Gaming giant EA Future: A dilemma for conservative companies

John Ricitillo, chief executive of EA, the gaming giant, Johnriccitiello a few days ago that it would leave at the end of the month, causing an uproar in the industry. Mitch Lasky, a leading venture capitalist, Mitch Laski on his blog to look ahead to the future of EA. The following is a summary of the full text: the current extensive discussion around EA tends to focus on the digital distribution of EA Games, the mobile game of EA, and the development of EA in free value-added mode (F2p,free-to-play). Can the company win these new markets? What should EA look like in the 21st century? Below, I intend to take stock of EA assets and the current digital gaming economy from the perspective of what the new leader of EA might face. Note that the "digital revenue" range referred to in this article is relatively narrow relative to the "digital revenue" (digital revenue) in the EA financial report. The former includes online store sales for physical disc games, as well as "extras" (additional content) revenue for home game host games. This article refers only to the monthly fee for mobile games and online games (or card charges) and the income of virtual goods, as well as the "extra content" income of home host games. The new platform has "shaped the climate" according to my experience, game giants are well aware that mobile, PC games and free value-added models are inevitable trends. They know what the future is, and they know it's been a while. But the top managers of these companies still have a lingering view: they feel that these new trends have not yet "shaped the climate" – which means that revenues from existing home hosting games are still far more than the revenue from these new platforms through new business models. The revenue generated by digital channels and their higher profit margins, it really pleased them, but for companies that sold more than 4 billion dollars a year for EA and Activision, the channel could increase profits, but there was no "climate" for boosting revenue growth. There is a problem with the view of the top of the game, that the current situation is no longer the case. In mobile and free value-added mode PC platform, some games have indeed formed the climate. For some of the next generation of game publishers, the high level of profit from popular games is almost unthinkable-at least in terms of the physical disc game. Roit Games's "League of Heroes" (League of Legends) is an online game I know more about, and its revenues are expected to reach the level of World of Warcraft in the near future, bringing record profits to its parent company Tencent. On the mobile platform, Supercell's two gamesThe net revenue created by Clash of Clans and Hay Day is already comparable to the top 5 home host game series. Wargaming's online games "tank World" and NaturalMotion's mobile game "Speed Racer" (CSR Racing) generate revenues and profits that make them the backbone of older entity disc game companies. EA's mobile and PC games for EA's ipad games for EA's next CEO, The good news is that the company has not been indifferent to the phenomenon. In fact, EA has been the most active large game publisher in terms of winning digital revenue. The company acquired the predecessor of EA Mobile as early as 2006, and mobile gaming start-up company Jamdat Mobile. EA Mobile is currently the largest market share possessor on the iOS platform, probably on the Android platform as well. EA has also launched a number of sophisticated mobile games, such as the city-building game "The Simpsons: Exhaustion" (the simpsons:tapped Out), and the recently released real Racing 3, which demonstrates the company's ability to create world-class games for mobile platforms. EA has not yet been able to launch a landmark hit game--in last summer's top-grossing game list, "Real car 3" is not the same as "Speed Racer" (CSR Racing)-but as long as EA has some strategic knowledge, the leaders of the game studios boldly embrace the new business model, EA's mobile gaming business has the potential to earn 200 million dollars in annual revenue and 40 million dollars in profits. If EA can control the cost of production (which is an old problem for the company) and marketing spending, the likelihood that their mobile business will grow to 1 billion dollars within a few years is high. Also, EA's Battlefield (Battlefield) series has been good for free value-added PC games. Although it has a gap with the physical CD game called Call of deriving or the free value-added model popular game "The League of Heroes", it also brings a steady revenue to EA and demonstrates the competitiveness of EA in this space. EA's Origin platform, although not compared with steam, but its performance is also commendable, and the recent steam product innovation is insufficient, EA may take the opportunity to superior. That said, the recent crash of the Sim City server has shown that it still has a long way to go before it can build a stable, scalable online business. EA Sports Game Virtual product EA transforms FIFA into a virtual goods engine, which is a very smart move, but it has not attracted the attention of the industry. There is no doubt that FIFA hasIt became a key game for EA to connect physical and digital games. At the end of 2012, the company said it sold 12 million FIFA 13 on all platforms, but what impressed me most was that the FIFA Ultimate Team MOD, the virtual goods engine of the entity's CD-ROM game, created more than $150 million in virtual goods revenue ( Does not include the more than 70 million dollars earned from the Asian Network version. The FIFA Ultimate Team is one of the coolest things EA has done in the recent past, and all sports games in the company should follow this pattern. The success of the ultimate team shows that EA can make significant revenue from innovative virtual products. Therefore, assuming that the next generation of EA's top level has excellent product selection capabilities, good commercial savvy and analytical skills, EA gets 2 billion dollar digital revenue is also normal: 3 to 4 100 million dollar level mobile games, 3 to 4 dollar free value-added mode PC games, from online games (Pogo, Leisure and social gaming) earns 200 million dollars, earning 500 million dollars from sporting-game digital products, plus 7788 other online and mobile businesses. I think that if managed properly, the digital business can bring 1 to 1.5 dollars per share for EA. EA Home host business: Highest risk Now let's look at the status of the home game host business. I think that the home machine business is the future development of EA unknown factors, is the highest risk platform. As we all know, in the past few years, home hosting business has been declining at a two-digit annual rate. At the same time, the next generation of host hardware to be launched this Christmas may revive the market, and this expectation may bring a "Zha bounce" (Dead cat Bounce) for EA and video, as the two companies are most affected by next-generation game consoles. To be a participant in the next generation of gaming host platforms, EA will need to give the green light to more than 10 games, and their production costs are very, very high because EA has always had a tendency to splurge, and these games need to support multiple hardware platforms and online capabilities at the time of launch. This makes EA's development costs likely to be as high as $1 billion trillion. And sports games also have a yearly update of the tradition, so EA every year has a sum of this expenditure. In an interview, EA's CEO described the introduction of a new generation of consoles as "the light at the end of the tunnel." But I was worried because things might not be as rosy as he thought. Home host games, even with the number of blessing, or mobile games and free value-added mode of the online game is completely different. These two areas require different talents, different infrastructure and logistics support, different team sizes, different development rhythms, different marketing strategies, and a wildly divergent revenue recognition (revenue recognition) model. Mobile and free value-added model between PC games, althoughThere are considerable differences in size and scope, but in fact they are more similar to each other, and the difference between the host game is relatively large. We can basically assume that the brilliance of Sony, Nintendo and Microsoft's home mainframe in 2005 will never reappear, and that the number of users will never return to that level. Home Mainframe has basically lost the living room this position. My own family already has a situation where a child sits on a couch and uses his cell phone to play "The Temple Escape" (Temple Run), putting aside a large-screen high-definition television that connects to a variety of game consoles and broadband Internet. Obviously, the main trend of home mainframe business is the decline. EA's Dilemma EA faces a dilemma. To support a new generation of home hosts, EA will have a bloated team and high production costs, as well as a physical disc marketing and sales campaign, which I believe are not contributing to other EA business machines. Therefore, investment in the home domain will bind EA's hands and feet, affecting its new platform business. Of course, you can put home host game TV advertising costs, think of it is conducive to the promotion of mobile and PC games "brand Halo". But the only thing that EA can benefit from is that when home gamers play games online, they use EA accounts instead of Sony, Microsoft, and Nintendo's accounts, or the EA doesn't really get the benefits of gaming and Cross-platform from home hosting games. And it's unlikely that the home host manufacturer will be easy for EA to do this. However, if EA alienated the home hosting business, they would feel strongly that they missed a chance to make their revenues grow fast (that is, short). For executives, the opportunity is really tempting. On the one hand, the management of the home host game as their main business, on the one hand, mobile or free value-added PC business and the effect of dubious. That's why, if EA is doing its best in home hosting business, the business may get the most attention from management and build a talented development team. The games need to be advertised on TV, advertised and sold in a large number of retail outlets, and share audiences with Microsoft and Sony, competing for cross-platform interests. As a result, the business is fraught with risk and execution risk (Execution disorientated) and requires a nuanced long-term strategy. In my opinion, EA needs to seriously rethink the home console gaming business – the business has been fairly lax in product selection, cost control, and marketing spending, and it is also the biggest risk factor for the new EA platform business. So, on the whole, I think EA has a lot of opportunities, but it takes a lot of effort to cut some of the costs to become an outstanding enterprise again. The management team of EA cannot take advantage of all the opportunities in front of it, and the recent loss of management has added to the gloom. However, I am more convinced than ever that the traditional properties of games, such as brandingand quality can effectively reduce the cost of user acquisition (customer acquisition), and EA has advantages in these areas. Although the profit margins of sports games are not as high as they used to be, they are still very popular around the world and EA is doing a great job of improving the business. Of course, there are other optimistic aspects of EA, but it's essentially a very conservative company, and it's not easy to make a big shift to seize new market opportunities. EA's current strategic position suggests it could be very, very difficult to find a new CEO.