Electronic Arts continues to be a company in transition. The publisher has clearly put a focus on digital, while console releases become less frequent. As EA CEO John Riccitiello said on the firm's last earnings call, "We've reached an end of an era." EA's transition has led to a slowdown in new IP creation, and there's a reason for that, according to Ethan Levy, a former BioWare San Francisco producer who worked on Dragon Age Legends.
On his Quarter Spiral blog, Levy noted, "EA's stated strategy is fewer, bigger brands. Of the many new IPs developed for this generation, only Army of Two, Dead Space and Dragon Age continue to see new versions. As far as I can tell from publicly facing information, creating innovative, new IPs just isn't a priority for the organization."
Levy believes EA's success on iOS with hugely popular brands like The Simpsons means that the company can get a much bigger return on investment with a much, much lower risk compared to creating new IP for consoles.
"Big brands + big marketing budget + high production values = $$$. This is the EA formula. They may have been late to the mobile & tablet freemium party, but now that they are here they will outcompete the Dragon Vales and Tiny Monsters of the world," Levy continued. "This formula may have finally run its course in the core space, where 80+ rated Lord of the Rings, James Bond and Godfather games have all fallen out of favor with gamers' wallets."
"But as Tapped Out proves, the players who enjoy the games produced by this formula have simply moved to another platform. EA's digital future has less to do with big, risky new IPs like Mirror's Edge or Brutal Legend and much more to do with the huge return on investment proven by The Simpsons' $20.7 million breakout success."
That $20.7 million estimate is not an official EA figure, but is in fact a pretty solid guesstimate from Levy, who said that Tapped Out has generated $29.6 million in sales for EA (which becomes about $20.7 million after Apple takes its cut). He arrived at this number by reverse engineering Supercell's iOS success in a model he explains in detail right here.
Levy noted that Tapped Out's budget was probably a "mere sliver compared to the cost of the critical (and probable commercial) failure, Medal of Honor: Warfighter."
Indeed, if a company can spend a few million instead of tens of millions of dollars, and gain double-digit millions on that minor investment, making that model the foundation of the business going forward makes perfect sense.