Electronic Arts (NASDAQ:EA) announced Wednesday at the Gamescom tradeshow in Germany that it would be transforming its coming real-time strategy game "Command & Conquer Generals 2" into a free-to-play digital platform.
The game was announced less than a year ago at the 2011 Spike Video Games Awards as being in development by a newly formed Bioware studio -- creators of "Mass Effect" and "Star Wars: The Old Republic" among other acclaimed titles. The new announcement indicates a dramatic shift not only in the developer's intellectual property, but also in EA's wider embrace of evolving digital platforms over traditional hard-copy products in the coming years.
Speaking to Reuters on Sunday, Electronic Arts COO Peter Moore acknowledged that its business model has been "evolving" to suit trends toward digital content development in the industry that EA has helped to define for 30 years. "There will come a point, whether it is two or three years from now, when we say. 'We are doing more in digital media now than we are in physical media,' and it's clearly ... not far away," Moore said.
EA's digital revenue has increased in the last 12 months to $1.3 billion, Reuters reports. By the time game developers and analysts began to descend on Gamescom this week, industry analysts and shareholders were already concerned that traditional publishing models like those previously touted by Electronic Arts can no longer sustain their edge against mobile and web-based platforms like Zynga's assorted "-Ville" and "With Friends" games.
The numbers, all reports seemed to indicate, are clear: physical sales are on their way out. Sales of boxed copies of video games dropped 20 percent to $548 million in July-the eight straight month of decline for the industry. Meanwhile, digital sales increased 17 percent to $1.47 billion, according to a report by Bloomberg.
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An analyst from the research group NPD said the digital gains still are not quite enough to offset the losses in physical retail, but that did not stop Moore from putting more of EA's eggs into the digital basket. "This fiscal year we have 41 social mobile and free-to-play games on the slate, and later in the year we might make announcements about more games coming," he told Reuters.
Moore maintained that his company "will never abandon physical media." Yet little more than a month earlier, Electronic Arts Labels president Frank Gibeau admitted in an interview that it was "inevitable" that EA is "going to be a 100 percent digital company."
Despite the overwhelming trend, it is nevertheless surprising to see EA pushing more of its core AAA franchises into such a young and barely tested business model. BioWare was only purchased by Electronic Arts in October 2011. As a developer, the newly acquired company has a long history and reputation for crafting intricately detailed and vast role-playing games that emphasize high-quality voiceover work and scriptwriting and appeal to a dedicated fanbase of "core" gamers.
Then just months after their new massive-multiplayer online (MMO) game "Star Wars: The Old Republic" was poised to take on Activision Blizzard's (NASDAQ:ATVI) "World of Warcraft," the game was shifted to a free-to-play model. "Command & Conquer" was originally touted as a similarly deep "core" title offering single-player experiences such as a unique campaign and storyline. The free-to-play structure instead offers a multiplayer-only social experience along with always-online digital rights management (DRM) that will require players have a constant Internet connection and be logged into EA's native digital platform, Origin.
So, really, it was almost more of a surprise when "Command & Conquer" was initially alleged to be anything other than a free-to-play multiplayer game.
"We are thrilled about this opportunity to transform Command & Conquer into a premier online experience," Jon Van Caneghem Vice President and General Manager of EA, said in the company's press statement. "For nearly two decades, this franchise has existed as something you buy; now we are creating a destination where our fans will be able to access the entire Command & Conquer universe, starting with Generals and continuing with Red Alert, Tiberium and beyond. With Frostbite 2, we are able to keep an emphasis on the AAA quality our consumers expect while staying true to the RTS gameplay they know and love -- all available online for free."
The reasoning here seems to be that such a focused and historic brand identity will free up the game from some of the negative connotations of the "casual market" or other free-to-play games like those made by Zynga, a company that EA is currently suing for copyright infringement of its Facebook game "The Sims Social."
But the story for Zynga itself is even less clear. Despite its continuing financial and legal troubles, the newly minted public tech company seems be poised to move into publishing higher-quality titles from third-party developers who are willing to invest in a traditional distribution model. The social game developer recently announced a partnership with Phosphor Games Studio, for instance, a "console-quality" title that Zynga hopes to promote on the mobile app market using its obvious clout in the field.
In an interview with the website Pocketgamer, Adam Sussman, Zynga's head of mobile publishing, explained the new partnership as an expansion of his company's brand beyond the casual market to reach "core" gamers as well: "Zynga strives to expand its portfolio to include more categories of games that our players want."
While he would not go into much more detail about the company's future plans, he did add that while "Zynga believes free-to-play is the future of social games and will continue to primarily use this model for its own first-party games" it is still "partnering with a number of third-party developers across several different genres."
"Horn," Phosphor's upcoming game, will be sold to players for $6.99 up front. The details of the partnership aren't clear enough to show how, exactly, Zynga plans to benefit from this move. But the essential question for a publisher like EA thus becomes: Are AAA game companies rushing to embrace the "Zynga-fication" business model even as Zynga itself is doing its best to move away? After analysts seemed ready to diagnose Zynga as all but a failed experiment in social media and virtual economies, is the entire game industry turning head over heels?
"I think the big publishers see free to play as a way to squeeze some extra coin out of old IP," Bert Bingham of Gas Powered Games wrote in an email. His studio's 2009 game "Demigod" was one of the first -- and only -- games in its genre to be distributed as a standalone boxed product rather than an evolving digital free-to-play platform. But while the game was well-received at release, Bingham admits that it never had anything close to the numbers of its competitors like "League of Legends" and "Defense of the Ancients."
Bingham sees development as a trade-off between asking players to invest more up-front for a higher-quality product and luring them into a digital content platform free of charge (similar to something like "FarmVille" or the fellow EA title "The Sims Social") in the chance they will begin to spend money on in-game virtual products.
"The amount they invest becomes a double-edged sword," Bingham explained. "The more they invest, the more intense the pressure to squeeze players for cash at every turn, and there has to be a high minimum bar they would set for a classic IP like ["Command & Conquer"]."
EA has not given any information yet about how it plans to monetize "Command & Conquer," so any predictions are necessarily speculative. Yet embracing a "Zynga-fication" model for one of its oldest and most respected franchises is bound to make the company unpopular among some core fans of Electronic Arts and "Command & Conquer" alike.
"I guess it depends on how involved the financial guys are in making the decisions how and where they charge money in the game," Bingham concluded. "EA can certainly fill a couple boardrooms with guys who aren't afraid to push that type of agenda right into a player's lap."