on the store.
Origin also will play a bigger role in the distribution of mobile games over time. EA itself is moving more toward so-called freemium games, where players can download and play the game for free but are presented the option to purchase extra items such as weapons, level, or in-game currency.
"Consumers have voted with their feet" and overwhelmingly choose freemium games, Moore said.
That freemium model will likely lend itself better to the Android marketplace. Despite EA's dominance in gaming, its presence in Android is weak. The company handed out a list of games coming for the year; only three were for Android. But the company does intend to move more into that area, as evidenced by the Android stuffed dolls given away to attendees.
Still, the freemium focus doesn't mean there's still not a place for traditional pay games. He didn't comment on the idea of making SWTOR a free-to-play game, saying he liked how the model currently worked.
Likewise, the consoles are still an important part of the business. Moore said he expects better graphic and more horsepower from the next-generation consoles but denied knowing any firm details. He added he expects the companies to lean more heavily on Xbox Live and Sony Entertainment Network as their killer app and social component.
With those services--which connect with users directly--so tightly controlled by Microsoft and Sony, respectively, it's clear why EA is so eager to push Origin and its own link to the consumer.