IndustryGamers: Let's start with your feelings on this year's E3. The past two E3s saw a lot of negative feedback and Peter Moore was pretty outspoken about it.
John Riccitiello: What did Peter say?
IG: I believe he called the event “soulless” last year.
John Riccitiello... looking to acquire IndustryGamers next? (See Page 3)
JR: Within the board of ESA I've been pretty vocal, and my point of view is that the last couple years didn't work very well. In years gone by E3 was basically a retailer event... but with the rise of more sophisticated marketing techniques, larger companies, etc., retailers don't buy anything anymore at the show. It's not that they don't come, but it's no longer a show where you measure your success by the orders you bring. E3 is now really a PR event, and it's where companies like ours and other major publishers show what's new, and that sort of starts the process of buzz around content for the coming year. ... My point of view as a member of the board of the ESA when I first returned was a simple observation: what's the point of small PR? I didn't quite understand a shrunken E3. I can understand no E3 if we decide we don't need to do it, and I can understand a scaled E3 like we have now, but I don't get the stuff in the middle. ... I think what we're doing now is making a lot of good noise.
IG: Right, so you're basically saying E3 is now a media event designed for me and my colleagues...
JR: I actually think media is the most important audience here.
IG: I like the sound of that!
JR: Ultimately, we sell pretty complex products. Smart journalists can be an interpreter for a mass audience that doesn't get to come to E3 or see the products before they're on the shelf. There's only so much we can do. There are a number of journalists that have their own following and can guide people to what looks good or doesn't look good. And news is actually pretty important in our industry. You wouldn't want the best sales to go to the guys that spend the biggest ad dollars but it happens sometimes.
IG: I'm assuming you heard about the big announcements from the Sony, Microsoft and Nintendo press conferences?
JR: About 15 months ago [grins]
IG: So how do you feel about the new motion sensing technologies?
JR: I've been playing with them for a while now. We've got our own secret little laboratory on my floor of the [EA] building and we screw around with this stuff. If you actually think about it, a year ago some industry analysts were suggesting that the [console] cycle was going to be five years like all prior cycles. I actually think the most relevant start date is when the market leader launches... so if you sort of bridge [the cycles] from PS2 to the Wii, we're in year four. We've been saying for a while that this cycle's going to be longer. We've already got high-definition gaming and what we're seeing is something that Nintendo tapped into first: the traditional controller can be an awfully intimidating device for a large number of consumers. So they tapped into a new audience and new kinds of gameplay and it resonated and got a lot of success. Interestingly enough, we've seen three partner plays – Sony, Microsoft and Nintendo – with a different approach. Natal looks like a breakthrough idea – like any breakthrough idea, you never know how large an audience it's going to realize. But it's certainly very compelling for a number of game concepts I've got in my mind and my teams are working on. And I find it very compelling. I think the challenges around it is that there's a lot to be worked out – it's not something consumers have interacted with before.
Probably something a little closer to the consumer experience as of today is the [motion] controller that Sony put out – that seems oddly somewhere between what Nintendo has out and what Microsoft announced. It's probably less jaw-dropping just to look at it. On the other hand, it's an engineering prototype so it'll probably be jaw-dropping by the time they bring it to market. But probably more importantly is that it looks like a great bridge technology, meaning you'll be able do a lot of things that you could never do before with game platforms. And it doesn't require quite the leap of faith that Natal does. So I think they've carved out very different market positions; my honest view is they are both [MS & Sony] going to expand the market in different ways and they're both going to be successful.
What the Wii did was brought out the Wii MotionPlus, which is shipping first with an EA game – which we're very pleased with – and I think that's a big positive. So what we've been trying to tell people is that this is a better way to go for this generation of consoles because just making a better GPU or CPU doesn't seem to be as important at this point in time, especially when you take a look at what we're putting out already in terms of pixels. It's pretty staggering; it's not like we're lacking for fidelity with our graphics or sound. So what I took out of this is that 4-5 years into a cycle we have hardware news on all three platforms, and if you noticed both Nintendo and Sony made pretty big noise in the last six months on their handhelds. So I think if I pick a single thesis out of all this, it's likely to be a very extended cycle and it's probably going to dampen the boom and bust cycle we had in the industry beforehand. It used to be that the next set of consoles would come out when people tire of the last ones and that's challenging for publishers, but I think that's [now] mostly gone.
IG: Sony's announcement of the PSP Go got me thinking again about digital distribution and the future of this industry. What do you think about where we're headed with digital distribution?
JR: I think it' easy to mistake a market trend being driven by what is supplied versus what is demanded. Let's use the music industry as an example. The consumer was clearly demanding individual tracks and digital distribution... [Record stores shutting down] wasn't driven because the stores decided to reduce their footprint or because the labels decided to do something; it was driven because the consumer wanted to consume music differently. They listen to it probably every bit as much as they used to, probably more and the major bands make as much money as they did before, but it used to be the tour was a marketing event for the album. Now in many ways, the album's a marketing event for the tour. In our industry, there's no question that the best software is patched and upgraded and extended sometimes a hundred times. We literally patch NBA Live after every single game is played in the NBA. It's a pretty staggering concept, and so we're increasingly selling services – the disc is an enabler for the service, more than the service is a bolt-on to the package.
I think the consumer is going to help us understand how they want to buy things. It's not so much because of our supply equation as it is their demand equation. Today, already you can play free, lightweight games with an ad model, micro-transaction games like we have with Battlefield Heroes, FIFA Online and NBA Street Online, and you can buy subscription services like Pogo or subscription games like World of Warcraft or from us Warhammer Online, and coming soon Star Wars: The Old Republic. Ultimately, I think you're going to see all sorts of business models pop up. Frankly, neither we, nor the first-party guys, nor the retailers have much choice. We're going to put the business models up because if we don't somebody else is going to. Then what happens is the consumer buys more of what they want and when they run out someone will make more.
The market will evolve over time, but there are a lot of reasons I don't think it'll evolve like the music industry did – mostly because music really isn't a service. Once you've got the song you've got it... most games are increasingly played online. If you and I have an inconsistent executable we can't play against each other. So we've got to be constantly updated in real-time and have the same version of the game for us to play together and for things like leaderboards to matter, or for post-release content to feel like it's valuable and differentiating. Because of that we have to build support infrastructure behind it – so it's about mass customization, not just mass distribution. There's something more going on with our business. So people can be naïve and think it's a supply equation when it's more a demand equation but they can also be naïve in thinking video games will progress a lot like television and music have because there's something fundamentally different about our medium.
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June 24, 2009
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