Will EA Change the Gaming Industry's Revenue Model?

Picture it, it’s nearing October and the Red Sox and Yankees are meeting at Fenway for a final showdown. The pennant is potentially on the line (or at least a playoff appearance). Tensions are high. Mariano Rivera is on the mound.  David Ortiz is at the plate. Tie game. Bottom of the 9th. Bases loaded. Full count. Two outs.  Rivera just got off the disabled list and his shoulder may be troubled. Ortiz has had his number all season but he’s been slumping lately too; fatigued from the season and a lingering wrist injury. One pitch will set the teams' fates. Win or lose. Here it comes.

Now adjust your screen. The same scenario is actually playing out in a video game on your PS3 or Xbox 360. The video game is mirroring reality. You’re playing a friend for bragging rights and beer. Same playoff race. Same scenario, right down to the injuries and fatigue.  

To make the virtual reality display possible, unlike traditionally hard coded “set and forget” games, your console called ESPN.com (or an equivalent statistics site) through its Internet connection. The players’ latest trends and statistics were downloaded to the console’s hard drive and the game play was altered. The play of Ortiz and Rivera reflects their real injuries and their historical match ups from the current season.

To some the idea sounds farfetched but it isn’t, it’s a concept called “Dynamic Gaming” and it’s actually a reality in some games today.

Electronic Arts (ERTS) first rolled out a commercial demonstration last year.  Through a partnership with The Weather Channel that slipped largely under the radar of most major media, EA enabled its NCAA Football title to change the weather at the game’s virtual stadiums to match the real world. As described in the press release at the time: "Every time a player with a live Internet connection loads a new game, they have the option to choose real-time weather from TWCI. The video game will then use the current conditions at the selected location to create the weather experience for that game."

It was clear then that weather was just the beginning. Earlier this summer, EA unveiled the second generation. They’ve called it Dynamic DNA. It’s an extensive evolution to be featured in their NBA Live 2009 release in October. 

Comparing Dynamic DNA to the weather experiment is like comparing a ’57 Corvette to a Ford Model-T.

According to details published on EASportsWorld.com by one of the producers, Dynamic DNA brings an artificial intelligence component to the game that adjusts to details as slight as which hand a basketball player is favoring. It uses a “tendency chart that breaks down what the player is going to do when they receive the ball in that particular position on the court.” 

The data is drawn from the same statistical database used by NBA coaches. With it, Dynamic DNA can adjust to a player’s hot (or cold) streaks throughout the season. If Shaq becomes a free-throw genius midway through, the game (if Dynamic DNA is turned on) can adjust. It can track player and team performances. Offense and defense.  Video game players can even use a “rewind” feature to adjust their game (and player performances) to a recreate a historical matchup from earlier in the season.

From an entertainment perspective, it’s an exciting phenomenon, especially for the world of sports simulation games, but the more I think about it, it seems the business potential  of dynamic gaming might be an even more interesting story:

In today’s world, most console games take millions of dollars and several years to develop. In addition to general development, they carry costs for outsourced art, voice licensing and game engines. They also carry massive marketing expense.

When it comes time for sales, a title has limited shelf life, maybe a few years.  During that time, the developers need to recoup the millions of  expense.  It’s an equation (high cost, short life), similar to the movie industry, that creates financial imperatives for supporting “tent poles” – the sure thing sequels. It’s an environment where studios consistently redeploy known brands because they’re the only commodity that can provide relative insurance of a secure income.  Creativity and innovation are sacrificed.

EA’s CEO John Riccitiello spoke of the phenomenon in a keynote last February.  He charged rising development costs with “putting pressure on everyone.”  “It’s leading to developers being bought by publishers and publishers disappearing.  It’s leading to creative failure,” he said. For all but the biggest publishers, “it’s created a hit or else.”

Dynamic gaming is a business innovation with the potential to improve the situation (assuming it's jointly embraced by publishers and audiences, and the offerings provide an improved user experience). It’s a matter of previously unavailable recurring revenue.

In a dyamic gaming world, titles can be expanded and improved through subscription services. A Madden 2009 could in the future become simply “Madden,” a single SKU title upgraded on-demand or by user subscriptions. With extendable content, a title’s shelf life (or earnings period) can be spread across a longer period of time. Fee-based dynamic gaming elongates the tail and brings money to offset publishers short term risks. 

It’s not a cure all, but it’s a potentially significant reinvention of the business models underlying console game sales. That makes it something to watch.

Comments

[Seth:]

Update: Not long after this article was originally published, EA announced their FIFA 2009 game will feature a similar dynamic gaming service.

For those tracking related information, the original article on Metue has been updated to cover the FIFA offering as well. the article is available here: metue.com/08-19-2008/d.../

2008 Aug 20 03:30 PM

[Writin_Reg:]

EA has weather on their pc games. We have winter, summer, spring, and fall on our The Sims 2 games since the expansion Season's came out. It's nothing new for EA.

2008 Aug 21 12:40 PM

[borisb:]

Looks more likely that Activison-Blizzard will be the trend setter shifting revenues online. Blizzards world of warcraft is already doing $2 Billion a year with the monthly subscriptions , there is Battlenet.com and the social and community based positioning of the A-B offerrings will be magnifyied with the next annualized installments due in front of the holidays. Guitar Hero 4 will be a strong example of this .

2008 Aug 25 06:58 PM