EA Banks On Subscription Revs With Tiger Woods GameNot In-Store Sales
This story was written by Tameka Kee.
Stuck in a cycle of lackluster game sales, staff layoffs and sequential quarterly losses*Electronic Arts* has every reason to try to shake up the game industry status quo. That's what it hopes to do later this year with the online-only launch of its Tiger Woods PGA Tour golf game: people will be able to play the game without having to buy it in storeswith subscription fees and virtual goods sales as the most likely sources of revenue instead.
Tiger Woods will be EA's first attempt to evolve a console-centric franchise into a substantial online business, and it's a nod to the viability of similar efforts to go "beyond the console," by smaller gaming companies like Steve Perlman's OnLive and 4mm. "The console business at best appeals to 100 million people," EA CEO John Riccitiello told the WSJ, signaling that the company is aiming for a much larger audience.
Going online-only has its pros and cons. On the plus side, it slashes game development and manufacturing costs (including shipping and store stocking fees) and eliminates the issue of gamers selling the disc back to GameStop; subscriptions and virtual goods also represent a recurring revenue stream as opposed to a one-time $60 buy.
But disc sales make up the bulk of EA's revenue right now, and there's no guarantee that enough gamers will subscribe to the new Tiger Woods game to make up the difference. And while it takes fewer resources to produce digitally distributed games, the company still has to invest in the personnel and infrastructure to support the new model (to the tune of $150 million per year for the past two years, according to the Journal). Still, EA is betting that the benefits will ultimately outweigh the costsand that the shift to digital will eventually help the company double its annual revenues to $6 billion.
By Tameka Kee