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Focus On: Electronic Arts' Larry Probst

Senior executives of big media companies are always busy. It's an unsurprising and incontrovertible fact of their existence that they will constantly be rushing from one engagement to the next, and journalists have long since come to understand that they face severe competition for the valuable time of such people.

What we're less used to, however, is the quality of the competition. After all, who ever expects to have to compete with Hollywood action star, would-be game creator and gym-attendance poster boy Vin Diesel for - well, for just about anything?

It's Vin Diesel, however, that some of EA's most senior staff are thinking about going to see when we meet up with Electronic Arts' chief executive Larry Probst in the publisher's corporate suite at the Los Angeles Convention Centre during the E3 expo - further proof, if any was required, of EA's growing acceptance among the star-studded media community of southern California.

Electronic Arts, after all, isn't just the biggest independent publisher in the videogames industry. It's the publisher that has most successfully integrated itself into the media world at large - with games like Lord of the Rings and Harry Potter being increasingly seen not just as a form of merchandise for their associated movies, but as a genuinely core part of any successful franchise, while the company's own properties such as Need for Speed develop a wide cultural recognition which has previously eluded most interactive entertainment brands.

The next Disney?

The fact that EA executives casually rub shoulders with Hollywood's finest is a symptom of the company's status in the media business; another is the comments of the business press, with American business magazine Business 2.0 this month asking the somewhat loaded question - could Electronic Arts be the next Disney? Comparisons with the giant empire lorded over by the House of Mouse are interesting; EA may be a huge player in the games industry, but it's a minnow by comparison with the likes of Disney or Time Warner. However, with its current rapid growth - and what's perceived by many in the industry as a significant level of influence over the actions of the platform holders such as Sony and Microsoft - might the comparisons hold some water?

"I wish we had power over the platform holders," says Probst. "That is the farthest thing from the truth." However, he's not pouring any such cold water on the comparison with Disney, which is apparently quite welcome - and perhaps indicative of EA's future ambitions. "There are parts of Disney we admire greatly," he tells us. "They have the most valuable portfolio of intellectual property of any company I can think of. That's something we admire and would like to emulate."

Emulating Disney by building a world class library of IP is no easy challenge, but EA is approaching it from two angles simultaneously - with both internal development, which is largely based on the creation of titles in existing franchises, and external third-party development, which has become an increasingly important part of EA's portfolio over the past twelve months.

"We're going to do both," responds Probst when asked which of those areas the company plans to focus on. "We're going to continue to build our internal development resources and continue to drive EAP [EA Partners, EA's third-party development and publishing programme]. And so we'll continue to push hard and push aggressively on both fronts."

Room to Grow

Electronic Arts will top $3 billion in revenue next year ("We'd better, or I'm going to be fired," comments Probst wryly), making it more than twice the size of its nearest competitor in the western publishing market - but the firm has its sights set much, much higher than that, Probst reveals.

"If you take a look at our world wide market share - people think of us as this 800 pound gorilla, but on a global basis our market share is only 20 per cent. We think, 'why can't that be 25 per cent or 30 per cent?' If you look at other companies in different industries, NIKE, for instance, on a global basis, has a 65 or 70 per cent market share. I think there's a long way for us to go in terms of incremental market share in the next three to five years."

Those words will be a stark reminder to EA's competitors in the industry that however large and dominant the company may be now, its ambitions are even larger - and its plans see no room for a slow down in its growth. "We're a growth company and our shareholders expect us to be a growth company," says Probst, "and we have to deliver against those expectations."

"We want to continue to drive market share - we think that's one of the ways we can grow the company," confirms Probst. "And acquisitions over the next three to five years are probably likely to occur. I'm not sure that it's going to be us acquiring other companies and I don't think that anyone's going to acquire us in the industry, but I think you're going to see consolidation in the next three to five years, where there are fewer competitors to us in five years than there are today."

Making the Transition

That consolidation - which is a factor Probst clearly sees as being very important in the near future for the games industry - may well be even more far reaching than most industry watchers predict. "I think the next generation technology transition is going to drive some of that," he explains, "because I think it's going to be very difficult and very challenging for some of these companies to make that transition successfully."

"Our technologists tell me that this is a more formidable technology transition than the last one, but I think that plays to our strengths," he reveals. "I'm sure that we will successfully navigate that transition. I'm not so sure about some of our competitors and smaller companies that aren't as well resourced in the industry. When I talk about consolidation and fewer competitors, I think that's what drives it."

Being blunt, we ask the question - is this a good thing? "I don't think it'd be a good thing if there were just a handful of companies in the industry," Probst responds. "If one or two companies aren't here in five years from now, I don't think that's a terrible thing. I can imagine in the longer term a movie industry model where there are seven or eight companies that matter."

The Kingmaker

There's an interesting anecdote about how Electronic Arts came to acquire the enviable - if perhaps somewhat overstated - "Kingmaker" moniker. The tag originates with the ill-fated Sega Dreamcast, a console for which the final death knell, in the opinion of many analysts, was lack of software support from Electronic Arts in terms of key franchises such as the EA Sports range. Supporting the PS2 but ignoring the Dreamcast, the conventional wisdom goes, effectively saw EA crowning the winner of that round of the console wars - almost certainly not deciding the outcome, but arguably hastening the demise of the Dreamcast and the triumph of the PS2 significantly.

The anecdote - which may or may not be true - is that EA didn't actually do it on purpose. Nobody at the company, internal rumours say, actually disliked the Dreamcast or was inclined not to support it - and the momentous decision (for Sega and the Dreamcast, at least) not to provide software support simply came because nobody actually liked it enough to champion ports of software to the platform. An act of omission rather than a act of commission, then, and if anything an even more intimidating display of EA's sway within the industry.

Both Sony and Nintendo, then, will be relieved that EA is keen on their forthcoming handheld systems - and both platforms will be seeing strong software support. Probst sees the PSP and the NDS as platforms which may help to ease the financial difficulties presented by the forthcoming technology transition in home consoles, as major platforms which will be performing strongly by the time next-generation home systems arrive on the market.

"We think it will help," he says of the impact of the handhelds on that upcoming period. "To some degree it's going to depend on how many units of PSP Sony can deliver to the marketplace, whether or not there are going to be any restrictions on the manufacturing side. As you recall, when they launched PlayStation 2, they talked about delivering 2 million units to North America in the first four months, and it turned out to be 1.1 million, so hopefully that won't happen again."

Concerns over supply levels aside, Probst is optimistic about the PSP. "We hope the supply is steady and significant," he says, "because we have high hopes for that handheld system. We think it's going to do really, really well."

The Kyoto Accord

What about the company's plans for DS, then? "Different demographic," Probst says emphatically. "We're thinking of DS as the 18 and under crowd and PSP as the 18 and over crowd. We think you're going to see a higher price point, at least initially, on PSP and different types of software as opposed to what's going to be on the DS."

"I think there's appeal to different audiences, different demographics at a different price point," he continues, "and we'll be represented on both systems. I think we're going to be more prolific on PSP than on DS, but we'll support both."

Nintendo is a key rival for EA, in some respects - the two regularly duke it out for the title of top software publisher in North America, for example - but Probst is adamant that he's happy to see the resurgent strength of the Kyoto-based company at E3 this year, and hopes that it will continue to build on that. "As far as we're concerned, three is better than two," he says. "We very much hope that Nintendo stays in the business, brings a next generation console to market and is successful with that. I think that's a good thing for the industry."

Going Live

Of course, one of the biggest announcements of E3 this year to have EA's name attached to it was Microsoft's centrepiece - namely the new deal between the companies which will see Electronic Arts' games supporting the Xbox Live service for the first time. The deal is a hugely important one for Xbox - albeit one of the worst kept secrets in the industry over the past few months ("For the record, I never lied," interjects Jeff Brown, EA's VP of corporate communications. "We always said we didn't have an agreement and that's correct - we didn't have a signed agreement until I think Monday, or Friday? Their CFO signed it on the day of the announcement. We never lied to you.")

It's taken over a year for EA and Microsoft to reconcile their differences over the Live service, but Probst seems very happy with the eventual outcome. "We don't feel as though we've been forced into anything," he says. "We made this decision on our own. It's a good decision for EA and a good decision for the consumer. It just took longer than it may have done otherwise."

Although it's known that many differences between Microsoft and EA over the online gaming service revolved around the control of the service and the ownership of the billing relationship with customers, Probst would not be drawn on details of the eventual settlement. "I think we were pretty forthcoming about that last year, when we talked about some of the things we weren't comfortable with," he says. "I think over the course of the past year we've got to a place where we're happy with the arrangement, Microsoft is happy with the arrangement, and the most important thing is that the consumer benefits."

"It did take us a year to provide that functionality on the Xbox system and the consumers are really happy about that. In the end that's what's important - providing as satisfying a consumer experience as we can."

So what of the conspiracy theories which suggest that the timing of Microsoft's decision to cancel its XSN Sports range of titles for 2004, just weeks ahead of the announcement that EA Sports titles would go Live on Xbox this year, is all too convenient? "Frankly, I don't think those things are related," Probst says dismissively. "I think they came to that decision on their own."

"I think it was a result of them deciding that their products weren't competitive from a quality standpoint, and that they needed to redirect those resources and get their sports business in good shape for next generation technology. But I can tell you that at no time during our discussions did the subject of quid pro quo come up where they would say, 'we'll give up our sports business if you do this' - we never had those discussions.

Diesel Fuelled

EA is an intimidating prospect for its competitors; a giant rival which, despite being big enough to handle a few wrong steps here and there, actually missteps remarkably infrequently, and a company which is by no means content to rest on its laurels and allow others to catch up with it. EA grew through the last transition period, it hopes to grow even more strongly through the coming one, and it has its eyes on all emerging platforms; it's hard to see what disaster could halt the progress of such a juggernaut.

The company already has its sights on next-generation technology, too. "They're shaping up," laughs Probst in response to a question about development efforts in this area. "What I will tell you is that we've had more exposure to PlayStation 3 and Xbox 2 technology than to whatever Nintendo is planning. But once they're ready then we'll engage with them as well."

And with that, Larry Probst is back to an appointment schedule which, if the clutch of stupendously famous faces in the EA corporate suite is to be judged from, would give most Hollywood producers a touch of the green eyed monster. EA is unquestionably leading the charge of the games industry into the established ranks of Hollywood, and indeed of the music industry as well - and the coming years, if Probst's measured but nonetheless impressive ambition are anything to go by, will be even better.

For now, we're just glad we didn't have to arm-wrestle Mr Diesel in order to win our time in that appointment book...

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