Jon Niermann - Part One
EA's Asia-Pacific president on overcoming the challenges of doing business in China, and the growth of the regional market
While many analysts have predicted that the biggest growth in the games industry will come from Asia in the next five years - often quoting staggering figures - while many Western publishers have tried to crack the market, few have had any real success.
Here, EA's Asia-Pacific president, Jon Niermann, talks about the challenges that face anybody wanting to break into the region, and explains EA's route to long term success.
Q: How do you evaluate EA's position in the Asia-Pacific market?
Jon Niermann: Well if you look at where we stand against the local companies... for example, I'm sure you have all sorts of numbers about the size of the Asian industry, but ours is that there's about USD 8 billion in the Asian market right now, growing to about USD 11 billion in the next couple of years, with China and Korea being the big markets.
Out of that USD 8 billion, about USD 5.5 billion is online games, of which we had zero, although now we have FIFA Online, so we can't say zero, and fortunately we're now moving.
But what happened was that the industry just moved totally away from the PC game. Korea's always a good example we use - we used to sell about USD 20 million of packaged games per year, and that number fell to about USD 7 million because everything was going online.
So we thought it was time to catch up, and we got FIFA Online ready for the World Cup. We worked with Neowiz as a partner, and now we make more money on that one game online than we do on our entire packaged goods range.
Q: You mentioned the predicted USD 3 billion rise in the next few years - do you see that growth particularly coming from the online PC market?
Jon Niermann: Yes, and if you look at countries that haven't even started to register yet, like India, with broadband penetration - I was talking today to some of the guys from India, and there are maybe 1 million homes with broadband... Think about it - the PC penetration increase, the broadband increase, across most of these countries... unless you're in Korea, where I think everybody has broadband basically in their cars, it's just everywhere.
But you still have a long way to go in every other market. For us this growth trend is going to keep going.
Q: There aren't many Western companies that have been hugely successful in most of the Asian markets so far. In general, it's quite difficult for Western companies to break in?
Jon Niermann: I'd say the toughest place is Japan. If you look at their line-up of the top 100 games, usually 98 or 99 are Japanese, and usually we're that 1 or 2 in there that cracks it. We've done it with Sim City on the Nintendo DS, we've done it before with FIFA, Harry Potter.
So we've managed to get there, but it is a very tough market, it's all about Japanese games. In other markets they're a little more accepting of Western content, especially markets like China - online. So we'll see more success of Korean games and Western games there.
And even Korea, which showed us - because we didn't know - you take one of your franchises like FIFA, and your timing is good, the game looks great, and you're partnering with somebody - and it worked, and that really feels great.
In fact, we've been in this game commercially for two years now, we've switched to a new engine - FIFA Online 2 we call it - this past month was the highest revenue yet. The past three months were progressively higher than one another. So this thing's showing you that it has staying power, it has growth, and to see that after two years it's a living case study for us. We've gone nowhere else, except this past week we're launching a beta test in China, Japan, Thailand and Singapore. So FIFA Online is going forwards.
Q: Do you see that as part of the overall market growing? Or does the FIFA Online growth represent you taking market share from others?
Jon Niermann: We are, and I think for us, when you're starting at zero it's much harder. I think when you're taking market share, it's much tougher than creating it. In markets like Australia, which aren't really developed in the online games space, we plan to take a market-leading role. India is in its online infancy, simply because it doesn't have its online infrastructure yet, but we can still get in there and take a leadership role.
But China and Korea - we're way behind and we have to claw that back. You have to replace someone else's game, and get those consumers, those eyeballs. It's a tough proposition, so our growth is going to come from not only the market growing but also displacing competition.
Q: When people talk about China, people talk about the challenges of doing business there - how have you found those challenges?
Jon Niermann: The key thing is to understand the system, and work within it. You have to respect the government rules, you have to understand how the game is played, and then you have to be part of that. You can't change it. I think some people coming in from the West think, "We're the big company, we're gonna come in and change the way it's done!" And they come in and hit the wall, they get smacked down and they disappear.
But for us, part of our strategy has been partnering with people, and I think we can admit that we're not big in China, we're not big in Korea. We're not that big in Asia - there are other companies that are much bigger than us in the space, even though we're the global leader, so to speak. In those markets we aren't, and I think if we go in with that understanding, that admission, and we go in and partner with great people, our chances of success are better - and that's what's happened for us.
So you've just got to learn who has been successful, and Neowiz was successful in Korea - they operated the number one game. The guy that's running development used to run Nexon, he sold KartRider, so we said, "What can you do with FIFA?" His name is Mr Chung, and when he says the game is ready, the game is ready, so you just have to let your partner lead.
Q: People seem to see the Asian market as a bit of a gold rush - but are they learning and being more realistic in general?
Jon Niermann: I think they are realistic, they realise it's not so easy to get a dollar from everyone. What you have in Asia is two thirds of the world's population and the fastest-growing middle class. If you look at China and India you've got 300 million in the middle class - that's the same size as the US each. If you're working virtually with a couple of Americas, okay the pricing's different, obviously governments are different... it goes back to working within that system, then you start with nothing and then you build it - as opposed to saying we're going to go in and get a billion dollars just out of this particular market.
You have to first figure out how to get one game launched - what's required to do that, and it's not as easy as going in and saying we're going to release a game next Friday. You need government approvals, you need a partner to run it - in China specifically because it's illegal for a foreign company to publish - you have to get all these things lined up, and it's just taken time.
Q: Now you have all those partnerships in place, it must make it easier next time around?
Jon Niermann: Yes, with FIFA two years ago in Korea, it was one partner, one country. By the end of September with FIFA we'll be in twelve different countries with games and online, plus NBA Street and Warhammer. So we'll basically go from one to about twelve games operating around Asia because we've taken the time to put this partnership infrastructure in place.
Jon Niermann is the president of EA Asia-Pacific. Interview by Phil Elliott.