Challenging everything

Last week, Electronic Arts held its annual games expo, this year titled Studio Showcase '06, at its Redwood Shores campus in San Francisco. There were a few disappointments - corporate communications VP Jeff Brown opened the event by announcing which games would not be shown, such as Command & Conquer 3, Crysis and next-gen FIFA.

Instead, visitors were given the chance to try out new iterations in popular franchises such as Tiger Woods and Need for Speed, plus a variety of US sports sequels, PC MMO Warhammer online, movie tie-in Superman Returns and the Xbox 360 version of The Godfather. There were also a couple of surprises - namely the revelation that a new Lord of the Rings game is on the way, and that Half-Life Episode 2 will ship simultaneously for PC, 360 and PS3 later this year.

We sat down with Jeff Brown to discuss how strong this year's line-up is looking, and how sales prospects are looking as the Christmas season draws nearer. Also top of the agenda was the next-gen console war, and whether market shares could end up divided in a different way this time around. Read on to learn more about Brown's views on these issues, and to find out why he believes the accusations that EA relies too much on sequels are misguided.

Jeff Brown: I was just saying to somebody, the thing that worries me the most is that people are so enthusiastic about the NHL Hockey game, which is not considered one of our big games - but everybody thinks it looks absolutely fantastic. It's a mixed blessing; number one, they all like it, but number two, hockey - from a business perspective, you never know if you're going to sell that many NHL Hockey games.

That said, I think the line-up at Christmas this year is an embarrassment of riches. I think we're going into the holiday with a lot of good games on a lot of good systems, whether it's 360 or Wii or PlayStation 3 or the current generation stuff for the PC... [We've got] more games for those systems than anybody else, and in many cases before anybody else gets there. So, the business equation is looking very, very good, and if I was a gamer in the UK, a gamer in Europe, I'd say, yeah, it's worth buying one of these systems, because there's a lot of really great software coming out.

Would you say that EA is equally committed to all three next-gen platforms?

No. I don't want to be indiscreet, but the truth is EA is most committed to the platform with the biggest installed base. We've always been very practical and open about the fact that this is a business; if you do well in business, you get to keep making more games, and you can hire more people to make more different kinds of games - as long as you remember that this is a business first.

One of the things that we noticed after E3 is we thought, you know, we're going to support Nintendo, they've got an extraordinarily loyal base of consumers all over the world, and we had a number of games we planned to make for Nintendo Wii. That said, we were very surprised by the level of enthusiasm we saw at E3 and subsequently for the Wii.

This is not a business plan, but there are a lot of people at EA who are walking around whispering: "40 / 40 / 20 per cent." The last time out, it was 65-70 per cent PlayStation, and everybody else divided up the 30 per cent that was left. Microsoft obviously took a big piece. Now it looks like 40 / 40 / 20 - Microsoft, Sony and Nintendo - and that is good for us, and it's good for people who like games.

Here's another thing that I think trends well for both the business and for consumers: everybody's saying that the Nintendo Wii is so unique that it's going to be the second system people buy, meaning if you own a 360 or a PS3, you'll probably also buy a Nintendo Wii. The funny thing is, some people say that discursively, like it's some sort of dig at Nintendo - and what they don't get is that if you're second on everybody's system, you're first overall.

It is very possible that Nintendo is going to expand its market by being the second system, that people who are hardcore and own a 360 or a PlayStation 3 will also go and buy a Nintendo Wii because it is so unique and so different this time. Whereas they didn't also want a GameCube against an Xbox or against a PS2, they'll go out and buy it, because it's a different experience.

If you look at what EA's doing with the Wii... Today we showed off Madden NFL on the 360 and I've seen it on PlayStation 3, and there are some differences between the two but they're largely the same experience. The Wii is a totally different experience, and if you like Madden NFL on 360, you still don't know what it's like on the Wii - it's a completely different experience.

That just opens up so many possibilities. First for gamers, that there's different kinds of games, different kinds of experiences. And then second, as a business prospect, you look at what the motion picture business calls ancillary markets - you get people to come to the movie theatre, then you get them to buy a DVD, then you sell a package to cable television, and it cascades down again and again. Well, you get ancillary markets against an initial investment in the code with this thing. From both the consumer perspective and a business perspective, the Wii changes a lot of things.

But your question was are we favouring one or the other, and we favour the one that has the highest installed base, the one with the most consumers. If it's a choice - I'm guessing now - between seven million 360s around the world versus, first month, one million PlayStation 3s, well, guess which one we're going to favour. It's pretty simple. That said, keep an eye on the Wii - that is a very interesting dynamic.

So perhaps it might not be 40 / 40 / 20 then?

Let me tell you, if they get up to 20 per cent worldwide, that is a momentous event right there. Look, I'm not predicting it's 40 / 40 / 20, and I hope you understand that is not EA's business model - I'm just telling you that the buzz going around is that rather than this huge, lopsided victory for one, and then a pretty good number two and a distant third, you can see some parity for the top two. You could even see 30 / 30 / 30, something like that.

What do you think about the PlayStation 3's price point? Do you think that's going to damage its chances of being the market leader this time around?

Say what you will about the PlayStation 3, we know this as fact: Sony Computer Entertainment and Sony Corporation are very, very, very good at marketing consumer electronics. These guys aren't dumb. I wish it was cheap - look, at EA, we wish there was a $200 PlayStation 3 out there; we love big, big numbers on installed base.

But they have a business that they have to maintain, that's the price point they came to. Is it a little high? Perhaps it is, but I would never underestimate their ability to market consumer electronics. Again and again, they've really distinguished themselves. Does it hurt them? It certainly remains to be seen. I wouldn't say that yet.

There seems to be a feeling amongst gamers that Sony's been very arrogant, not just with the price point, but by suggesting that it's cheap since consumers are getting a lot of hardware for their money - and that this is actually damaging Sony and the PlayStation brand. Do you think that kind of criticism is fair?

I don't think it's fair. And at the risk of sounding arrogant myself, I don't think it's relevant. I've been in this business for seven years, which is not a long time, but it's long enough to have seen a couple of cycles of hardware, and I know that there are always trips and stumbles at the start of these things.

Everybody writes these big stories like 'Oh my God, what will this mean? Will they stumble for the next for years, can they recover?' When Sony first put out the PlayStation 2 there were hardware shortages, and some manufacturing glitches, and everybody was like 'Can they recover?' If you watch that cycle, then certainly you know that whatever people are saying now - could it be a stumbling block - remains to be seen. I give Sony a lot of credit and would never ever underestimate them.

Are you concerned about hardware shortages? Obviously, if people can't buy a system, they're not going to buy the games you've produced for it, so what strategies do you employ to cope with that problem?

You'll play a strategy both business and philosophical that says there's going to be snags, there's going to be problems, there's going to be shortages, because we've done this enough times. This company's 23 years old and we've been through a lot of cycles - there's always, always a stumbling block, whether it's a manufacturing problem or a transportation problem, or there's just too much demand.

There's always a problem. We saw it with the PlayStation 2, we saw it with the Xbox; it wasn't that long ago that everyone was saying where's the Xbox 360, you just couldn't find them in retail in late December, January, February last year, and they seem to have recovered nicely.

There are always stumbling blocks, so if you're a veteran of this industry, you learn to forecast these numbers in the belief, let's be practical about what we're going to get here. If for some reason they do something that nobody's ever done before, which is launch a console without any problems, then we'll certainly see the upside in the forecast. But we're not going to get caught on this thing. It's about being practical from both a philosophical and a financial perspective.

What's your plan going forward with regard to the software you're putting out? It seems like you're still doing a lot of iterations of familiar franchises, that there's still not that much original IP coming out of EA...

Well first off, I disagree. I know you know this industry and I know you know games really well, but we typically hear that question from people who don't understand games, and come from a motion picture mentality. It's because in the motion picture business, usually the sequels stink. In the videogame business, sequels - certainly by the time you start getting into three and four - are in fact pretty good, or they wouldn't be sequels.

If you look at Grand Theft Auto or something - do you even know anybody who played GTA 1 or remembers it? Or GTA 2? It was Grand Theft Auto III that blew the roof off the entire industry, and the culture for that matter.

With iterations and sequels in videogames, there's a huge loyal audience that really likes it, and one of the reasons that they come to like a franchise is because typically, there's a lot of innovation within each one of these iterations. So I dispute the idea that Dead or Alive 3 or Halo 3 or something like that are inherently not as good as the originals; that's motion picture thinking, that's not videogame thinking.

As far as EA goes, the only other thing I'd add to that is, you know, FIFA - we put out a FIFA game every year. Every year, just based on the technology and the understanding of developers, those games get better, incontestably. Whether they get better by 50 per cent or 100 per cent is a matter of speculation - I'll leave that to reviewers - but they get better every single year. Tell it to FIFA, because they've got a new season every year; they're not going to skip a season because they think everybody's tired of football, for crying out loud.

A couple of things are driving original IP at EA, and as always at EA, simple economics are at the root of this. If you start with the consideration that when new platforms launch, the first five million 360s, the first five million PS3s, for that matter even the first five million Wiis are going to be purchased by the hardest of the hardcore fans. They don't like James Bond, and most of them don't like Harry Potter and things like that. There are huge audiences for those games, but typically not within the universe of people who buy the first five million units of a new piece of technology.

What they like is this really freaky game IP which is weird and twitchy and really is made for people who grew up on games, and don't need to approach a game from a motion picture mentality or a book mentality. They love game IP, and they understand it. Now is the time to introduce that, when these people are coming to these systems.

And if you can get them to adopt it, then when the next five or 10 or 20 or 50 million people pile into these new hardware systems, then that will be the standard - you've got to buy Halo, or from the EA side, you've got to buy Army of Two, because there's a game that defines the 360 or the PlayStation 3. It's good for those consumers, it's what they want, and it's extraordinarily good business because it allows you to create new franchises without licensing fees associated with motion pictures and stuff.

That said, three or four years from now, when the price of the 360 has migrated down to Ã'£140 or something - I'm guessing - then, because younger people have them, games like Potter are going to be extraordinarily popular. That first Harry Potter game sold nine million units, a shocking number. Guess what - we didn't put it on PlayStation 2. It was on just PSone and the PC in the first year of PS2. The reason why it sold so well was because as big brother got a PlayStation 2, they didn't throw away PSone; little brother got the thing, and boom, Harry Potter. So if you're smart, you manage your portfolio that way.

New IP is really easy to measure at EA, because a year ago, a little over 30 per cent of all of our games, all of our revenues, were based on wholly-owned intellectual property - things like The Sims, which we own and don't pay licensing fees for. Today it's a little over 40 per cent. The goal at EA is within the next year, maybe year and a half, the percentage of revenue and the percentage of games which are based on EA-owned, non-licensed properties goes over 50 per cent. So come back in a year and I'll tell you exactly where we are...

EA's clearly the biggest third-party publisher in the industry; how comfortable do you feel in that position? Are there any competitors that you're particularly worried about?

It sounds a bit trite, but there's the expression a rising tide will lift all boats. I hope that there are competitors. I hope that Take-Two survives the problems that they've got. I hope that there's another GTA out there, that someone comes out with these fantastic games that makes everybody feel they've got to buy a 360 or a PS3, because everybody's playing that game.

I hope that EA's got that game, but to the extent that something unique's going to happen, I hope that when lightning strikes there's a brand new company that does that.

Before I came to EA, I worked for the Pepsi-Cola company, and there was a real us-versus-them, and there was only two people in the universe. And every time somebody bought a bottle of soda that wasn't Pepsi, we lost to the other side. It's just not like that in videogames - a great Halo or a GTA or something like that actually sells copies of Need for Speed, it sells copies of FIFA. I hope that there's somebody out there making fantastic games that just explode with prosperity.

Jeff Brown is EA's VP of corporate communications. Interview by Ellie Gibson.