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Friday, June 19, 2009
EA's John Pleasants: A Digital Distribution Future For Games
6:00 AM | Cord Kruse | Comment on this story

VentureBeat has posted a new interview with Electronic Arts COO John Pleasants. In the interview the executive discusses a variety of topics including the shift from traditional game distribution to online models, how the idea of games as services will lower costs, and the company's future plans.

VB: How do you look at this whole shift from software to Internet services? Everyone from Microsoft to Autodesk is doing this.
JP: Ticketmaster was a software and infrastructure company that moved to a direct-to-consumer model. For anyone in software, the move is going to be like moving from Blockbuster to Netflix, record label to iTunes, Siebel to They all carry elements that are directly parallel to us. If you believe all games will eventually be services ó as I do ó then the idea of game teams that make a game, ship it, and then do something else goes away. They will now ship and day one begins when the customer gives feedback to the live service. The way you distribute will be different. The way you charge will be different. There will be more permutations in pricing. Merchandising will be much more important. Co-marketing will be much more important. You have to have persistent identification and entitlements for a user, no matter where they are or in what game theyíre playing.

VB: But there is something I donít understand about how much games cost to make these days.
JP: Thereís no question that in a world where games are a service, the cost to deploy any one game should be coming down over time. We have been investing in infrastructure for that. You can make games faster and then test them and revise them. We had big teams in high-cost locations. We had $2.3 billion in costs and were on track to spend $2.6 billion last year. We took $500 million out of that run rate through internal cuts. None of that was pleasant. But we did take the cost structure down significantly. At the end of the day, you have to make hits. If we donít grow our revenue and we have $2.1 billion in costs, thatís not good enough. If we grow revenue by a billion, then itís OK to have $2.1 billion in costs. You look at the bang for the buck you get from your investment. Our operating margins this year are double digit, but theyíre low double digit. Thatís unacceptable to us as a management team. We want to double the operating margin over time. To do that, you either grow revenue or cut costs. We want to grow revenue or shift revenue to higher-margin products. We are making fewer titles to focus on quality. If you make fewer titles, you have to make more revenue per title. Itís a hit driven business. You are only as good as your hits. EA used to have lots of hits. If you looked at the top 30, we used to have 10 games on it. Last year, we had four. If you do the math on it, your cost structure is not right.
Visit the page linked below to read the full interview.

VentureBeat: Shift To Digital Game Distribution
Electronic Arts

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