Bloomberg News

Electronic Arts Betting on Cheaper Free-to-Play Titles

August 30, 2012

Electronic Arts Inc. (EA:US), the second- largest U.S. video-game publisher, will develop fewer Facebook games as it shifts to mobile and free offerings, the head of the company’s development studios said.

The maker of “Madden NFL” and “Medal of Honor” has become the largest publisher of games that are free to play on mobile devices, Frank Gibeau, president of the Redwood City, California-based company’s EA Labels said in an interview.

Electronic Arts is hastening development of less-expensive games, titles that cost $2 million to $5 million to produce, to double its share of the mobile market, which Gibeau put in the “low teens” in percentage terms. To that end, Electronic Arts combined Playfish, the unit focused on social-media games, with Maxis studio, which develops the popular “Sims” franchise.

“We’ll build social games, but we’ll probably have a smaller line-up,” Gibeau said yesterday. “Free-to-play is the dominant model. You can fail fast and you can fail cheap.”

Developers are trying to adopt a “cross-platform” strategy, delivering games for play on everything from traditional home consoles to Apple Inc. (AAPL:US)’s iPads and Facebook.

Those efforts have been complicated by the shifting tastes of casual players, constituting the majority of the market, who don’t stick with individual games for very long, Gibeau said.

With free-to-play games, users spend nothing upfront. About 10 percent to 15 percent of players purchase additional levels or add-ons. “The Simpsons” is the most popular such game for Electronic Arts, Gibeau said.

PopCap Games

Electronic Arts’ PopCap Games, which makes titles played on Facebook, fired about 10 percent of its staff on Aug. 21.

The company acquired PopCap in July 2011 for $750 million in cash and stock, with performance incentives that potentially raised the price to $1.3 billion. Zynga Inc. (ZNGA:US), the largest maker of games played on Facebook, has been grappling with an exodus of top executives as it tries to revive growth by making more money from mobile services.

Electronic Arts gained 2 percent to $13.10 at 2:28 p.m. in New York. It had declined (EA:US) 38 percent this year as of yesterday. Activision Blizzard Inc. (ATVI:US) is the largest U.S. publisher.

With the global online gambling market poised to hit $30 billion by 2013, social game makers also are preparing to offer products with real betting as a new source of revenue.

Electronic Arts hasn’t yet decided whether to add gambling to its World Series of Poker game and another title, Gibeau said. It would be relatively easy to do so, he added.

“We don’t need to do this in order to grow our company and achieve our goals,” he said.

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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Companies Mentioned

  • EA
    (Electronic Arts Inc)
    • $47.85 USD
    • 0.40
    • 0.83%
  • AAPL
    (Apple Inc)
    • $112.94 USD
    • 1.16
    • 1.03%
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