Riccitiello: Digital market will overtake consoles next year
If EA's digital business was stand alone company it would be "the darling of Wall Street"; publisher wants to "conquer" new markets, says CEO
Electronic Arts' CEO John Riccitiello has said that the digital videogame market will overtake the traditional console and packaged goods business next year.
He added that if the publisher's digital business was a stand alone company, it would be seen as the "darling of Wall Street", with the recent Playfish acquisition a clear indication of EA's growth strategy as it strives to become a market leader in the online gaming sector.
"It's new to compete in that sector, so when people think of games they traditionally think of the Xbox, the PlayStation and the Wii, and they forget about all these online services that are out there – subscription, microstransactions, games they find on Facebook or if they go to Pogo," Riccitiello told Reuters.
"If you add all that stuff up, it's almost half of the industry now. It's about 40-45 per cent. Next year it's likely to be a larger share of the total industry and it'll be bigger than the console games all put together.
"A couple of years ago EA embarked on a plan to really build itself up in this new frontier. In the last quarter alone we did $138 million in revenue and if EA's digital business were a stand alone company it would be the darling of Wall Street," added Riccitiello. "It's in a larger company right now, but we're building it very quickly and our goal at Electronic Arts is to have a very profitable packaged goods business, but also to have a digital business of a similar scale over time."
The recent acquisition of Playfish for $300 million will allow Electronic Arts to bring its strongest brands such as FIFA and The Sims to Facebook and other social platforms, he revealed.
"We look for new business models that will help the rest of our business be stronger and allow our intellectual property to do well there," he said. "That's what we got with Playfish, it reaches 60 million people a month. And yet they don't have the same intellectual property that we have in terms of The Sims, FIFA... that can do well on that platform. We look at that combination and see huge synergy."
Any further acquisitions are likely are also likely to be in the digital market, said the CEO, as the company continues its plan to "conquer" new markets.
"From the perspective of Electronic Arts, when we look at M&A we look for three things. We're constantly trying to conquer new territory in particular on the digital side, so when you ask about deals, we're mostly looking at the digital side, we're mostly looking at compatible organisations from a culture perspective and of course you need to agree on price. And those are three hurdles that are often difficult to reach," he admitted.
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