EA "dropped the ball" during generational transition
But shift to new models and a refocused product line has been backbone of resurgence, says Riccitiello
EA CEO John Riccitello has spoken about the publisher's continuing embrace of digital distribution and new business models, which have been a response to the company 'dropping the ball' during the transition to the current console generation.
Speaking at the Goldman Sachs Technology and Internet Conference yesterday, the CEO admitted that EA had not initially adapted well to the "PS3 generation", but has now formulated new strategies which have lead to it being the "one of the fastest growing businesses in the industry today," with the digital sector being the fastest growing part of that, forming around a quarter of EA's business.
"Through this last transition to the PS3 era, Xbox 360, Wii - for a whole bunch of reasons that aren't worth getting into in a short answer, I think it's fair to say we dropped the ball," Riccitello told listeners. "Our IP deteriorated, our costs went up, and we didn't really have an answer for the rise of digital.
"Over the last three years, we've made a dramatic number of changes, which can be described as part turnaround, part transformation. The turnaround has been cutting our title slate in half and dramatically strengthening our intellectual property portfolio. I think we have the strongest IP portfolio, by far, in the industry today.
"At the same time we have been managing costs aggressively and we have built a leading position, a broad base, in digital gaming. Whether it's mobile, strength in social networks, microtransaction-based services, game services. This past year, we recorded over $700 million in purely digital revenue streams."
However, Riccitellio still sees the core console market as incredibly important to EA's business model, fostering new IP which can then be transferred to other mediums.
"The core market for high definition gaming is a huge and fast-growing one," Riccitello believes. "It's a great business, it's growing, and it's where IP is created that spreads out onto other platforms."
Riccitello also talked about the allure of microtransaction models helping the company to find its feet after a few years in the wilderness, calling the 'play first, pay later' method "a very compelling idea".
However, the company still obviously has faith in its forthcoming MMO Star Wars The Old Republic, and although he has the utmost respect for market leader World of Warcraft, he doesn't see its hold on the subscription model as unbreakable.
"It's one of the greatest products ever invented," Riccitello said of Blizzard's MMO. "It's probably the most profitable individual entertainment property ever built. Um, we're going right at it. We want to take a share; we want a leadership position here. And our product is innovative in a number of ways.
"I'm not expecting to sort of knock them over but you know, they've got 12 million subscribers in the Western market and a big chunk of business in Asia that counts them up to that 12 or 13 they keep talking about. We want to take a big chunk of that."