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EA: Live services plus subscriptions equals "uncapped" monetisation

CFO Blake Jorgensen discusses how publisher is becoming less dependent on new titles, growing a more stable business

Electronic Arts believes a mixture of live and subscription-based services is the keen to monetising players in a way that sustains its long-term future.

Speaking at the UBS Global Technology Conference, the publisher's chief financial officer Blake Jorgensen reflected on the ongoing success of initiatives like FIFA Ultimate Team and Madden Ultimate Team, which generate additional revenue long after the base game has launched.

He also observed that when married with its subscription service EA Origin Access, and the similar EA Access on Xbox One, live services are able to make these platforms even more lucrative.

"If you have a live service component to [games on EA Access and Origins Access], you can have a subscription that's uncapped"

"If you have a live service component to [games on EA Access and Origins Access], you can have a subscription that's uncapped," he said. "Give people a way to spend money on things they want to do and that they enjoy doing vs simply capping them at $9 or $10 per month and that's all they can ever spend.

"We find people play twice as many games, they spend twice as long on them, and they spend twice as much money, because you've reduced the cost of trial to close to zero."

He offered the example of a customer who wants to try Madden, but considers the standard $60 price tag too much of a risk to warrant investing in it.

"Maybe they went into the subscription to play Star Wars, they try Madden, they find out they like the game, like playing Madden Ultimate Team, and then may spend money on Ultimate Team. It's a great consumer offering, but it's also for us a much more stable business, an easier business for us to run long-term and doesn't have the same limited cap that most subscriptions would have."

By comparison, subscription services like Netflix or Spotify are 'capped', charging a flat monthly fee and unable to further monetise their users without altering that price.

His comments echo that of rival publisher Take-Two Interactive, which said after its recent financials that "recurrent consumer spending" was becoming increasingly important to its business.

Electronic Arts is most prominently trying to establish a new model of live service with this week's Star Wars Battlefront II, but so far its monetisation plans have been met with considerable ire from consumers, prompting the publisher to constantly adjust its strategy.

Jorgensen also suggested previously released titles could benefit from a live service given that some still have highly active userbases.

"If we had a live service on [Battlefield 4], we would also be able to try and monetise them over time"

"Battlefield 4 is often the fourth, fifth or sixth most played game in any given day," he said, referring to his regular look at how EA's multiplayer servers are being utilised. "Oftentimes, it's consistently in the Top Ten - and it's a game that's four years old.

"If we had a live service on that, and we could keep people engaged, give them even more to play them, we would also be able to try and monetise them over time. That's a huge opportunity, to continue to build the live-service piece of our business."

While live services and mobile titles are a major source of revenue for Electronic Arts, Jorgensen reiterated that its popular sports franchises - including FIFA, Madden, NHL and NBA Live - have become central to the publisher's portfolio.

His comments followed a question about how investors are often focused on the cadence of brand new releases to drive growth.

"We have this wonderful evergreen sports business that every calendar year we're going to release new sports games," said Jorgensen. "We have this fabulous foundation to our business, and then you layer on the live service business and mobile business - both sports and non-sports - all of a sudden you have a pretty good business. About 75% of our business comes from that every year.

"Less and less of our business is dependent on brand new titles. But we've been able to bring out some great new titles that have turned into franchises, like the Star Wars activity, like Battlefront, for example, that layer in more franchises over time. We're trying to do that with BioWare's Anthem game - I was up in Edmonton with the team a few weeks ago, looking at the game and playing it. It's looking very exciting, the team's done an amazing job and we're really excited about that for next year.

"We have a team in Montreal that is building a brand new action franchise, probably for our Fiscal [Year] 2021 that also looks fantastic and very exciting. A new game, with a lot of new interesting gameplay that I don't think anyone's ever seen before.

"Trying to move the business to more live services and grow our subscriptions is trying to build a much more steady business"

"For us, trying to move the business to more live services, grow our subscription part of the business, is trying to build a much more steady business. I'm very comfortable with a steady growth rate, and with digital that continues to become a bigger part of our business and continues to expand the profitability of the business."

The Montreal title Jorgensen refers to is Jade Raymond's first project since heading up EA Motive, something the exec believes will give EA a foothold in a market where it currently lacks much presence.

"Action is clearly the place we're missing the most, and the reason we're building Anthem and the new title that Jade Raymond's team at Motive is building in Montreal," he said. "That's the largest sector in gaming. It's one we haven't spent a lot of time in because we were so focused on sports and first-person shooters. We feel like there's a huge opportunity there."

Other areas of growth the CFO identified including the expanding games business in China, particularly as the country becomes increasingly interested in football. Thanks to the help of Tencent as a partner, FIFA is growing "extremely fast" in the region and if the Chinese government's bid to host a World Cup is successful, Jorgensen only expects this to grow further.

Finally, Jorgensen observed that when he attended the UBS conference five years ago, digital revenues were a "single digit margin business". It has since passed the 20% and 30% mark, and today EA is looking at growing this to more than 40%.

"I don't think we're too far away from that," he said. "Over the next three to five years, you're going to continue seeing the expansion of live services, full-game downloads and mobile as a driver of that."

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