April 4, 2019
To: Andrew Wilson
From: Kevin Ray, Market Manager
Date: 4/4/2019
Subject: Market Strategy
Dear Mr. Wilson,
This memo will be analyzing the current state of EA in our current economic climate in the games industry. This memo will also discuss the current aims and activities of our competitors and recent consumer response to those ventures as well as our own. To achieve this, I will examine how we can capitalize on our current projects, insert our services in a new marketplace, and fix the issues we face with our public image.
We took a hit of about 18% in early February when Battlefield V greatly underperformed followed by the failed launch of Anthem, selling only half of what Mass Effect Andromeda sold in physical copies. The anticipated sales by the end of the fiscal year are currently estimated at around 37 million copies though this assessment is widely distorted from a realistic perspective. If this prediction is accurate, that would make Anthem one of the highest-selling games of all time which just isn’t going to happen due to the sour release. Bioware used to be one of our most profitable assets but fans are beginning to lose their faith after two poor releases. They have hurt our stocks immensely and the original team has mostly moved on from EA. However, the recent layoffs from marketing and publishing may allow us to rebuild these development teams.
On the upside, games as a service are the future of profits and EA is the frontrunner in the field. Even with fewer game copy sales, our games are making more profit than ever before through in-game microtransactions. Most of our games have microtransactions present allowing us to make money after the game launches for a much smaller production cost. Most notably, the game Apex Legends by our team at Respawn has had a very successful launch with over 50 million players in just a month, overtaking Fortnite as the most-watched game on Twitch. Respawn’s team also continues to release new purchasable content to incentivize player engagement and spending. Investors are excited by the prospect of this game and are willing to look past losses from Anthem, Battlefield, and then some. Apex Legends should be a strong source of income for years to come and is projected to be on a path similar to that of Fortnite.
One element we must be wary of is the controversy surrounding our company’s business practices with microtransactions. In late 2017 following the release of Battlefront II, we were surrounded by controversy over our loot box systems in the game. People were upset by the fact you could pay real money to obtain an advantage over other players in the game and that the items you received from the microtransactions were random. Though we faced harsh backlash and criticism from many, the NDP Group shows their studies found that 77% of people playing games with microtransactions are willing to spend a little extra money to enhance their experience. However, 68% also believed that pay-to-win aspects of games are “unfortunate”. Microtransactions are still extremely viable but how we implement them determines consumer response. Games of all genres have the opportunity to use microtransactions in a positive and profitable manner. (very nice paragraph!)
In 2018, consumers have been yearning for an incredible single-player experience as seen through the response to titles such as God of War, Spiderman, and Red Dead Redemption 2. On April 20, 2018, God of War became the fastest-selling PS4 game of all time at 3.1 million copies over its opening weekend, and Spider-Man proceeded to break that record in September selling 3.3 million copies on their opening weekends. Big wins considering they are both PS4 exclusives. Finally, Red Dead Redemption 2 was released in October and had the biggest Worldwide opening weekend in all entertainment earning $725 million in just three days. These games’ success was not only reflected in their sales but their glowing reviews from critics claiming these games to be great achievements in gaming. Furthermore, Sony uses their exclusive game releases of God of War and Spider-Man to bring more people to PlayStation. Because consumers crave these incredible single-player experiences and are willing to buy these exclusives, there is immense potential for profit.
Another interesting development in the past year is the increased competition for PC digital marketplaces. Discord launched its digital marketplace along with its game service Discord Nitro while Epic Games opened the Epic Store. Both companies arranged to have exclusive deals with game developers to limit certain games to their platforms. Steam has been a dominant force in the industry for a long time, though it remains to be seen if these other platforms affect it in any meaningful manner. Epic Games is currently providing games for free bi-monthly. Though they may take a hit through this tactic, it will definitely pull new users to their store and away from Steam. This could create an opportune time for more companies to launch their own digital marketplaces and services.
Many opportunities present themselves currently but to begin we must launch our latest form of success — Apex Legends. Respawn amassed quite a following with this title and brought many users to our digital marketplace, Origin. Now is the perfect time to bring more focus to Origin PC while all these other digital marketplaces are bringing competition to Steam. Many people have had issues with Origin in the past and is often associated with poor service and all the controversies with EA and our dysfunctional PC ports of console games, therefore, Origin needs to be rebranded with a completely new name and new user interface to distance ourselves from this reputation. This new digital marketplace will be the face of our company, acting as the publisher in our place. Activision-Blizzard uses the same method representing their PC-centric titles – Diablo, Overwatch, and World of Warcraft – under the name Blizzard while their console titles – Call of Duty, Destiny, and Sekiro – under the name Activision. Apex Legends has brought so many new users to Origin and the PC digital marketplace presents an excellent opportunity.
Many benefits would emerge from using our own PC digital marketplace. The first perk of using our own digital marketplace is simply not needing to give service fees to Steam for all EA game sales. We could bring our titles such as Assassin’s Creed back to Origin and increase our margins as well as our user base on Origin. In turn, the increased user base can then access our digital store where we can push our own content like the latest FIFA or Assassin’s Creed. Additionally, we may be able to push EA Play as a live service that includes exclusives for consumers.
Bringing people to this new digital marketplace will be an endeavor even though Apex Legends is so successful because quality and consistency are what earn the loyalty of the consumer, not more haphazardly constructed titles. To associate our service with dependable excellence we need to produce acutely polished games that will maintain a legacy. Bioware used to have the loyalty of many but most faith has been lost in them along with many of the team’s developers. With the recent layoffs, we can afford to hire new talented developers to make a game that leaves people in awe, perhaps a new IP or possibly a redemption of Anthem. Regardless, a game with a talented team and better technology are essential to bringing more people to our platform where we can introduce noninvasive microtransactions.
I understand you may be fearful of allocating funds toward a new AAA game but if we take a moment to learn from the failure of Anthem, we can make a game that brings in new users. Anthem didn’t have clear leadership and executive decisions weren’t made quick enough in addition to using the difficult Frostbite system. This led to starting from scratch multiple times in both design and code, severely delaying the production process. To combat this, we need more dedicated team members for the development of Frostbite Engine and allocate the support staff at Frostbite to work more closely with the team developing this new AAA game. FIFA has not been performing as well recently but the team at EA Sports has a much larger framework of base code to go off of so they won’t need as much support.
With this in mind, new games can be made exclusive to Origin and we can become a dominant figure in the PC digital marketplace. We can continue with live services with nearly all of our games and earn a large majority of our profits there and if consumers enjoy the base game, they will be more inclined to purchase in-game content. Rebranding is key to building customer loyalty and showing consumers we learned from our past transgressions and making development an easier process for future developers at our subsidiaries.
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