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EA: Digital to Overtake Boxed Retail this Year

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Digital games sales are growing rather rapidly each year. I’ve certainly been spending more on downloadable titles with every passing year – and you likely have too.

EA CEO John Riccittiello believes that this year, digital game sales will overtake those of traditional boxed retail products. He might be right, as far as revenue is concerned – particularly in the realm of free-to-pay games that generate their income by charging real money for virtual in-game items and perks.

"At the end of [2011], the digital business is bigger than the packaged goods business, full stop. No questions in my mind. Then, you know, I think that we’ll find ways to even sell our packaged goods content in chunks and in pieces and subscriptions and micro-transactions," Riccittiello told IndustryGamers. Continuing with "Look at what I Warner and Turbine did with Lord of the Rings Online. While I still think the majority of their revenue is from people giving them the premium subscription for fifteen dollars a month, there’s a lot of people coming in and they upgrade."

That free-to-play model has been similarly lucrative for EA. "Our highest ARPU (average revenue per user),” said Riccittiello “are free-to-play games among paying users. You think about that and say, ‘how can a free game be the game they pay the most for?’ We have people who are giving us $5,000 in a month to play FIFA Ultimate Team. And it’s free. Dirty little secret."

Hold on just a minute! Some people are shelling out $5000 a month to play a free game? The world, apparently, really does run on stupidity.

The key to taking advantage of digital distribution, says Riccittiello, is flexibility. "I actually don’t think that there’s a lot of mileage in trying to decide exactly how consumers want to buy their entertainment content. They may want to buy it on an iPad; they may want to get it through the social network, they may want to pay for it through micro-transactions and monetizing, or they may want to pay for it all at once. "They may rather pay a subscription price in order to count on what their costs are going to be, but they may want to pay for it all at once and never have to pay for it again. We’re in all of those businesses and I think the way this is going to work is that the models that the consumers like the most are going to grow the most."

I love the ease and convenience of digital distribution – I am lazy, after all – but I still like having a physical product at the end of the day; something tangible, that has an actual value, real or perceived.

Source : IndustryGamers

Last Updated: January 10, 2011

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