CNN/Money  
graphic
Commentary > Game Over
graphic
Pay for Web games?!
Electronic Arts mulls subscription fees for online Web games, Madden football.
May 7, 2003: 3:17 PM EDT

NEW YORK (CNN/Money) How much would you pay to play bridge online? How about backgammon or chess? Electronic Arts wants to know.

It's no secret that online gaming has been less than successful for EA. High profile projects such as "Majestic" and "Motor City Online" have been cancelled. And the game that was supposed to be the flagship of the division "The Sims Online" has been a disappointment. (There are currently 97,000 active subscribers to "TSO", less than half the number EA initially predicted it would have by this point.)

Pogo.com, the company's Web-based game service, though, has been doing tremendous business. At any given time, you can find 10,000 or more players simultaneously enjoying card and board games, word games, puzzles and EA Sports games. The only price they pay is watching the ads that occasionally interrupt the fun.

Those ads aren't making as much money as they used to, though generating just $4 million in revenue in EA's fiscal 2002, compared to $14 million the previous year. As a result, the company is seriously considering adding a monthly fee to its Web games.

At any given time, thousands of people are playing free online games on Pogo.com  
At any given time, thousands of people are playing free online games on Pogo.com

"We believe that there is potentially a subscription business around the web based games," said EA CEO and Chairman Larry Probst in a conference call Tuesday. "So you're going to see us experiment with subscription pricing in the back half of this year and we're going to try to turn that into a business as well."

It's a pretty bold plan and one that could conceivably drive customers to competing sites like Flipside or Yahoo! Games. Casual gamers, who make up the bulk of the Web-based game audience, have shown a remarkable resistance to paying for online games.

Analysts, though, say EA might be onto something.

"I think, in some respects, for all those common parlor games, it may not be an easy thing to charge people for them," said Stewart Halpern, managing director and analyst for RBC Capital Markets. "But if they create a channel where people are getting a lot of things and some are driver titles, then it's certainly reasonable. The critical thing is what can they package in there that will drive people to pay?"

It may not end with the Web-based games, either. In the same conference call, EA president and COO John Riccitello hinted that many of the online features today's gamers enjoy for free might be something they have to pay for down the road particularly on console online games.

 
"Madden 2003" has sold 3.5 million copies, according to The NPD Group.

"I think in this generation there's only very modest revenue potential for [Xbox Live and Sony Online]," he said. "What has yet to be proven, but I think it represents a significant revenue opportunity if we can play it out properly, is added revenue generation capability in the back end. So instead of just selling Madden at $49, we may be able to generate subscription [revenue] on the back of that. At this point, that's frankly more speculative than it is substantive, but that's what we're going to be working on over the balance of the cycle."

I'll pause here so you can listen to the screams of outraged gamers.

Pay-to-play games aren't uncommon, but no publisher has yet tried to convert a free online component to a paid one. When you buy "EverQuest" or one of its many expansion titles, you know up front that beyond the retail price, you're going to pay a monthly fee to enjoy the game.

Series like Madden, though, have been around for years. This year, in fact, will be the 15th installment of the game. People buy them out of loyalty and habit. Adding the ability to play friends online via the PS2 gave the game an incredible boost at retail last year and "Madden 2003" is one of the PS2's most popular online titles.

 
More outrage? Click the orc.

Free online play is something gamers get used to pretty fast and they resent it when it's taken away from them. In the PC market, if a title does not have a free multiplayer component, sales usually suffer. Given the rate of growth for online console gaming, the same may be true in that segment of the industry within a few years.

If EA (ERTS: Research, Estimates) can pull off subscription fees for its most popular franchises and Web-based games, it will succeed where no other company has. It wouldn't be the first time EA has done that, either. But while it might have the magic touch in so many other areas of the gaming industry, so far EA has yet to prove it has a firm grasp on what does and doesn't work online.  Top of page


Morris is Director of Content Development for CNN/Money. Click here to send him an email.




  More on COMMENTARY
Yes Virginia, there is a Santa Claus rally
Thanks for nothing, Corporate America
It's not just the economy, stupid
  TODAY'S TOP STORIES
Ready for the Fed? Watch these two words
5 risks for investors buying Alibaba shares
Mark Mobius: Stay away from Alibaba




graphic graphic
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.