A financial analyst met with Electronic Arts and then divulged more of the publishing giant’s digital download strategy: expanded demos that cost $10 – $15.
The head of EA’s Visceral Studios, Nick Earl, met with Michael Pachter of Wedbush Morgan in order to woo the analyst into more favorably valuing EA stock. Wedbush Morgan has been undervaluing EA for years, but Pachter liked what he heard about the massive publishing company’s attempts to cash-in on digital sales and its “project $10.” The next step for EA is to begin releasing smaller versions of their upcoming games for around $10 to $15 on Xbox Live and the PlayStation Network. This “premium downloadable content” would essentially function as large demos, build marketing buzz, and allow developers to fix glaring problems. Pachter penned a note to potential investors upon re-valuing the stock for Electronic Arts.
“The PDLC would be sold for $10 or $15 through Xbox Live and PlayStation Network, and would essentially be a very long game demo, along the lines of 2009’s Battlefield 1943,” Pachter’s note read. “A full-blown packaged game would follow shortly after the release of the PDLC, bearing a full retail price. Mr. Earl believes that the release of the PDLC first limits the risk of completing and marketing the full packaged version, and serves as a low-cost marketing tool.”
“It actually sounds like a great strategy,” he told Game Industry. “I don’t know if they intend to include the PDLC in the packaged product, but my guess is that they won’t. I think that the PDLC will be a ‘prequel’ to the full game, so that they can keep selling it after release of the full game.”
This plan, coupled with EA’s focus on reducing costs and its ongoing DLC strategy with games like Dragon Age and Mass Effect, was enough for Michael Pachter to reverse his opinion on the giant company.
“We’ve been wrong about this stock for almost five years,” wrote Pachter. He went on:
Either we’re stupid, stubborn, or unlucky, but we’ve been wrong. The definition of insanity is doing the same thing over and over again, each time hoping for a different result.
This time, while we are again hoping for a different result, we see evidence that the company is not doing the same things over and over again: lower headcount, fewer facilities, fewer games, a greater use of outsourcing, innovative combinations of digital and packaged goods content, a better greenlight process and a growing digital business. This time, we think that EA is on the right path.
It looks like the financial analysts are on board, but what about the consumers. I personally don’t think I’d buy a short game if I plan to get the big version. On the other hand, game companies have to reduce cost somehow, and if that means making games in bite-sized chunks and only focusing on the titles which resonate with consumers than so be it.