June 20th, 2012Top StoryThe Strange, Scary, Fascinating, Exciting Future of Video Games, According to A GiantBy Stephen Totilo
You have some favorite video games. And there are some series and some types of games that you hate. Maybe you keep up with gaming news on a site like Kotaku. You have an ordinary life, probably. A good one, hopefully. But you're not a wealthy Chief Operating Officer, and you might not be able to relate to all of the hopes and fears of the average COO. When Peter Moore, COO of Electronic Arts talks, what he is saying could affect you. It's even sort of about you. It's about the games you might play in the future and the way you might play them. But it's also about how the things you might say make a COO feel. That part, you might be able to relate to. The part about where the COO thinks games are going? That's the part that might make your head spin. EA, of course, makes Madden and Mass Effect and The Sims and Battlefield and Bejeweled and so much more. They're about as massive as it gets in gaming and what they want to do will affect a lot of gamers. I'm about to dump a whole lot of Peter Moore on you, but I've got to set this up first. Moore is an amiable executive who, in a previous incarnation as a top marketing guy at Microsoft, would roll up his sleeves to reveal tattooed logos of whichever major game he was about to hype. He's frank enough in interviews to say that a key product his company is currently offering might need two more years of tinkering before it's excellent. He's relatable enough that this middle-aged, English executive can precede his latest interview with me, conducted a couple of weeks ago in Los Angeles at E3 with a discussion about West Coast rap. He's mortal enough that he admits a weakness for reading all the comments under articles about EA and internalizing the harshest criticism. This is a Rorschach blot of a sentence, but let's give it a shot: He genuinely seems to care. He did not think it was cool at all that his company had been called "cynical bastards." I'd interviewed Moore many times before we spoke at E3 but was eager to again to follow-up on a rant of his that I had witnessed while visiting EA's Los Angeles campus in May. He'd ranted then, in front of reporters, about how day-one downloadable content, micro-transactions and other aspects of modern gaming were here to stay, how gamers needed to cut EA some slack and how he did not think it was cool at all that his company had been called "cynical bastards." (That last one was a reference to the creator of Minecraft, Markus "Notch" Persson, snarking on EA's promotion of an "indie game" bundle when the company started promoting a discount bundle of several indie-developed games that EA had partnered with and published. EA = indie? It's a $4 billion company, one of the industry's largest.) "We're going through, as an industry, just an unbelievably difficult transformation, that is not from one business model to another but from one business model to a myriad of different business models," Moore said to me as we chatted in L.A. Business models. Not the sexiest of topics. We were definitely in the realm of Things COOs Care About. But it does involve you, so bear with me. "It is a very interesting period," he said. "And I"ll say interesting period in our industry's history when the conventional wisdom of 'We're going through a console transition and, when the new consoles come out, everything is going to be fine again', is no longer the case. Consoles are still going to be a very important part of what we do. But so are browsers. So are iOS devices. So are Android mobile phones. So are PCs, which are feeling a renaissance. It's all coming together in this potpourri..." Moore: "I think, ultimately, those microtransactions will be in every game, but the game itself or the access to the game will be free." OK, stop again. A little more context is needed. The mood of my chat with Moore was the mood of much of E3. Many game creators and business people with whom I spoke seemed tired of this generation of gaming and said they felt gamers were ready to move on. Some, of course, are excited about selling games to the huge numbers of people who own Xbox 360s now rather than to the relatively tiny number of people who will own a next-gen Xbox in, say, the fall of 2013 when that machine is just getting started. But coming in from the sides, breaching the walls of the hardcore gamer's paradise that is E3 are the Zyngas and the Apples, the people making games for Facebook and iPad and Android. Companies like EA have been branching out to all of those fresh areas, just as they've been trying out new or imported business models—making their games free-to-play (you download the game for free and pay for gameplay-relevant upgrades and/or cosmetic items later); selling downloadable expansions even on the day a game launches, and so on. Overall, there's a sense of confusion as to what is really going to take hold, whether one form of gaming—primarily the $60 console game—is going to be dominant in the future. Hell, you're about to hear from a COO who raises the question of even how relevant the $60 console game will be. In fact, let's get to that part now: Kotaku: "How do you balance the effectiveness of any microtransaction-based game design or business model with the anxiety a gamer might feel that they're being nickel and dimed?" Moore: "I think, ultimately, those microtransactions will be in every game, but the game itself or the access to the game will be free. Ultimately, my goal is... I measure our business in millions of people have bought our game. Maybe when I'm retired, as this industry progresses, hundreds of millions are playing the games. Zero bought it. Hundreds of millions are playing. We're getting 5 cents, 6 cents ARPU [average revenue per user] a day out of these people. The great majority will never pay us a penny which is perfectly fine with us, but they add to the eco-system and the people who do pay money—the whales as they are affectionately referred to—to use a Las Vegas term, love it because to be number one of a game that like 55 million people playing is a big deal." Kotaku: "You're saying inevitably all games are going to be that model?" Moore: "I think there's an inevitability that happens five years from now, 10 years from now, that, let's call it the client, to use the term, [is free.] It is no different than... it's free to me to walk into The Gap in my local shopping mall. They don't charge me to walk in there. I can walk into The Gap, enjoy the music, look at the jeans and what have you, but if I want to buy something I have to pay for it." Kotaku: "I understand how that would work for Madden. I can't imagine how that would work for a Mass Effect. That's a storyline game." Moore: "That's the point. If the business model... what do you do? It may well be that there will be games that survive and they are the $60 games, but I believe that the real growth is bringing billions of people into the industry and calling them gamers. Hardcore gamers won't like to hear this. They like to circle the wagons around what they believe is something they feel they have helped build—and rightly so. But we have seen, whether it was with the Wii getting mom off the couch to do Wii Sports or whether it was, more recently EA Sports Active, where we get females who love to work out, all the things that social gaming did—Rock Band did it, Guitar Hero did it—all of the things that elevated it from being a dark art of teenage boys usually sequestered in the bedroom—that it was testosterone-filled content that everybody railed against—to where everybody is a gamer...if you can move your index finger and swipe it this way, your'e a gamer. And that has got to be the way it goes." You really could have called this E3 the anxiety E3, the E3 when people wondered and even worried about what was coming next. But why confine that to E3? The feeling's been rumbling for a while and there are people—younger gamers, I imagine—who might tell codgers like me who grew up playing Super Mario Bros. to get over it and embrace our free-to-play League of Legends era. Anxiety? Moore: "We can't end up being music." A big gaming chain went out of business in Europe. So, here's Moore, cheering for the big chain in the U.S.: "We all love going to GameStop and chatting with the guys. You want these guys to stay in business. You've got to provide them with opportunities to play in digital, otherwise they become Blockbuster. Otherwise they become Tower Records. " Under threat? Moore: "We can't end up being music." (I'll get back to that one.) Peter Moore, the polished COO, gives the impression of a man who is bushwacking, hacking at the reeds and swatting at the gnats, squinting at the sun while trying to find a clearing. And the last thing he yearns for now—though he likes constructive criticism—is what he thinks are unfair potshots. Moore: "You've got this potpourri of things coming together in this fabulous kind of soup that we need to figure out as an industry... I just ask for patience. You know me pretty well. I read all of this stuff…. I think at times gamers need to understand that we need to work our way through this stuff. They need to be patient with us as we try to figure out what are the business models of the future. I am the chief operating officer of a company that has offices in 70 countries and is responsible for the employment of over 9000 very creative, hard-working talented people. And when you see the things—look, I know it's the Internet, I know it's anonymous… Kotaku: "It's not all anonymous. Somebody with a name called you 'cynical bastards.' You referenced that [in an earlier speech]." Moore: "I did. I took umbrage to that in front of you. I just read that story and, what we're referring to—I'm almost doing the interview for you—is the fact that we decided to help some indie developers and bundle some stuff up…" Kotaku: "Right, those were partner games, right?" Moore: "Yeah, these were Partner games. EA Partner games… before I even came to EA, I was in awe of what EA had done in terms of EA distribution and EA Partners, to get out there and help provide a platform of distribution for developers that just couldn't' put their stuff out on the market. We were the guys that would do that. I don't know of anybody else in this industry that's got the record that Electronic Arts have, way before I got here, welcoming stuff. Look, we do it to make money. No bones about it. But we do it so that we can share money and put games out in the market. And you can name a hundred of them that you know EA has published as an EAP or, previously, EAD operation. Probably the biggest one was Rock Band, which was an EAP title which we helped market. We worked with MTV and really helped that little bit of a social change to what gaming was all about. Yes I know Guitar Hero was there, but Rock Band became a bigger… that was an EAP title. So, the 'cynical bastard' thing, and, of course, because of who it was and it got so much coverage that I just thought: 'This is not right for the employees who have worked hard to put this together. My team at EAP had worked with these developers and said, 'let's just bundle this together and offer up a deal.'" Kotaku: "Did you call Notch?" Moore: "No. " An EA spokesperson sitting nearby chimed in, pointing out that shortly after the "cynical bastards" incident, EA announced that EA would waive distribution fees for 90 days for any Kickstarter-funded games sold through its new PC service, Origin. A counter-measure to Origin's mighty competitor Steam? Probably. A boost for indies? Probably that, too. It's weird to hear a COO to ask his customers for patience as his company dabbles with different business models. Moore will vigorously defend charging $10 extra for Mass Effect 3's day-one DLC, maintaining that the $60 base game was chock-full, but his answer as to why EA didn't charge for the day-one DLC for Mass Effect 2 is a meek: "We make individual decisions about individual games and individual business decisions with partners who are involved." He certainly respects the enthusiasm of gamers. "There's no more passionate a fan of a medium than a gamer," he said. "People love movies. People like music. People love TV shows. Nobody loves their medium like gamers love their medium. I've always known that the tallest trees catch the most wind. That's a fact of life." And he doesn't think his company should be spared harsh words. "None of us expect to be nor do we deserve to be immune to criticism." Moore: "There's no more passionate a fan of a medium than a gamer." But the patience he's begging for sounds like it could be, well, expensive or even just confusing, for gamers who wait for EA to figure out the best way to charge for its stuff. "I want people to understand that what EA employees and the people who create the games are working hard to do is pick our way through this transformation as best we can," he said. "We're a publicly-traded company. We have an obligation to, quite frankly, make money so we can re-invest money in making great games again. The games you saw yesterday [at EA's E3 press-conference, games such as Dead Space 3 and Crysis 3] are, if you will, pre-paid by us from a development perspective. And it's only a year or a year and half down the road that we start to see that [money come back as people pay for the game]. That's why, to continue to do what we do and build the brands and build the business models, again, I'll ask for patience—the same way you covered me when I said we need 18 months for Origin and I still stand by that. "We're just picking our way through and nobody is any way trying to gouge anybody. [Moore slaps hand on the table.] We're picking through this at the same time that gamers are trying to figure out what he or she likes about games in the future. and how much they want to spend and what platform they want to do it on and what other genres there are of the future. We're doing our best, alongside everybody else. " Let's get back to the music thing. The upheaval of the music industry several years ago is surely what freaks out movie people and book people and, it seems, games people as well. Piracy, downloading and the Apple juggernaut changed everything. Who buys CDs any more? Who waits for albums? Music is the spectre. So let's end on this last exchange: Moore: "We've got to listen better as an industry, but at at the same time we've got to pick our way through these things. Stephen, we can't end up being music. Music used to make money selling music. They don't make money selling music anymore. Apple makes money selling music. God bless them, because they sorted out the problem that was BitTorrents and LimeWire, Kazaa..." Kotaku: "My kitchen table is LimeWire's kitchen table, because they went out of business and my wife and I needed a new table." Moore: "We've got to listen better as an industry, but at at the same time we've got to pick our way through these things." Moore: "I remember going to a lot of going-out-of-business sales in 1999, south of Market, but this ability for us to learn from the lessons of music... Maybe we don't sell our games up front and it's all about [making money later]. Maybe it is like music. Music is now all about going on tour and concerts, go do corporate appearances, sell your merchandise, build your online website, find ways to do it that way, because they don't make much money after Apple takes its cut, and that's where most of us get our music. "We're going to go through a similar trial and tribulation in the video game industry in which it's no longer about… we don't even see ourselves as a traditional publisher anymore. We're a digital entertainment company. And within that comes different ways we have to drive our revenue, keep our investors happy and make sure that w'ere providing compensation to our employees in the form of the stock price that they're happy with that is part of their equity package. And all of this is part of being a publicly-traded company." Kotaku: "The glass-half-empty reporter would mention that you didn't just mention as one of your priorities: Make great video games." Moore: "That's a given for EA. That's what we do." (Top photo by Chris Hondros | Getty; modified by Luke Plunkett)  |
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