John Riccitello believes digital goods will overtake brick-and-mortar retail sales in 2011, without question.
EA CEO John Riccitello has gone on record stating that he believes sales of digital goods will overtake traditional retail sales by the end of 2011. He says that free-to-play MMOs will lead the way, along with the purchase of content distributed across various digital platforms, such as social networks and portable devices.
EA even hopes to morph the way it traditionally sells goods to match various methods that consumers have proven they’re preferential towards, including subscriptions and microtransactions. In an interview with IndustryGamers, Riccitello said: “At the end of , 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 microtransactions.”
Riccitello points to the success Turbine had by transferring Lord of the Rings Online to a free-to-play MMO, which tripled revenue, as an example of how new digital business models are “finding their feet.” He dropped a bomb by revealing what he calls a “dirty, little secret” about EA’s revenue from certain free-to-play games like FIFA Ultimate Team, where players are paying EA as much as $5,000 a month each. That’s soccer/football fans for you though.
Free-to-play games are EA’s highest ARPU (average revenue per user) titles. However, Riccitello says the key isn’t transferring every game to a subscription or free-to-play model, but offering flexibility. “[Consumers] may want to buy [content] 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,” he added. “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.”
Digital distribution is already exploding, and it may not even hurt retail that much right away, which is still doing pretty well in certain circles. Riccitello simply indicates what might be a shift in focus away from traditional retail channels in 2011.