EA Leaps into Free Video Games

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The beauty of EA's new business model, adds Pachter, is that it's a "tamper-proof, pirate-proof product." The game lives on servers in the network, not on an individual's PC, and the servers control the characters and keep track of each player's scoring history.

"It makes sense to take this model worldwide," says Eric Hippeau, a managing partner in the New York office of SoftBank Capital. SoftBank is an investor in Shanda Interactive Entertainment (SNDA), a leading Chinese online game company that raised $151.8 million when it listed on Nasdaq in 2004.

Pay and Win? Not So Simple

Like FIFA soccer, Battlefield Heroes, which was created by game developer DICE in Stockholm, Sweden, features a built-in matchmaking system to ensure that players of equal skill are paired together for fair play. Although it is possible to buy performance-enhancing capabilities for avatars, safeguards are built in to ensure that players cannot simply pay to win.

The idea is to build local social networking communities around games, as EA has done in South Korea. "If only the guys who pay the most win, the game is dead, so it has to be tuned very carefully so that the really good players are the ones who actually win," says Florin.

It will take time to develop such services for each market, Florin cautions. "We will build social communities, country by country." The free-to-download version of Battlefield Heroes will become available beginning this summer. The U.S., Britain, Germany, and France are among the countries where the game will be introduced first, though a precise timetable for each country has not been announced.

Gamer's Choice: Retail or Online

If EA is correct, free-to-play games may appeal to consumers put off by the online subscription model popularized by the hit game World of Warcraft, from Vivendi's Blizzard Entertainment unit. While hard-core gamers don't mind paying a monthly subscription fee, Florin argues, most casual gamers do. And not all home PCs can handle the rich graphics in games like Battlefield Heroes, so the free-to-play version launching this summer will be less complex. It will also be more cartoon-like and easier to download.

EA's premise that retail sales to hard-core gamers won't go away was apparently borne out by the reaction of one of the DLD conference speakers. Tom Varsavsky, the 13-year-old son of serial tech entrepreneur Martin Varsavsky, was asked to speak at the conference because of his expertise on gaming. The teenager admitted that he had to swear off World of Warcraft because he was playing it up to five hours a day.

The younger Varsavsky concedes that free-to-play may attract new users. But he still plans to buy games in stores. After all, he notes, if customers buy all the accessories online, they may end up paying more than if they had bought the boxed game in a store. Still, EA is figuring that for every young Varsavsky out there, there could be dozens of others who'd rather approach their games one bite at a time.

Schenker is a BusinessWeek correspondent in Paris.