Talking About a Revolution: Bizzaro EA Edition
I don't think this idea rises quite to the level of heresy of this one, but it could definitely fall into the category of "Wow, that is nuts . . . hmmm now that I think of it, it may not be so crazy." You see, I got this email from Gamestop with an amazing offer on a great game:
As a Tim Schaefer fan since Full Throttle, I was already counting the days to release, but Gamestop nows sweetens the deal by offering the game for one ATM unit, or as some of us might say the right price for a game? Sure, it would be tremendously hypocritical for me to cash in games to Gamestop, but if I put on just a bit of a disguise and went somewhere other than my regular Gamestop. . . . Inspired by Pete Townshend's one man crusade, and like him, solely in the interest of research, I looked at the list of games:
I wouldn't give back Arkham, still hours to go in The Beatles - and it is one of the only games my wife will play with my son and I - do they really want G.I. Joe or G-Force? Fallout 3 will create shelf fulls of a great free alternative to the new GOTY version Bethesda is trying to sell creating the question - is it better for the publishers to squeeze more dollars out of their hard core consumers or have Gamestop sell a very similar thing to new consumers without paying Bethesda? FIFA 09 for those newbies who don't realize games are dated like magazines. WET to guaranty a reduction in re orders and all the rest of the games necessary to make sure the stores are well stocked for 40% margin product for the holidays. Sure, a lot of these are gathering dust on my shelf, and even if I intended to buy DLC, I could just repurchase the game when the DLC comes out. My console will still have my game saves. A very cluttered closet is a clear testament to my never turning in an old game, but when they spell it out this clearly, grabbing the third rail is oddly attractive.
Then I started to wonder why Gamestop had to have all the fun. Why are they the only ones who get to sell product over and over again? We should be able to get us some of that too. I thought about how much money I pay EA every year. In the past year, I purchased Dead Space, Mirror's Edge, Need for Speed:Shift and Brutal Legend. That's probably about average for a core gamer. Sports oriented players probably bought Madden and either a FIFA or NBA title and PC gamers bought whatever it is people do on a PC. Regardless, it is pretty safe to say that if their core buyer purchases between four and six games a year, they are very happy. Even though we pay USD 59.95 on average for a game, by the time it filters through the intermediaries and manufacturers, EA will receive about half of that money. Add in marketing, and you are probably between USD 25 and 30 per unit sold. So guesstimating on the high side, I paid EA USD 120 last year. But what would happen, if EA decided it was tired of my "renting" games from everyone else (isn't a Gamestop purchase with an intent to turn it on just a rental by another name) and chose to capture the revenue? It really would not have to reinvent the wheel. Disruptive models requiring changes to human behavior are expensive, but EA wouldn't have to do that. The model has already been created. EA need only act a bit more like gamefly, or better yet, with the combination of physical media and instant viewing, Netflix.
While the rest of the world is looking to advertising subsidies, or swallowing Chris Anderson's (the bald Wired editing one, not the saving world TED one with the full head of hair who used to publish game magazines) "look at me I discovered the free sample" manifesto, companies from Blizzard to HBO understand subscription is a good model. Sure it's hard. You have to offer compelling content and listen to your consumer, but if you do, they keep paying you money every month. In fact, they will do it until you do something really, really bad. And curiously, the customers subsidize themselves. Your costs increase with consumer base growth, but so does your revenue. What would happen if EA switched to a subscription model?
Gamefly charges USD 16.95 a month and seems to be growing its base. For this price, a subscriber can hold on to one game at a time and if they choose, exercise a purchase option on the game they have. If EA charged me the same thing, rather than USD 120 last year, I would have paid them at least 203.40 - assuming I did not choose to keep any of the games they sent. If I chose to keep them or wanted more games at once, they would have received more - and so would I. Exclusive catalogue titles available only on line to subscribers would allow me to introduce my son to some of the things I used to play. Even though EA can't justify putting the Road Rash series in a box, it would cost nothing to stick it on a server and give me access. Interest may even revitalize the title ala Ghostbusters. I would also tick the order box for titles I may not choose to buy at full retail and become a convert. Even if I don't EA captured the consumer rather than Blockbuster or Gamestop.
You are going to jump in and say "but EA does not have all the games on the market and I want to purchase from other publishers." I had a law professor who used to answer questions like this with "true, but trivial." Does Blizzard offer anything other and WOW to the 12 million folks who pay USD 14.95 a month? Does your membership in the Girls Gone Wild continuity program stop you from buying other porn? Subscriptions are a funny beast. Once a consumers signs up and go on auto bill, the money is no longer considered part of the budget. It just happens. Subscriptions and new game purchases are not mutually exclusive. My EA subscription will just keep giving me new gaming goodness and when Borderlands or Assassins Creed hits the shelves, I'll go buy them. The difference is, EA's titles get returned to them, reducing their cost of goods and letting them capture the used game margin while ensuring a consistent, predictable revenue stream from me, while Take 2 and Ubisoft will see reorders decrease proportionately to increases in sell in.
Of course the channel will be pissed. Wal-Mart, Target, Best Buy and Gamestop - especially Gamestop because they deal with the hardest core who are most likely to subscribe - but the scene will look more like a John Woo each guy has a gun to the other's head than a blindfolded EA standing in front of a firing squad. Games will sell on discs just like CD's are still sold at retail in spite of iTunes and subscription music services and retailers want their games. It would be hard for Take 2 to make this move because retail only cares about one product every four years. But EA puts out a Madden, FIFA and NBA product they care about every year. EA will still sell games at retail and none of those stores want EA to be exclusive anywhere else, so EA has leverage. They will just sell less product at lower margins and it may even encourage retail to invest in promotion the way they have in the music sector.
I don't know, maybe I am nuts.