John Earner was undoubtedly one of the stars of this year’s London Games Conference.
As part of a panel that wasn’t exactly short on smarts or lacking in gravitas (it included luminaries such as Q Entertainment founder Shuji Utsumi and was chaired by games industry legend Phil Harrison), he spoke confidently and convincingly about significant shifts in play patterns and business models.
The delegates (mostly heavy hitters from big companies themselves) were nodding and note-taking like students. Well, students who actually work and want to learn, anyway.
A few weeks later at Playfish’s fun and funky Sloane Avenue office he tackles some of those issues in a little more depth.
It’s almost exactly 12 months since the firm was acquired by EA, but Earner joined two and a half years ago to open its US office (Playfish is a European success story, remember). He now heads up the London studio, which created and manages two of the firm’s biggest games, Pet Society and Restaurant City, and, earlier in the year, launched FIFA Superstars.
That product was the first fruit to be borne of EA’s $400m swoop.
Much was made of the price tag, but Earner says that EA wasn’t buying to bulk up, but to sharpen up: “EA recognises, more so than other major publishers, that there’s a tectonic shift taking place. It’s not a shift that will happen overnight, but it has started, and is irrefutable.
“EA is making a lot of moves to disrupt their business before someone else does. The deal wasn’t about adding immediate, significant revenues, because the reality is that today, if you’re sitting on a series of triple-A franchises and a bunch of sports IP, your revenues are massive. But five years from now the way we do business is going to be entirely different. Not just on Facebook, but on platforms like Xbox or whatever becomes of it.”
He summarised the change as “from products to services, from standalone to social and, most importantly, from money up front to money ongoing.”
MAKING A SPLASH
So buying Playfish gave EA a beachhead that would protect it from a business tidal wave, to understand how to engage millions of consumers wanting games every day and get them to pay for the fun.
What Playfish gets is slightly more immediate: global brands in an environment where standing out is more and more challenging.
So far, FIFA and Madden have been utilised, and more will follow, with The Sims surely top or close to the top of any To Do list. Earner isn’t saying. You probably guessed that. He does, however, point out some other slightly more oblique advantages:
“EA has a massive global footprint. In the previous two years in our space, folks didn’t put a whole lot of time into localisation. But today catering to local markets and having local knowledge is a point of competitive differentiation. FIFA’s a good example of that.
“They also provide us with a lot of experience in game design, a rich talent pool and a pretty powerful recruiting engine. They give us jet fuel to grow quickly.”
That doesn’t mean, however, that there will be a surge of new releases. In fact, Playfish games are appearing less often.
“The catalogue’s up to 10 games or so, but what the investment and increased headcount has done isn’t to make 10 more games, but to put more people onto the management of the existing titles.”
The strategy pays off in a market packed with short-lived rivals. Playfish’s Pet Society has outlasted many games that competed, but are off the map already. The game has a daily average user (DAU) figure of about 2.3m, says Earner.
FIFA Superstars’ DAU currently stands at about 700,000, but, Earner says, “where it really shines is in its ability to monetise – and I think that’s because the content in the game is real world and has high meaning to people”.
One of the key metrics by which Playfish and others measure monetisation is how many non-spenders get converted to spenders per month.
“That tends to be a very low number – one to three per cent, that’s kind of industry standard. But when we look to Japan or Korea, which are a few years ahead, we see five to ten per cent, and we’re cautiously optimistic that’s where we’re heading.
“But the devil’s in the detail. In a lot of cases you’ve got games that make a lot of money off a small number of users and you’ve got games that make slightly less money off a much larger volume of users. In an ideal world, it’s better to convert more people than to rely on a small number of whales.”
Pursuing this model means the company has fully embraced Facebook’s new Credits currency. Sometimes controversial, but already stocked in retailers like GAME and Tesco, Playfish has signed up to exclusively use the payment system in some games.
“Anything that takes friction out of the purchase process will work to our advantage. It’s so easy, I can imagine in six to 12 months from now seeing a large lift in that conversion. It comes with a promise that over time with everyone able to use a trusted currency across all games, we’re going to see massive increases in conversion rates. And I don’t think that’s a pipe dream.”
Where this leaves Playfish’s own retail cash cards, launched earlier this year across the UK, Earner isn’t saying, but it seems most likely they will be phased out.
And despite being such an advocate of microtransactions, Earner says future business models will make game subscriptions a source of revenue, too.
“I think there are interesting subscription models out there and there’s something appealing about finding a way to monetise a user who isn’t a ‘whale’, but might pay up to £10 pounds a month for some currency, status and access.
“The challenge is making it operate in parallel with microtransactions. You don’t want to kill the golden goose, and I think the microtransaction model is the golden goose. But someone will figure that out and in the future you’ll definitely see those business models working hand in hand.”
More immediately, in the next six to nine months, in fact, Playfish will release another game carrying an EA brand, and an original title.
“There are amazing opportunities in the EA IP toy box, but I think the best players in this space have proved that there are tremendous opportunities to make games that don’t use established brands.
“The social gaming space also creates its own IP. We’ve had in the region of 80 million people play Pet Society. Many of them have moved on, but many of them have stayed. Pet Society is a global brand with the sort of useage numbers that the best triple-A games just don’t have. So we’re creating brands and looking forward to taking them to other places.”
The initial scepticism over EA’s acquisition of Playfish was understandable, possibly inevitable. There have been some clunkers when companies from a traditional space moved in on up-and-comers in a digital sector. And it’s easier for analysts and pundits to look smart by switching to a default sneer setting.
But there’s no denying EA has bought not just a way to present its big brands in new ways to the expanding social gaming audience, but a different view of the future of gaming. And that can only help it negotiate the unprecedented changes to come.