The possible changes and impact of the EA layoffs & Playfish Acquisition

Yesterday our industry saw some of the biggest changes we’ve seen in one day, with EA announcing the $400 million acquisition of social gaming startup Playfish, and the 1,500+ person downsizing and studio closures at EA. I totally agree with Shacknews’ Garnett Lee when he wrote in a column yesterday, “As the dust settles this marks one of the most dramatic signs of the times for the videogame industry“.  What I would like to do is share some of my thoughts on what this might mean for the game industry and some possible outcomes that I see from this huge change.  Some of this may dip more into “What is the new game industry”, rather than just what will happen in the aftermath of the changes at EA.

More social game company investment and development

A $400 million exit is a pretty good indicator that the social game market is huge, and that doesn’t even take into account the hundreds of millions of dollars a year companies like Zynga are making (Zynga is a competitor to Playfish, with games like Farmville and Mafia Wars in their portfolio).  These companies are crushing it, with what I’m guessing is huge profit margins.  These games aren’t particularly complicated..and in most cases aren’t even original.  They’ve got to be cheap to make and maintain, and the money that is made on microtransactions and offers is huge.  This market was already expanding quite rapidly, but I’m betting this encourages more game developers (that are now unemployed?) to create new businesses, and it encourages more Venture Capitalists to invest a few million in a social gaming startup.

More “social” elements and micro-transaction models in EA portfolio games

This isn’t anything particularly new, considering EA has been dabbling with this stuff for awhile now.  Most recently we saw them launch Battlefield Heroes, a free-to-play, micro-transaction funded game based on the popular Battlefield franchise.  I’m not sure how well it has done since launch, but I’m interested in seeing how many more games we’ll be seeing from EA that are micro-transaction based.

This should also manifest itself in the form of more paid DLC for released games, which EA has said “extend the life and profitability of our disc-based games“.  Last week Dragon Age: Origins released and had DLC immediately available, and EA reports that they have “seen strong early performance”.

More engaging social game experiences

In my opinion..most Facebook games are pretty lame.  I don’t feel particularly invested or engaged with the games, with most of the motivation for playing coming from the competition with friends to be a higher level Mobster/Farmer/whatever.  Ultimately everyone is the same, with your character and farm looking exactly the same as all the other players.  I never feel invested in my characters or the games themselves, which I think is a lost opportunity.

I personally would like to see more engaging and interesting experiences – something more along the lines of Quake Wars or even Battlefield Heroes, but in the browser and as a Facebook game.  I’ve never played a Facebook game that blew my socks off, and I’d like to see that changed.

Enthusiast Press will start covering the social game space

I think it has been interesting to note the lack of coverage of the social game market by the enthusiast press (Joystiq, 1up, Shacknews, Kotaku, Destructoid, etc).  I understand why they do it, though, since they’re writing content for their community, and most of their community probably doesn’t find this stuff very interesting.  If perhaps the game experiences become more interesting and advanced, the coverage of the space will start to increase.  Or maybe if EA continues to dump millions and millions of dollars into the space the enthusiast press (and hardcore gaming community) will have to take notice.

It’s probably worth noting that EA owns Pogo.com, a company that makes free internet games and casual retail games, and the enthusiast press don’t really cover that side of EA’s business…so perhaps this one won’t come true 😉

Opportunities for game developers and publishers

I’m wondering what Activision thinks about all of this…Do they see a big opportunity to take market share in the vacuum that may form from all of the EA titles being canceled, or will Activision follow suit and join the social gaming market?

Since so many developers are now out of work, now is a great time for new businesses to be created.  Hopefully we will see all these creative and talented folks start new game companies that will push the boundaries and do interesting things.  The traditional big publisher model of funding isn’t the only way to go, with alternative funding models like Venture Capital investment being real opportunities for developers.  Riot Games recently spoke to Gamasutra about how they have funded League of Legends without taking money from publishers and sacrificing IP ownership.

These new indie studios could partner up with hungry publishers like Warner Bros. Interative Entertainment, who seems to be pretty eager these days to try new things.  They’ve been acquiring quite a few studios over the past year, and most recently published 5th Cell’s Nintendo DS game Scribblenauts.  With 194,000 unit sold in the first month, I’d guess that 5th Cell is pretty damn happy with that arrangement.

What are your thoughts on the impact of the EA changes?  Where do you think the game industry is going next year, and beyond?  Am I full of shit?

Interested in your thoughts!

-Sam

  • Random Guy

    Interesting article. To your point about facebook games being ‘lame’ to you – I totally agree. The thing is, I don’t think we’re the target demographic for games like those. Those games (farmville, mafia wars, etc) are just based on a) being addictive with compelling leveling/reward systems and b) totally viral to encourage sharing with your friends. Facebook is such a massive platform that if you can find a game that’s simple enough for moms and dads to play and hits those 2 points above well, you have the chance to reach WAY more people than the consoles typically could.

    That being said, it could just all be a fad. Who knows.

  • http://www.qubemedia.net Glenn

    I think playfish are better than most in making good quality Facebook games. While they dont have many ‘original’ games (who does these days!) I think they make them to a high standard and have added some interesting (and slightly addictive) mechanics into the mix.

    EA have started expanding their current IP into the social space with a Facebook Spore game so I expect that to increase dramitically. I think the EA ‘Experience’ will start trying to invade all the spaces we use to hang out in, console games, portable games, facebook games and iphone games all linking together to ‘enchance’ our gaming.

    Clearly social network games are no joke, but it will be interesting to see if someone can target the ‘hardcore’ gamer succesfully, funny how we are now a niche audience.

    I wonder how a well known franchise with a good product could do in the browser space, Pokemon/Animal Crossing MMO anyone?

    (I wrote something about this a few weeks back that might be of interest http://www.qubemedia.net/blog/2009/09/10/social-media-is-becoming-part-of-play-time/)

  • http://www.twitter.com/paolopace Paolo

    I think treating social gaming as the next gold rush is similar to when Hollywood switched to reality TV. It was profitable at the expense of quality and, sadly, people ate it up. This switch signaled the beginning of very dangerous business model: produce cheap crap for increased profit and this trend scares the crap outta me.

  • http://www.quickhit.com Samantha S.

    As an independent developer and publisher of online sports games, we were watching EA’s announcements yesterday. It will be very interesting to see how EA handles working with a new PC studio like Playfish, having closed so many in the past few years. Presumably they will roll this up into Pogo, but regardless, it was the only way for EA to get into the social gaming space. The gaming giants don’t have the nimble nature or social network experience to penetrate this market without buying companies like Playfish who already have serious momentum.

    I’m not sure if Facebook is the right place for big publishers. It will be interesting to watch and see what comes next as you can imagine this just started a wave of future acquisitions by the big guys.

  • Jeff A

    While I agree that EA’s moves yesterday signaled several changes, I disagree with the assessment. It has been clear for some time that the current console paradigm is fading, and that online distribution and free-to-play content is replacing the old guard. This new round of layoffs is clearly the result of the so-called “recession-proof industry” meeting that reality. Nothing new there. Likewise, EA has a healthy casual online business (e.g., Pogo) targeting older women, so the acquisition of Playfish is a natural fit. Rather, I am intrigued that these publishers are struggling with their not-so-distant future selves. In other words, they are having a very public mid-life crisis – one which threatens the very foundation of those companies and forces them to reevaluate who they are and how they make money. As the owner of a small business dedicated to this space, I am carefully watching this public self-questioning to see how EA chooses to handle its critical cultural inflection point. Will a company that Wall Street rewards for console revenue embrace the anti-gamer while managing the inevitable cultural shift inside its four walls? As they say, only time will tell.

  • http://www.mrluigi.com Tom

    The day they start covering the mafias in Mafia Wars I am done with game journalists for ever!