In part one of the GamesIndustry.biz interview with EA's Asia-Pacific president, Jon Niermann, he discussed the challenges of doing business in China, as well as the overall growth potential in the region.
Here he unpacks his thoughts on the opportunity for Warhammer Online in Asia, as well as the future of the console market in the region, and the plight of the Xbox 360 in Japan.
Q: World of Warcraft recently launched in China with some success - what are your hopes for Warhammer Online across the region?
Jon Niermann: Oh, we have high hopes. It's a terrific game, the quality is outstanding, the franchise has strong appeal and a 25-year history plus a following, one of the best creatives with Mark Jacobs at Mythic and Games Workshop... so you've got a team of people who know what they're doing.
Everyone looks at World of Warcraft as the Western MMO - they've done very well globally. This is an opportunity for us to go out with a Western MMO, and I have high hopes for this game. I think it's going to surprise people, I think it's going to do extremely well.
Q: Western MMOs tend to have a very different feel to Asian MMOs, and we've seen Asian MMOs struggle on the whole to make a huge impact in the West - you're confident that Warhammer Online can bridge that gap in the other direction?
Jon Niermann: Yeah - I think it's a fun game. I think really that you've got a fun game, and you've got what Western games have - better graphics. So I think the game looks better, it plays differently, and maybe the games that are going into the West aren't as sophisticated in terms of look and gameplay.
So if you're Asian or if you're Western, if you have a fun game that's playing well, I think we've seen that with World of Warcraft and the momentum that had - people want to challenge each other, they want to be the best, they want to get that next level, and I think there aren't that many yet, right?
Obviously there's been one, and we kind of kicked it off with Ultima Online in 1996, and then it's taken a while. So I think that Warhammer just has... if you play these type of games, and not everybody does, it has a very strong appeal to that core segment.
We've seen that market grow because of the more casual games, such as FIFA and KartRider - they're really bringing in more players and newer players, so it's a good time to have an MMO and all of our mid-session games.
Q: How do you assess the future of the console market in Asia? Is there a future even?
Jon Niermann: Sure, I think there is. I mean, markets like China - in which they're still illegal - that will change, at some point consoles will enter China. India, I think they've got about 300,000 PlayStation 2s, so there's still a lot of room to go there.
Markets like Singapore and Hong Kong are small markets, but they're strong console markets. I think console online is going to have a good future. We think that packaged goods games will only be about half in terms of revenue, so it's always going to be a very important core part of our business. They're going to continue to grow.
Q: Do Sony and Nintendo have an advantage in Asia, because it's their "home territory", so to speak?
Jon Niermann: I think no matter where you're from there's a home field advantage - they're Japanese companies, they understand the market really well, they've got a history within the market, they're well-respected companies. When people see their brand on the product, that really helps.
If you look at the Nintendo games, people ask if it's coming from Nintendo, or if it's a third party, and there is a differentiation in a lot of people's minds. They'll take that core product, but I think they're also becoming very global in their thinking - more so than a lot of other local companies.
They are global companies, look at what happened with Nintendo, it caught everybody by surprise, and it's still catching them by surprise. Now, Sony has rebounded with the PlayStation Portable, taking back market share when everybody kind of counted them out in Japan. They've come back, so all the developers are scrambling to find more PSP space.
What's good about it is that they seem to evolve, even though they have such long lead times for their product development, and they seem to be able to respond. I think there is some home field advantage, but we all have fair playground there.
Q: Does the poor performance of the Xbox 360 in Japan make much of a difference for you, as a third party?
Jon Niermann: Yeah, it makes a difference for us. If there were more 360s in the market than obviously we'd have bigger total unit sales. For us it definitely would be a good thing, and I don't know what their thoughts are on that - watching it from the outside they've got a great machine, they've put a great effort into it. So it's just always unpredictable how the consumer responds.
Q: Is Japan quite a closed shop for people trying to break into that market?
Jon Niermann: I wouldn't classify it as a closed shop. I'd classify it as a place with probably the strongest local competition in the world. I think anyone's welcome to play, it's just a question of having a game that will appeal.
It's a bit like looking at TV stations in the US - there are 500 channels... I don't know if there's a Japanese channel on there. So Japan's got its own entertainment, that's very strong. 99 out of 100 games are Japanese, so it's just because they've got so much local content that's good, that's appealing.
When we come in there, and we've sold many games out of certain franchises, they'll buy. What I love about it is that there's a gamesmanship of release dates, and marketing message, and pricing, and everything that you have to go in, but it's an open economy I believe.
But Western companies just haven't cracked the code yet - we're the top Western publisher in Japan, and we're probably tenth in the market...
Q: How much of a problem is the strong local cultural identities in Asia? In Europe you can put out the same game, but with different languages and it has a chance. In Asia the separate national cultural identities are far stronger.
Jon Niermann: It's true - if you take FIFA as an example, you have to have the national teams - Japan, Korea, China, and you have to have all the local leagues, whereas in the West, we've kind of got all that for the most part. But out here you've then got to go and negotiate deals to try and get some of the key leagues in there as well - that just makes it a little more complicated, but once you get it, you have a good opportunity.
I think that Japan is the hardest one to crack, but I think it's forgiving if you go in and have the right product. We approach Asia with three different business models - we've got Australia and New Zealand, which is like the West, so it's largely packaged goods for console.
Japan is largely console, but growing online, but very local content. So we do much deeper customisation and localisation in Japan than we do in other markets. And then you've got the rest of Asia, which is a mix of many types of content, but it's mainly online and mobile.
So when you're operating a business, and I think that's distinct from America and even distinct from Europe, it's really complicated to have these different plans for the same region. People that speak of Asia like it's some generic shop... it just isn't.
Q: So it's taken a while to build up that expertise, but now you're seeing the benefits?
Jon Niermann: Yeah, we're there, and I think that everything that EA did - we have 15 offices across Asia that are wholly owned that we represent in-market for direct distribution. And that's really enabled us to have a much bigger presence. It's good.
Jon Niermann is president of EA Asia-Pacific. Interview by Phil Elliott.