EA’s CEO on the pandemic-driven video game boom and streaming’s future
Electronic Arts is a Fortune 500 company, again.
The video game giant first appeared in Fortune’s ranking of U.S. companies by revenue in 2010, at No. 494. This year, after a 10-year gap, the maker of FIFA, The Sims, and Apex Legends returned to the list at No. 485, behind investment brokerage Franklin Resources and ahead of energy company MDU Resources.
EA’s sales jumped 11.9% year over year to $5.5 billion in its fiscal 2020, an improvement from a 4% drop to $5 billion in the previous year. One reason for the increase is live services, a catch-all term for game publishers regularly updating their multiplayer games and enticing players to buy extras like digital clothing. In EA’s most recent quarter, for instance, its live services business grew 6% year over year to $1.03 billion.
But the business model also comes with some controversy. Critics allege that certain games like EA’s FIFA Ultimate Team—a version of the core FIFA soccer game—encourage players to spend money on so-called loot boxes that contain random selections of digital goods. Because some players spend big money on loot boxes, critics allege that game publishers encourage a form of gambling, which EA vehemently denies.
In this interview with Fortune, EA CEO Andrew Wilson talks about live services, the considerations that go into encouraging players to buy digital goods, and the problems facing Google’s Stadia cloud-gaming service.
This conversation has been edited and condensed for clarity.
Why do people keep spending money on digital goods? Isn’t there a limit?
When I talk to guitar collectors, and ask how many guitars they should collect, the answer is always “just one more.” That’s because that’s how we are as human beings—we evolve. Once we get this thing in a virtual world, or when we’re building a virtual team, or establishing ourselves as individuals, who we are today differs over time.
Has EA changed the cadence of releasing new games like FIFA to increase its live services revenue?
It’s different for different games. We don’t put every game in a one-size-fits-all category. Regardless of when you launch a new game, people are playing games more and for longer.
When I started this business 20 years ago, we would build a game and people would play for four weeks. They paid $60 for the game and they moved on. People would play four or five games a year, and spend $200 to $250 bucks on these basic games and play for these little blocks of weeks.
Now people buy FIFA, and they play it all year. And they invest time and money in the experience and establish themselves as individuals in that community. The value for a player is exponentially bigger than it was 20 years ago for the level of engagement they get today.
Do game publishers push people to spend too much?
When we think about charging any amount of money to any of our players, whether that’s for a small item inside of a game or whether that’s a game in its totality or the subscription service that we offer for annualized access to every title that we develop—we think about choice.
We want you as a consumer to be able to choose and not be disadvantaged for choosing not to do something. On balance, our players are spending less now than they did 20 years ago, on an annualized basis, but they’re actually playing the games longer.
We want gaming to be fun. We don’t want it to feel like a grind, and the output of that is FIFA Ultimate Team, which is one of the biggest live services and social networks in the industry. Two-thirds of players don’t spend money on digital services, and nine out of 10 packs are opened with earned points, not with purchased points [a reference to players using in-game currency rather than real money to buy “packs” of soccer players].
Would you be happy if that stays the same, or do you want people to spend more money on packs?
Yes, we are very happy about this. There are ways—and we’ve seen companies do this—to cause people to do unnatural things in our industry and other industries, and you can rely on all kinds of negative motivations like guilt and obligation. When you fulfill positive motivations, you extend the lifetime value of a franchise and a business.
I think this is a real hot-button issue, and I think the press have used sensationalist headlines to paint Electronic Arts in a really poor light, and I just want people to know that’s not how we’re oriented. We’re not short term, we’re long term. And we’re not about the money, we’re about fulfilling motivations, because if we do that we’ll be around 50 years from now.
How will games be distributed in the future?
I think the cloud [making games available through online streaming rather than by selling game software] is going to disrupt our industry in the same way that it’s disrupted every industry. At a distribution level, what we see is that when the cloud comes into an industry, consumer orientation moves from ownership to access. Once that happens, subscription almost certainly rises to the leading business model for consumers, because it offers tremendous access at tremendous value with incredibly low friction. When you get those three things, you have a really strong business case. While it’s been a bit of a bumpy start, that will be true in our industry.
Do you think cloud-gaming technology is ready?
I think we will need a few more turns of the innovation cycle to get there, but it’s not an if or a when, it’s a foregone conclusion.
It’s early, right? That’s okay. That’s what happens when you’re on the cutting edge. I’ve actually played some games on Stadia and I will tell you, the game experience is actually pretty good. It’s not bad.
The issue with Stadia was that for multiplayer games, it was really hard to find other people to play with early on in the cycle. These games are now social networks. These are not solo experiences that we play in the back of our bedroom or our basement; we do this with other people, we connect around the world. It’s just going to take a little bit of time, but what I saw was actually reassuring, because there was a lot of goodness in gameplay and that’s only going to get better.
How have consoles and playing video games changed over the years?
We changed how the company made games so that we didn’t have to make bets on a day-to-day basis. Back in the day we were making a bet between two or three platforms. We can’t put ourselves in a position where we have to choose, because there was a time when this industry bet against the Nintendo Wii and we all know how that turned out. I was one of those who said, “But no one’s going to play the Wii.”
What do you think will keep EA on the Fortune 500 list? People may play video games less now that they’re vaccinated against COVID-19.
With absolute respect and humility, I hadn’t really thought about getting back on the list on a daily basis. I don’t really think about what it’s going to take to stay on the list as the core means of my motivation.
I will tell you what we saw pre-COVID were two fundamental secular trends. One, social interaction is moving from physical to digital. The other was that the consumption of sports entertainment was moving from linear to interactive. We sit at the very intersection of those two secular trends. COVID accelerated the trends, and while it’s too early to tell what’s going to happen, post-COVID I don’t think we go backward.
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