In sane industries, the product is changed before the business model. When McDonald’s sales go down, they change products. They don’t change their business model (which is extremely successful). In entertainment, the business models have remained the same. Even with iTunes, the business model is still a musician putting music up on a (now digital) shelf waiting for it to be bought. The product is still relevant.
The reason why an industry wants to ‘change the business model’ is because they don’t want to change their ways. They want to keep making the same product. A great example of this is American newspapers. The reason why they are in decline is not because of a need to change a business model, it is that the American newspapers are crappy products. Who would buy the New York Times today? Their stock price has plunged over the decade. But once, upon a time, papers like the New York Times or the Wall Street Journal offered substantial news, information, and commentary. The people who work there will never entertain the notion their product is garbage. Meanwhile, local newspapers are thriving. Television news are also in decline. CNN ratings are the worst in their entire history. The product they are putting out is not seen as quality by the viewers. They aren’t watching.
Peter Moore, operational officer of EA, is saying something similar he said six years ago: the business model of gaming is going to change whether or not anyone likes it.
From IGN, we read:
EA’s chief operating officer has expressed his belief that free-to-play is an “inevitability” for all mainstream games.
Speaking with Kotaku, Peter Moore suggests that a F2P future would be a good thing, as it would constantly bring in new players and potential customers.
He explained, ”I think, ultimately, those microtransactions will be in every game, but the game itself or the access to the game will be free.
“I think there’s an inevitability that happens five years from now, 10 years from now, that, let’s call it the client, to use the term, [is free.] It is no different than… it’s free to me to walk into The Gap in my local shopping mall. They don’t charge me to walk in there. I can walk into The Gap, enjoy the music, look at the jeans and what have you, but if I want to buy something I have to pay for it.”
It comes in the wake of rumours that Bioware’s MMO Star Wars: The Old Republic, which EA publishes, is looking at the viability of adopting a F2P model. If EA were to roll it out to their other titles though, it begs the question of how it would work. Microtransactions could be easily integrated into the likes of Madden NFL 13 or SimCity, but it’s less apparent how they’d work with titles such as Mass Effect 3.
While Moore accepts that the proposed F2P revolution may not be imminent, that’s not to say he didn’t suggest changes are happening right this instant.Prefacing his claims with the warning that “hardcore gamers won’t like to hear this”, he explained that companies are increasingly taking notice of platforms other than the consoles.
“We’re going through, as an industry, just an unbelievably difficult transformation, that is not from one business model to another but from one business model to a myriad of different business models,” he said.
“Consoles are still going to be a very important part of what we do. But so are browsers. So are iOS devices. So are Android mobile phones. So are PCs, which are feeling a renaissance. It’s all coming together in this potpourri…”
None of this is hugely surprising. When we recently spoke to Moore about the public perception of EA, he revealed to us that he feels ”The $60 game is dying. The mid-range game is no longer profitable. EA has to focus its energies elsewhere in order to meet those quarterly targets.”
Three points and a conclusion:
1) Free-To-Play Has Already Been Done Before
It was called ‘Freeware’. “But Freeware only refers to software not intended for commercial interests…” No, it doesn’t. The origin of the word Freeware came from Andrew Fluegelman because he didn’t want to use the traditional distribution channels. Does that sound familiar? People want the term now to mean ‘non-commercial’ stuff and now reclassify the person, who invented the word freeware, to have actually participated in shareware instead. The point stands that Freeware was all about an alternative business model. And it failed. The traditional business model remained king.
The reason why products become freeware is because no one wishes to buy them. Just like Game Industry games today.
All this has been done before. There is nothing new here. Even before the Internet, game companies used mail as distributing their ‘free’ or ‘shareware’ software. Interestingly, the game companies that emerged from this were Epic Megagames and iD Software who ended up getting big by putting their game into a box and onto a shelf (e.g. Unreal, Doom, Unreal Tournament, Quake).
2) Free-to-Play has the stigma for losers for a reason
A competitor appears to challenge World of Warcraft. This game is hyped to the heavens. Many games actually do buy it because it is the new shiny. After a few months, gamers return back to WoW. A year after release, the ‘WoW Destroyer’ goes Free-To-Play.
If Free-To-Play was such a superior position, then why didn’t these MMOs start off that way? Why didn’t Star Wars: The Old Republic start off as Free-Ware if EA believed it is the superior way to go? SWTOR is only going Free-To-Play because the game failed.
We hear all this hype of Free-To-Play, but we are not shown the money.
Where is the money? Show me the money!
“But Crossfire in China is F2P, has millions of players, and just made half a billion in revenue…”
In revenue… So why don’t we know about the profit? Where is the money? Show me the money!
“But Riot Games of League of Legends shows that this model is successful…”
Riot Games makes their money from showing growth of users with outside investors flooding money in. This is not money from the consumers to the degree of sustainable profitability. It reminds me of a Dot Com company showing ‘growth’ but not showing consistent and growing cashflow from the consumers.
A game franchise takes considerable hit when it goes F2P. Once you go F2P, you can’t go back. It is the franchise graveyard.
3) Peter Moore was in charge of the Xbox 360 marketing and completely missed the Wii revolution
If Peter Moore was Nostradamus, why didn’t he see the Wii explosion coming? And when it occurred, what did he do? He fled Microsoft and sought the safe haven of EA Sports.
This guy doesn’t have the track record for predictions that have become accurate. Six years ago, he was saying all sorts of stuff such as playing up episodic gaming.
The Game Industry is going through a transition. This transition is called ‘crashing’. Instead of meeting the challenge of the market for creating quality products, EA is retreating to marketplaces that have a lesser quality threshold.
In 1984, as computer gaming boomed, the quality threshold was very low. There was tons of garbage. Electronic Arts became the dominant computer company then because it was putting out the best quality games on the PC.
And Electronic Arts really shot up when it began selling sports games on the Sega Genesis. That is how it became a behemoth. And these sports games were well made.
If EA wants more money, they need to make better games.