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EA: DLC revenue "above and beyond" physical sales; FIFA DLC earned $30m

CFO also talks up importance of used market, claiming 60% take-rate for Project $10

EA's chief financial officer Eric Brown has claimed that digital content, such as downloadable expansions and the controversial Project $10 online system for used games, is vital to the publisher's future.

"We think that used games in America at this point are perhaps 20 per cent of overall business," he told attendees of the Deutsche Bank Securities Inc. Technology Conference in San Francisco yesterday.

Referring to recent NPD reports of an ongoing decline in game sales, he claimed "That's not captured in any statistic. You add back 20 per cent and you probably get a slightly different view of packaged goods."

Brown felt that the $10 Online Pass – requiring second-hand users to fork out extra money for a code necessary to play certain EA titles online – could draw significant money from the used market, which he posited had grown by around five times over the last half-decade.

"The price is $10, which seems to be gaining user acceptance – the acquisitions, the take rates are quite high, well north of 60 per cent on the titles we've seen so far.

"There hasn't been any significant push-back from the consumer, because I think people realise that if you're buying a physical disc and it requires an attachment to someone else's network and servers, people know bandwidth isn't free.

"So the fact that we're diffusing or covering online costs is not viewed to be unreasonable. We're well into this program and there is no consumer backlash."

DLC for recent FIFA games has earned EA $30m

However, he claimed that standard DLC was proving a far bigger earner than the Online Pass. "We don't expect to be able to attach an additional $10 to every used purchaser. What we've had more success with is a digital extension to the core product called Ultimate Team.

"FIFA 10 generated just over $30m in gross DLC sales – so that'd be above and beyond the revenue that we made just selling the physical disc.

"Now that stills represents a single digit uptake on revenue, but if we can take it from single digit to 20 per cent or so of the full franchise in the mid-term, that revenue on the margin is very profitable to us.

"70 or 80 per cent fully loaded net margin digital revenue stream, and so if we bring that well north of $30 million to 60/70 let's say, a lot of that's going to drop to the bottom line."

Arguing that, despite a general decline in units shifted, games in the top 20 were actually selling more, Brown asserted that the online functionality of triple-A titles was leading to enormous revenues.

"Instead of selling one product with a unified $60 price point we see people buying a $60 disc and then bolting on hundreds of dollars of DLC. We're happy to have $500 worth of extra content to sell."

Brown argued that retailers – specifically GameStop in the US – would be instrumental in publishers securing further income from downloadable content.

"There'll generally be half a dozen different pieces of DLC available for a title, and GameStop's in a really good position to explain to the customer what the DLC is, what pack number one and five and four and six provides, because they have a staffing model and a customer service model geared exclusively to games.

"So we view them as a very important current and future market partner for all forms of DLC."

Brown also felt that the PlayStation 3 was becoming a more important platform for publishers than Microsoft's Xbox 360.

"They're actually up about 34 per cent calendar year to date, so PS3 is much stronger than the 360 which is in turn stronger than the Wii."

A complete transcript of Brown's talk, which also covers his thoughts on 3D, Facebook and iPhone vs Android, will appear on shortly.

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Alec Meer avatar
Alec Meer: A 10-year veteran of scribbling about video games, Alec primarily writes for Rock, Paper, Shotgun, but given any opportunity he will escape his keyboard and mouse ghetto to write about any and all formats.
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