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Fri 14 May 2010 7:00am GMT / 3:00am EDT / 12:00am PDT
OnlinePublishing

EA's Project Ten Dollar was a good idea - but it has launched us down a dangerous slippery slope

The phrase "cautious welcome" might have been invented for EA's Project Ten Dollar initiative - a project aimed at discouraging the more egregious abuses of the second-hand market by bundling single-use codes for $10 worth of downloadable content with new games. Unlike previous attacks on the pre-owned trade, Project Ten Dollar is a fairly tightly focused tool. It doesn't prevent anyone from selling their games, and is unlikely to seriously discourage consumers from selling directly to one another - or from buying from heavily discounted second-hand bargain bins, months or years after the original launch.

With the DLC in question for games like Mass Effect 2 and Dragon Age being firmly in the "nice-to-have" rather than "must have" categories, the initiative actually gained some traction among gamers, who understood it to be a gentle but carefully calculated push not against their consumer rights, but against the business models of stores like GameStop and GAME, which often apply huge mark-ups to second-hand product and sell it very slightly cheaper than brand new games.

The negative responses came from predictable quarters, but were no less valid for that. Some people simply don't like DLC, especially DLC that appears at launch - they argue that it should be a part of the game, and that extra monetising at this stage in the life-cycle of the product is a pretty shabby way to treat consumers. It's not a terribly fair viewpoint, ignoring as it does the most basic financial realities of game development (put simply, if there wasn't a way to pay for the development of those features, they'd never have been made at all), but it's widespread and it's understandable.

Others cautioned against the slippery slope which this initiative could lead us onto. Certainly, Dragon Age and Mass Effect 2 handled Project Ten Dollar well, the latter more so than the former - delivering a good quantity of high quality DLC, without actually detracting from the core game experience in any meaningful way if you didn't have the DLC. Rather than crippling the game, it simply relied on people's completionist instincts and their desire to see the full experience.

That's a delicate balance to strike, however, and many feared that the decision making process at game publishers - which so rarely errs on the side of being genuinely consumer-friendly - was not conducive to the balance remaining in place. If Project Ten Dollar was successful, its critics warned, publishers would end up pushing it even further - stripping out crucial game systems and selling them back to pre-owned game consumers.

It's a slippery slope argument, scoffed the more optimistic commentators.

Welcome, ladies and gentlemen, to the slippery slope, because earlier this week, EA revealed the next evolution of the thinking that kicked off with Project Ten Dollar. In future, the company revealed, the online multiplayer of EA Sports titles will be activated by a code - which will be bundled with new copies of the game, or sold for $10 to those buying the games second hand.

EA's comments on the decision imply that this is simply the next logical step for Project Ten Dollar - an obvious and reasonable place for them to go with the initiative. That's either an incredibly disingenuous piece of PR, or a genuinely worrying insight into some of the thinking at a company which has, until now, looked like it was turning a corner in terms of its relationship with consumers.

In fact, the Online Pass represents a fundamental shift in the philosophy of EA's approach to the second hand market. Project Ten Dollar created bonus content which was given to first-hand consumers for free, and available to second-hand market consumers for a fee. Online Pass, on the other hand, strips out existing, long-established game functionality and demands a fee from second-hand consumers to add it back into the game.

In short, Project Ten Dollar was designed to reward people for buying new games. Online Pass is designed to punish people for buying second-hand games. That's a subtle but extremely important difference in approach.

Online Pass also raises a number of awkward questions both for EA and for the console platform holders. For example, is it now reasonable to expect that EA Sports games will have significantly longer life-spans than previously? That seems reasonable - after all, there will now be an ongoing revenue stream from people paying for online access, and those people should be able to play the game for a decent amount of time before being told that the servers have shut down and they should buy a new version of the game.

Additionally, what's the status of Xbox Live Gold in this arrangement? EA Sports boss Peter Moore was in the hot seat at Microsoft when the company launched the Xbox Live Gold and Silver service tiers, so he knows perfectly well that Xbox 360 gamers already pay a monthly fee to Microsoft to play online. The understanding was always that games which charged an additional levy (such as MMORPGs) would be accessible to Silver members - you wouldn't have to pay twice. So will EA Sports games, with their paid-for online service, now be available to Silver customers? Or are customers to reach into their pockets twice, once for Microsoft and once for EA, simply to play a game of football against a friend in another city?

Of course, this is a calculated decision on EA's part, and a cynical one at that. They know that the customers who buy FIFA and Madden every year aren't the same as the customers who bought Dragon Age or Bad Company 2. EA Sports' customers are less likely to read magazines, websites and forums which discuss Online Pass; the kind of consumer backlash which would have been witnessed had "core" games adopted this strategy is unlikely to gather steam within the wide-reaching sports game fraternity. Unless the story gains traction in the mainstream press - which it almost certainly won't - then the first that most consumers will know about Online Pass is when they discover that the resale price of their copy of Madden is significantly lower than they expected.

By itself, that's hardly the end of the world - but there's no arguing against the slippery slope vision of this initiative now. If, as is exceedingly likely, Online Pass succeeds in its objectives - sustaining first-hand sales of EA Sports titles, discouraging the second hand market and providing some revenue as recompense for second-hand sales - then it will become a much more widespread strategy, extending beyond EA Sports to other genres of game and other publishers.

This scenario bears echoes of the debate still ongoing around Ubisoft's controversial DRM measures. As we've learned more about the Ubisoft system, it's become clear that it definitely works - unlikely any previous system, it has the potential to protect PC games from piracy for weeks if not months after launch. The cost, however, is high - restrictions on consumers and damage to the relationship between consumer and publisher are dangerous things at a time when the boxed game market is already under unprecedented pressure from new forms of interactive entertainment.

The same calculation must be made for EA Sports' Online Pass. It will almost certainly work, achieving its business objectives admirably - but at what cost? The most elementary miscalculation made by even the biggest businesses is to underestimate the value of strong consumer relationships and goodwill in the face of a chance to increase short-term revenues.

EA has undoubtedly considered that balance, and may even have reached a sensible conclusion, given the nature of the EA Sports consumer base. However, this looks like becoming a more widespread model for publishers' engagement with consumers. The risk is clear. Faced with new threats from unexpected quarters, should publishers really be hardening hearts against the industry, driving even more gamers away from the traditional business models which they are so desperate to prop up?

10 Comments

I think it's a risk EA feels it needs to take. I don't accuse EA of anything other than trying to maximise (or generate any at all) profits, and online pass should be seen as one way of doing this. The fact is, revenues have been in decline while costs have been increasing, and while EA seem like they've turned a corner with regards to these 2 factors, the industry as a whole is somewhat bloated and needs to change.

However, like piracy, the secondhand market is something that on the face of it appears detrimental to developers, but may actually be responsible for growing the industry. Not only could project 10 dollar and online pass annoy the hardcore, but it could actually play a part in putting the skids on the secondhand market. I think the secondhand market actually drives sales of new games more than publishers would like to believe.

Posted:4 years ago

#1

Jason Avent
VP, Studio Head

139 140 1.0
The high margin second hand retail model is maturing into something that's even more threatening. LoveFilm offer a subsciption rental model which offers two games per month for a tenner. For the core, high value part of the market (which make triple A game development possible), who have the time and inclination to finish two games in a month, they're doing so for just £5 each. This is amazing value. However almost none of that revenue goes to the game makers and it denies them of a couple of games sales that could have provided £30-40 of revenue.

Then there are emerging online retailers who will sell you the game for a tenner as long as you send it back to them when you've finished. They make a small compromise on their retail margin because they know they'll get the stock back. They can then obviously do it again and again. I think that these new emerging business models are even more threatening to the industry because they're such good value that if you play alot of games, you'll never walk into a shop again.

I'm glad EA are leading the way and innovating just as quickly as these rental businesses and new retail models are emerging.

If you want to keep playing great games, you need to be happy for game makers to find ways to make sure they get a fair chunk of your money.

The one caveat to this though is that I feel games are too expensive. Publishers should be protecting their investment but also listening to consumers. The main price point is probably wrong. With digital distribution direct from the format holders/publishers, we could get the same margins back to games makers while offering full priced games at £20-25 each. Which is equivalent to the ebay second hand price at the moment for most games.

Posted:4 years ago

#2

Jack Loftus
Contributing Editor

95 0 0.0
We all saw that EA is still not making a profit, right? This news should be no surprise. EA is desperate, even with substantial hits under its belt, which is really saying something. If they weren't so big (and bloated), and such an important part of the industry, I'd suggest that maybe they should just go away. Instead, they lumber along, not making a profit, punishing customers for their mistakes and inconsistent software libraries.

Lastly this is for Rob: I enjoy your columns, as do many other people here on GI.biz, obviously. I wish that more journalists in the gaming field had the stones to ask questions like the ones raised in his column; to be more cynical and less ass-kissing, as the job and the readers, deserve.

They don't unfortunately, and ultimately serve as a PR wing for companies like EA. They simply "report" that Project Ten Dollar exists, and the press release--er, sorry, the "blog post" or "article," ends there. Then they ask that we take them seriously as journalists.

Edited 1 times. Last edit by Jack Loftus on 14th May 2010 2:16pm

Posted:4 years ago

#3

Rob Stevens
Senior Developer/Designer

7 0 0.0
Reading this and the news piece “Pressure mounts on E3 to prove industry can grow long-term” leads me to an off-the-wall conclusion.

What EA is actually doing is moving their distribution model online as best they can, given the current market conditions. Reading the opinions and reactions of investors to the recent dip in retail packaged goods sales it is obvious that investors like this business model. They feel comfortable with it, they want it to stay. Otherwise they get jittery.

The other major players invested in packaged retail are the console manufacturers. Without boxed games next to their hardware, retailers might decide not to stock that hardware anymore. After all, nobody makes any money from it, its bulky and space consuming. The only reason it is there is because they want to sell the games that go with it. Likewise, the hardware manufacturers take some of their cut of the pie in the form of disc manufacturing and a lot of their anti-piracy measures are based on the hard copy model of distribution.

So, publishers, and to some extent developers, want to move to direct online distribution and the sooner the better. Meanwhile, investors and hardware manufactures (at least for the AAA segment) want to maintain the boxed retail model. How can EA get around this?

Simple, sell a boxed disc to keep investors and manufacturers happy, but include a hefty chunk of the game via download to reap some of the benefits of, and get consumers used to, online distribution. Not an ideal solution, but a middle ground, a step towards what they really want but can’t reach.

What does this have to do with the second hand games market? Maybe not as much as we’re led to believe. Obviously a bonus to this stratgey is hamstringing the second hand market, but is it the principal reason? Going to purely online distribution would do a better job in the long run, so isn't that a more worthy goal? Maybe this is just the first signs of rebellion against the established norm by a big hitter with its hands tied.

Edited 1 times. Last edit by Rob Stevens on 14th May 2010 2:24pm

Posted:4 years ago

#4

Jason Avent
VP, Studio Head

139 140 1.0
@ Rob. That's exactly what they're doing. It's a plan that has long term and short term goals. It gets every aspect of the chain ready and in line for digital distribution. As long as the final price point is right, digital distribution should be good for consumers, developers and publishers alike.

Posted:4 years ago

#5

Simon Arnet

54 3 0.1
Its a good model, look at all the different business models EA games/sports have been trying out, APB and Tiger Woods have vastly different business Models yet similar concepts. I would suspect though, that APB is were they are really headed. The physical disc contains 50 hours of game play of certain features(More than most consumers will use) and an option to buy more hours or an unlimited package. The social and customization aspects of the game are still playable. Your effectively paying for the social aspect and renting the game aspect. This will be very interesting to see how it develops.

Posted:4 years ago

#6

Jason Avent
VP, Studio Head

139 140 1.0
Nah, it's a way of blending to full digital distribution I think. I reckon that we'll see discs get down to ten hours of gameplay, possibly with a reduction in price and then followed up by paid downloadable content afterwards. This is a logical half way stage along the same path. Then ultimately they'll do away with discs and conventional retail altogether so distribution is solely digital and more like the itunes store. By cutting out the cost of goods and the retail margin then, games should be £20 or so and sell in higher volumes. If this happens and they don't cut the rrp's that's when we should be all up in arms about the injustice of the price of games. Great games should be able to sell more content digitally then too.

A subscription based model could work too but I reckon it won't be like MMO's. Imagine the LoveFiLM model for digitally downloaded games. Pay £10-20 a month and you can 'own' two or more games a month. When you've finished playing one you de-activate it and download a different one. That's the future I reckon. That way, you have a committed, year round revenue stream to support the development and marketing of games. The emphasis is on the consumer to get as much value out of the system as possible. That could live alongside a 'buy a digital downloaded game for £20' system for those who don't play as many games or tend to play just one big one like MW2 or their favourite sport.

I may be wrong but this is an alternative future that could work well for everyone concerned.

Posted:4 years ago

#7

Simon Arnet

54 3 0.1
@Jason, Good points, your constant stream of revenue seems to be a clear cut win for the developers and gamers a like. More money=More and better content for games and the ability to keep the developing teams on the project longer(Most of the time). Your other method seems more like Valve's SteamWorks and Steam in general. Though steam doesn't have the subscription plan. EA could be going that direction like your saying, with an option to buy for single games, or subscribe if your a heavy gamer.

Edited 2 times. Last edit by Simon Arnet on 17th May 2010 8:24pm

Posted:4 years ago

#8

Jason Avent
VP, Studio Head

139 140 1.0
I actually think that the format holders are in the best position to offer this kind of business model rather than one particular publisher because they can offer a broad range of products from alot of different publishers and developers. Steam is a really successful model and I think it shows the way. Spotify has made me start paying for music again and its premium service operates in a very similar veign.

Edited 1 times. Last edit by Jason Avent on 18th May 2010 11:36am

Posted:4 years ago

#9

Shane Sweeney
Academic

349 250 0.7
High second hand sales is just a symptom of extremely high priced first hand goods.

Music and film have almost no second hand business, certainly not one the primary industries could complain about.

Make games cost the same as a DVD or even slightly more and there would be no need for Project 10 Dollar. EB Games and GAME are just catering to a market... as they should.

I think the core problem isn't being addressed just the symptom. If games were at an impulse buying price then;
1) More people would take risks on purchasing titles they havnt heard of
2) People would purchase a wider selection of games
3) People would purchase a higher number of title
4) It would lower the bar of entry and and more people would purchase games.

Edited 1 times. Last edit by Shane Sweeney on 19th May 2010 4:13am

Posted:4 years ago

#10

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