The eagerly anticipated “Battlefield Bad Company 2” (BFBC2) finally has arrived. Take a look at this single player first look here. For downloads and spotlighted features read this. This title needs to be successful for Electronic Arts (“EA”) http://www.ea.com/. They are slipping a bit in some investment corners on Wall Street. Maybe its not what there doing right or wrong or the lack of consistently huge, successful titles in the last 2 years—what could be challenging to their prospects going forward is the reality of the coming tidal wave of the free digital downloaded game. Packaged game titles, including the actual disc, the plastic cases, printing costs and paper inserts, push the individual game prices north of $50. Actually, its $59.99 for most new titles. Its hard to explain that cost in this economy to a spouse or a significant other—there’s no getting around it, that’s alot of money for most folks.
The problem is that the front end costs are considerable. To deliver the amazing titles like BFBC2 these companies must assume development and marketing costs that run into the millions. Hollywood voice-over or licensing talent for some of the other most popular titles add to these front end costs.
So when you total the development, talent and packaging costs while dumping on more costs associated with any retail partner’s “buy back” or resale agreements at the end of this food chain, its tough to compete with the growing market of free downloadable game titles. Essentially, the few big hits under the current model cannot keep a company’s bottom line up when the majority of the not so successful titles are getting eaten alive by the free games. The mobile platform is further putting pressure on this evolving business model. Simply put, free games on your mobile device can be a diverting alternative, albeit while not yet providing the immersive, escapism that a large, HD-driven home system can provide.
Not yet, anyways. So there’s still time for the industry’s leaders to figure out the next step.
The model needs to evolve. Consider this alternative: offer a completely new game title or a revamped, generational upgrade of the features for an existing franchise game title in the “old school” format—packaged and sold at the closely aligned retailer—and then offer various high-margin, low priced downloadable content. Even offer key, high user-demanded free content online to pull that customer base away from the mobile platforms. Or at least, stabilize their migration to this emerging competitor. Subsequently add more free, updatable content, you know, things like the “roster updates”, “tips”, “tricks” and the all important “new scenarios” online. Get away from the yearly packaged and retail delivery business model.
In doing this you slowly wean the now aging business model away from the rote system of rolling out the yearly packaged versions of the franchise title which, in most cases, contain less than complete overhauls of the complex coding. This “overhaul”—or complete coding upgrade—is the heart and brain of a particular title. Its the breeding ground for loyal followers of a title. The profit margin. A franchise title needs to evolve and to continually capture more of the “true” processing limits of the hardware on which they run and to not leave the immense potential power of these systems on the development’s team cutting room floor.
When this evolution is avoided, the consumer loses incrementally in the equation. Slowly over time. Its barely noticeable to the masses, yet the hardcore gamers have broken this code. They are leaving for the more cost efficient alternatives. The download-based and mobile platform is the future. They’re willing to put up with the current less immersive environment in favor of the ultimate decision maker—the cheaper costs. How cheap? The cheapest price of all, as in completely free. In time, the masses will follow these trend leaders.
Again for now the industry can maintain. For example, you’ve seen these tweaks as cleverly bulleted “New Features” printed on the back of the package for any newly delivered title of an existing franchise. This is critical to the current business model which calls for the recovery of those huge upfront costs by expending less money (or sticking to exact budgeted improvements) over the critical first few years of a given title—hence the “tweaks” and not the title evolving “overhauls”.
That’s fine to survive, and may even have to be continued in some format under any future business model, however this can be done more efficiently and cheaper through a download-based business model format. We’re not even getting into the environmental benefits of avoiding the use of discs, paper, high quality ink and tons of plastic for the packaging. We’ll leave that discussion for another day.
For now, let’s just focus on the business model. The big players in this sector, like EA and others, need to figure something out quickly. They’ve been creative and cutting edge in the past. They need to do it again. If not, they may be the ones left behind in bad company…