EA not expecting sharp transition to new consoles
"Multi-billion dollar" investment wouldn't benefit consumers; games played longer this cycle, says CFO
Electronic Arts' chief financial officer Eric Brown has said that the publisher is not expecting any new console hardware in the near future, as development costs would run into "multi-billion dollars" and current consoles are already fulfilling consumer's high-definition needs.
Speaking during the Goldman Sachs Technology and Internet conference, Brown said that consumer technology is currently at a peak, and there's nothing on the horizon that would seem significant enough to convince users to upgrade to more powerful technology.
"We don't see a sharp and distinct console transition like we've seen in the past. In the past the primary drivers were significant upgrades in silicon in the GPU/CPU combination that drove higher resolution for the games," he told investors.
"Today we have two of the three consoles that operate in full high-definition and are running games at 60 frames-per-second. If you step back and say if it's a multi-billion capital dollar investment for the next generation, the question I would ask is if you were to produce that then what would you display it on? There's really nothing in terms of broadly available consumer viewing technology other than 1080p flat panel televisions and so you could upgrade in theory but you wouldn't get the obvious graphical benefit that we saw really drove the sharp transitions in the prior cycle."
Brown acknowledged that this console cycle has seen a significant change in consumption of games, but it also provides plenty of opportunities – the company is changing its business to take advantage of different habits and tastes.
"I don't think the console cycle is broken, but it's fair to say that this console [cycle] is different to previous console cycles. The packaged goods market is quite healthy at the top of the charts, the key thing is to place games in the top 20 or top 25," he added. "There's been a concentration of demand in the top portion of the charts."
According to Brown, users of the Xbox 360 and PlayStation 3 are playing their consoles longer, helped in part by online and additional digital content.
"One of the things that's important to keep in mind here compared to the fiscal cycles several years ago is that actual gameplay is up despite the rise in social media and mobile computing. We see this is in our data looking back over the past two to three years, console usage for the high definition consoles is definitely up."
"Players in this cycle expect deep, rich multiplayer online experiences and they also expect to be able to customise their games through digital content, so that places a premium or additional importance on online capability and also the ability to download to a hard drive. These are challenges on the one hand but also opportunities because digital content allows the traditional ARPU (average revenue per user) model to be extended, and multiplayer online play creates persistence."
Comparing this console cycle to the last, he also noted that the price of boxed goods has remained higher for home consoles.
"Front line pricing is actually holding better than before. At this point through in the last cycle, ASPs (average selling prices) were down at roughly 30 per cent or so. At this point in the cycle, if you look across platforms, ASPs are down 9-13 per cent. Front line pricing model is holding better relative to the last cycle overall."