The revelation this week that EA Sports will no longer allow purchasers of used titles to play online without a $10 "Online Pass" set the gaming community on fire. From business standpoint, however, this appears to be a great move for EA Sports, and it's a policy that likely will extend to all EA titles in the future.
IndustryGamers chatted up some of our favorite game industry analysts to get their respective views on this EA Sports decision. The consensus appears to be that all major game publishers could soon be following suit, charging for online services to recoup costs.
Michael Pachter, Wedbush Morgan Securities
I think it's brilliant, and don't think that it's intended to "battle" used sales. The concept is simple: as gamers migrate to heavier online play as a part of the experience, the publisher needs to be compensated.
If the gamer is the original purchaser, the publisher gets paid when the user buys the game; if the gamer is a second-hand purchaser, the publisher currently does not get paid. With Online Pass, EA is ensuring that second-hand purchasers will pay something for the maintenance of the server network and for access to premium content, since they extend the costs of providing these services.
Yes, I think it will become the norm at the major publishers, and think that EA is charging too little...
Colin Sebastian, Lazard Capital Markets
It's a double-edged sword for publishers. On one hand, it may discourage some used sales, but on the other hand, it devalues the used games that consumers would otherwise use as currency to buy new games.
David Cole, DFC Intelligence
I think the game industry has created a problem for itself by giving consumers unlimited online game play for free. I think not just to battle used games, but as a basic business sense of generating more revenue from usage more and more of these programs will be looked at being implemented.
How consumers react is a totally different issue.
But overall the EA Sports Online Pass seems like a mild introduction. I can see consumers griping, but really it seems entirely fair that if a consumer is buying a second hand copy they are not going to get direct support from the publisher. It is not like they are charging a season pass for all users that want to play Madden online.
The reality is that these games are pretty expensive to develop and it is unrealistic to expect companies to support free online play forever. I think the bottom line in the industry requires companies to start to find ways to monetize online usage.
Jesse Divnich, EEDAR
I am still on the fence on whether discouraging used sales significantly impacts the purchase of new titles. Arguments have been made that used sales can positively impact the sale of new products, specifically if a consumer is trading in used titles in order to purchase new games; however, I understand EA's point of view.
I believe the EA Sports Online Pass is a positive for Electronic Arts.
As more users become connected and take advantage of multiplayer features, developers are focusing more resources into the post-development process by supporting multiplayer features such as updating rosters, paying for bandwidth/servers, adding free DLC, and managing the community. Whilst there is an inherent argument that a consumer purchasing a used copy of a game solely to play the content on the disc (single player mode) poses no financial cost to the publisher (aside from the possible loss of a new sale), this is not true for the multiplayer experience. Technically, if a consumer purchases a used game and then takes advantage of any feature that requires post-launch resources (multiplayer) then that consumer is free-riding, and becomes a direct financial burden to the publisher, albeit a small burden per user, but when multiplied by 100,000 used purchases, those costs quickly add up.
It is only fair that publishers recoup some revenue from consumers who take advantage of these post-launch game features.
The traditional video game landscape is quickly evolving and no longer is the complete gaming experience enjoyed by the content solely on the physical disk. Seven years ago, when you purchased Grand Theft Auto for $50, the entire experience was encapsulated on a DVD; in 2010 that is no longer the case.
The EA Sports Online Pass is a service that simply says, "If you plan on taking advantage of features not included on the disc, we ask that you pay a small fee." To me, that sounds perfectly reasonable.
I say bravo to Electronic Arts.
Mike Hickey, Janco Partners
EA's digital sales will likely show acceleration compared to prior year, as they have positioned themselves to participate in the economics of used game sales. A used game purchase requires an additional $10 fee to access online content associated with that game. GameStop is being aggressive at supporting the program, as they position themselves as a seller of PDLC. We expect the online fee program, will be rolled out on all future EA games, and will likely encourage new game purchases and/or push down resale value of used EA games.
Arvind Bhatia, Sterne Agee
I think the jury is still out on the impact of Project $10 on used games. From what I have heard so far, there wasn't a noticeable impact on Dragon Age and Mass Effect 2 used sales. Given GME is still the only real player in used games, I think it could manage its pricing, if needed, to accommodate this model and still maintain its used games margins. Also, given Game Stop was quoted in the same press release that announced this deal, I think GME is looking at this as an incremental revenue opportunity.
4 Comments
May 11, 2010
But will EA keep running their servers long enough to make it worthwhile? They have a nasty habit of shutting down online play after a few years which hurts even the original purchaser.
May 12, 2010
The problem I have is that used game sales aren't creating additional stress on their servers that havn't been compensated for. Lets say that EA sells 100 copies of Madden. Say, 10 of those are traded in at Gamestop for the purchase of a new game. Then those 10 copies are resold and played online. Thats still only 100 copies that EA recieved compensation to maintain their servers for. Those copies didn't multiply and create 10 additional copies that are creating addition stress/cost. They were compensated for 100 copies of server space, and that is all that is running.
Are they also forgetting about the additional revenue from DLC that they might not be getting if the used game purchaser won't be buying if they can't afford the cost of a new game to begin with?
EA is just crying that the used game purchaser didn't give them any money for the game they now enjoy. It's just like with used cars. Does Ford get any money from the sale of that used car? No, but what usually happens when a car is traded in? Another car is purchased. Sometimes new.
What could happen if EA devalues their own games? The people that depend on that value to purchase new games (which the publisher gets revenue from) may not be able to afford to buy that new game. In turn the publisher doesn't sell as many games and loses profits.
I just wish that EA would come out and be honest instead of trying to tell us this isn't an attack on used game sales, cause that is what it is. Used game sales don't cost them money in server maintenance. It costs them money in lost revenue from new game sales. I can understand, even respect that EA is trying to make money. Just call a spade a spade!
Also what about those who purchase the game new but have multiple XBOX Live or PSN accounts? Will they too have to pay $10 for each of those additional accounts to access online content?
Bottom line, for my money, if EA is going to start charging me above my XBOX Live subscription to access their online content, the service had better be far superior to what they currently offer. If not, 2k sports and other publishers who don't charge extra will begin to look much more appealing.
May 12, 2010
I agree with Kevin except I don't respect they way they're trying to make money. Gamers have proven that they'll support paying for online twice and they'll attack anyone who offers it free. This is most likely the outcome of that. EA would be better off selling the Single Player and Multiplayer on seperate disc if they're going to waste time doing this. Multiplayer lovers have shown that they'll buy games with only multiplayer. I think MAG and Socom Confrontation sold 1M each.
Free ride? Post launch resources? The multiplayer is on the disc. I payed for the game. I'm paying for my Internet connection. How am I getting a free ride? Am I sharing the game? No. Am I playing a copy of the game? No. Stop being foolish Mr. Divnich. EA received their money already. Whether I decide to give away my game or sell it is my business, Not theirs. If you don't want people to have your product then don't sell it. Stop coming up with stupid laws and silly schemes to control the consumer.
Gamers should never support this. What you're not realizing is that if you have more than one 360 or it breaks and you get a new one then you are screwed. Until recently I use to be one of those only buy new people and thought people who buy used are lame and didn't support the developers. Now I completely see the need for buying used.
May 12, 2010
It is a smart move if you are EA but as a consumer who's already paying for Xbox live every year, I feel I shouldn't have to pay anymore to play online. And as such, if and when EA starts to implement this on all of their non-sports games(like Crysis or Burnout) then I just won't be purchasing those games until they are $20 or less.