During its earnings call earlier this week, Electronic Arts (EA) CEO John Riccitiello declared the company had reached “the end of an era.” By that, he meant an era dominated by packaged games for consoles and gaming-dedicated handhelds. While the decline in packaged game revenue is no surprise given that current-gen systems are in their seventh year, Riccitiello suggested the industry is settling into a new normal defined by growing digital and mobile opportunities.
EA is well-positioned to capitalize on these trends. It’s grown digital revenue at a steady pace, averaging annual growth of 40%. The publisher is currently tied for first in digital revenue among western gaming companies, due mainly to the success of Battlefield 3 Premium. Its Origin digital distribution service is producing solid numbers as well: 30 million registered users and 4.4 million buyers with average sales of about $64. What’s more, about 13 million are accessing Origin on their mobile devices.
This shift toward mobile games will only accelerate as more consumers adopt 4G LTE services, and EA ramps up simultaneous multi-platform releases of its core titles. The fact that Origin now has 70 independent developers pumping out content for the portal can’t hurt, either.
EA’s public outlook signals a video game market in rapid transition. Packaged and social games are losing steam, while digital and mobile options take up the slack. The question is: Will the latter produce revenues fast enough to make up for losses in more established product niches? The uncertainty around the answer has compelled EA (and many other AAA title publishers) to adopt a conservative title development strategy, emphasizing its most popular franchises. This is a natural, but hopefully, temporary reaction to the current market volatility.
What makes gaming so exciting is the ever-present potential for an original idea to break through the standard industry fodder. It’s an industry built on the next big thing. Let’s hope powerhouse publishers like EA haven’t entirely lost their appetite for discovering it.