THE FUTURE OF THIRD PARTY INTELLECTUAL PROPERTY FRANCHISES

It is an interesting question what will happen to games, which are based on third party intellectual properties like FIFA, NHL, Madden NFL, UFC and other capital letter titles. Granted there is a BIG up as these titles do have ready following and many people do prefer a game with their real life heroes on it instead of generic characters. Today this is especially important because a basic unit for development budget keeps pushing up from million to ten millions.

However it is not your content so you need to pay for using the franchise theme. Also you can't turn the product into something else because you need to follow pretty strict guidelines regarding the brand - so no sharp metal sticks in NHL 2015 Extreme (which would be super fun). Also you end up sitting in many unproductive meetings regarding the implementation of the game and where the development is going and those meetings are already many enough without the third party implementation.

I know game companies are looking more and more into just creating their own content that can be turned into a cash cow. Rovio might be one good example that has now turned from game company into an entertainment company, which licenses its content to others. Rovio has tremendously good profit margin and while making good money from their IP they have managed to steer away from expensive product development as now they don't have a need to code up game engines without knowing if the product will sell. Unfortunately you never know what will be a success!

Third party IP will probably stay there as the games have carved up a solid segment for themselves, but I believe you need to go forward by creating your own original titles to capitalize the success.

IS ELECTRONIC ARTS EVIL?

I have written some prickly things about EA, but while doing some research I stumble to this EVIL claim time and time again. I was thinking that with this blog title I might get some visits from people who have rather strong opinion on the matter. Maybe write a comment and say what you think, OK?

EA USES ORIGIN TO EDGE UP THEIR PROFIT MARGIN

What we now have on gaming news sites is a wall of comments on how Dead Space is available as a free download at EA's Origin service. Yahoo! Good for gamers I say, so here is what I did, I opened a free Origin account. After all I am an oddball gamer since I don't have Steam account. I decided that it might be a good learning experience to see what online gaming has to offer at Origin. Maybe later I go and check the Steam and compare the two.

WAIT A MINUTE WHERES ULTIMA?

Is it just me or does it feel strange to get online gaming under the name Origin instead of Ultimas? Granted, you have to be an old timer to remember those days. Younger generation is much more accustomed to own something digital. For me it is important to have that game as a physical product, which I can later on sell if I feel like it.

Well no point of feeling sorry for Origin as it has been in Electronic Arts stable since 1992. On that ownership department nothing has changed and younger generation hasn't even heard of Ultimas since the plug was pulled. For the rest of us the name comes with some sort of pedigree. Really nice branding move from EA. Although for me it is especially difficult to move past the fact of putting Privateer Online on the shelf.

AFTER STEAM AT FULL STEAM

Obviously EA hasn't gotten enough steam behind their effort to match the sales of the Steam. All the time I have been in business life a free offer has been an attempt to get some solid assets (customers) under your feet. So what we got here is a failure to compete head to head with the current industry leader and some extra oomph was needed.

NOT LIKE THIS

I doubt that Dead Space is that extra oomph. It lacked the sales then and it will lack the interest now. It is just thrown into the mix because the title doesn't bring in any money in any case. Basically this is a scenario of too little too late.

What they should do is to combine Titanfall-like visibility into a free-to-play and recoup their losses in future from much bigger user base. Unfortunately once financial powerhouse EA is reeling from mixture of bad decisions and market trend changes and can't digest this sort of up-front investment at the moment. Origin service is not going to pick up speed any time soon.

WHY IT IS A LIFE AND DEATH MATTER FOR EA?

Games are leaving dedicated chains like GameStop and being introduced in household chains, which are master cost-cutters and price squeezers. This will lower the margin a game publisher will get from sold unit. You don't have to be a Holmes to see that revenue from games is slipping and the only way to maintain the margin is to deliver directly to consumer retina. EA needs Origin to retain as much profit for themselves as possible. This is the single biggest key to a solid finances for EA and it is strange how little they are pushing into it.

THIS IS HOW YOU DO IT

Set all classic EA games as free-to-play on Origin and drive hordes of new users into the service. When everybody and their moms are in they never want to leave, because all their stats and playmates are there too. You don't want to give up your accomplishments and the longer you spend on Origin the more history you get with the service and everything it has to offer.

Do it this way and there is a good chance Origin vs Steam will be like Xbox (One) vs PS3 (4) currently is.

IS IT STUPID TO CARRY STOCKS OF A BIG GAME COMPANY?

LEAN AND FINE COMPANY

Supercell is famous because of their Clash of Clans title. The company itself is very young but it has catapulted itself among game industry greats. Year 2013 turnover was 672 million euro and profit totaled whopping 349 million euro. They have two titles and third one coming out March 2014. It has taken only about 140 people to produce these amazing results as that is the amount of people who work for the company. Softbank bought 51% slice of the company and by doing it set the valuation up to 2,2 billion euro (thats about 3 billion USD). Insane, right? Company was founded 2010 even more insane, right?

FAT AND BLOATED COMPANY

Now let's take a look at the other side of the coin. There lurks the industry behemoth Electronic Arts once touted to be the best game company there is. Such a sorry state they are in now. Almost makes me sad but not really. If you take a look on my already fossilized articles I have been writing about Electronic Arts on this blog already almost ten years ago. I have always had some dislike towards their business practices just buying titles and market share almost as if they are a pure marketing company, which doesn't care about the games themselves, as if they just happened to be games they are in could very well be toiletries for all they care about. Anyway, this big juggernaut finds it increasingly difficult to make money it must be all those management, marketing, merger and acquisition people who load the EA boat with heavy costs and all the brand name game titles have not been enough to maintain the profitability.

PUBLISHING IS OVER IN GAME INDUSTRY FOCUS ON GAME DEVELOPMENT

The old way of bringing games to the market has changed. App Store, Google Play and Steam have all the audience you could possibly ever want. Since publishing is easy the focus must be the actual product and the story why people should pay attention and play it.

If you need marketing campaign just let Youtube gaming celebrities do their work and you instantaneously reach an audience of millions of viewers. Couldn't be better times for game development companies.

SELL THE STOCK OF YOUR BIG NAME GAME COMPANIES

Don't bet your pension funds on this advice but take it seriously anyhow. You need to unload the big juggernauts since they are bloated, rigid and generating losses, which will show in the valuation quite badly.

EA and Take-Two

LOOK IT'S YEAR 2008 AND EA IS BUYING
It's yesteryear and more when I last updated this blog, but it sure looks like yesterday. Electronic Arts is at it again - buying smaller game industry rivals. Some might think that I have something personal against EA, why else this is the news that makes me write after such a long silence...

WELL MANAGED COMPANY
On the contrary, I cannot but admire their business management and strategic skills. EA is a company that does it better than any other company in game industry. They buy assets to increase turnover and streamline cost structure by booting redundant workers (marketing, distribution, finance, office and non-performing developers...). This generates profits, which in turn can be used to buy more assets, which generate even more profits. No end at sight for this company. Well, maybe News Corporation will place EA as one step on their road map of world domination.

FOCUS ON GAMES AND GENRES
Unlike many professional analysts I don't think (not anymore anyway) that Electronic Arts minds about countries or market areas when they make their acquisition plans. Instead, I believe that they focus on on market share of post-deal combined product slate. You see them having two separate approaches - cement their current genre dominating position OR pushing boundaries of their present game genre reach.

IMPACT ON GAME MARKET?
In their genre conquering strategy they flirt with classic monopoly setting. Marketing and distribution dominance make competitors to shy away from these genres. If this doesn't increase genre specific profits... So all that anticipated financial muscle can be used to garner more market share in other genres.

SO WHAT WAS THE IMPACT ON GAME MARKET?
We will have less companies and developers will have less choice what comes to publishing and distribution channels. Let's say EA is totally happy with their success in genre of "watch the paint to dry" -games. Now if I have the killer idea of adding more colours to my upcoming WTPTD title and I already have a working demo, it very well might be that EA doesn't want to finance it and everybody else are afraid of the huge financial push (rendering drying paint can be horrendously demanding on engine department).

EA's motive would be their cash cow that doesn't need anything but cosmetic changes like new shade of white paint. It will go on for years to the point that developers start to have mental problems for coding the same game over and over. Also there is no need to educate gamers about new title in this genre, there's just that one household name, which purchase even mom can't fuck up if you ask her to go and buy it for you.

So, yet more difficult to get your game published and quite possibly less choice of games, the turnover growth will instead come from increasing game prices.

MY ADVICE
GO BUY GTA IV, BETTER YET, BUY THE WHOLE SERIES. If you still have some money left, use it to buy Take-Two stocks... if some day it is bought, it is good that you have something that somebody else wants.