Speaking during an industry event at the Berkeley Haas School of Business, Electronic Arts CEO John Riccitiello suggested that the big players in the videogame industry are going to have to change their business model over the next few years - especially regarding the distribution and pricing of games. From the Fortune blog:
"In the next five years, we're all going to have to deal with this. In China, they're giving games away for free," he says. "People who benefit from the current model will need to embrace a new revenue model, or wait for others to disrupt." As more publishers transition to making games for online distribution, Riccitiello says he expects EA will experiment with different pricing models.
He makes an interesting comparison between the fates of the three major US TV networks and the key videogame giants. Thirty years ago ABC, CBS, and NBC controlled 90 percent of the US TV industry and failed to appreciate the threat from smaller cable companies. Now the big three share less than half of the market.
Clearly, he sees a future where electronic distribution replaces traditional retail roll-out. Plus, the mention of free games suggests he envisages the rise to prominence of ad-funded gaming. But who does he see as competition? Who are the cable companies of the gaming arena?
Perhaps he's referring to the casual game networks like RealArcade or PopCap. But these generally work with an entirely different demographic - middle-aged women. Perhaps he's worried developers will start by-passing publishers and aggregators altogether and start using distribution initiatives like Steam or Manifesto. But these developers are unlikely to have the financial resources to develop for PS3 or Xbox 360, unless we face a future consisting entirely of PlayStation Network and Xbox Live Arcade downloads. Who is he afraid of?
The recent Radiohead release has certainly got everyone talking about alternative distribution methods - especially methods that connect the artist directly with the fan. Certain independent studios certainly have the financial clout and established userbase to give this a go - Pandemic and Bioware for example. Oh wait, EA just bought them. Which is one approach to the potential fragmentation of the market...
Would be interesting to see someone attempt the In Rainbows model with a videogame. It's tempting to suggest that gamers don't have the same emotional identification with game studios as they do with rock bands, but given the ferocity of some of the PS3 vs Xbox 360 debates in our comments section I'm not so sure.
So, seriously, given the choice - how much would you pay for Halo 3? Or Rock Band? Or Gran Turismo 5?
