By James Brightman
It’s no secret that Activision has largely ignored the fast growing mobile and social markets. It’s an approach to the industry we’ve criticised before, and during our recent conversation with ngmoco founder and former EA Los Angeles exec Neil Young we talked about the difficulties traditional publishers are facing in adapting to the mobile and social sectors.
“I think [the traditional games] industry is up for pretty significant changes. The companies that are not doing a good job of managing the transition will find themselves in a really difficult place. I think of all of the companies, Electronic Arts is doing the best job of managing the transition and I think other incumbents like Take Two/Rockstar, or Activision, or THQ, are doing a much, much worse job,” Young noted.
“I really only see Electronic Arts really understanding and getting that digital distribution and free-to-play and virtual goods-driven models are the direction that things are headed. For all the sh*t that EA gets, I think they’re by far in the best position to come out of this transition in good shape,” he continued.
When we brought up EA’s biggest rival, Activision, Young immediately commented that they’re in a tough spot.
“I think it will be challenging for them. I don’t think this [digital trend] is going to disappear overnight… I think there’s something much more fundamental going on at the heart of the industry. Customer expectation is changing. What you can get for free right now is just so radically different than what you could get for free a year ago, which was so radically different than the year before. It’s conceivable to me that somebody could build a competitive product to a Call of Duty and give it away for free. That would just so completely undermine Activision’s business model that the industry would change. There’s a good example of how ‘free’ can disrupt businesses,” said Young.
He went on to make an analogy to Craigslist: “The classified ad business used to be a huge multibillion-dollar industry, and Craigslist basically destroyed it, and Craigslist generates 80 million dollars a year in revenue. The Craigslist people are happy, but they basically destroyed 1.8 billion dollars of revenue elsewhere in the process. In these moments of disruption there are opportunities for the disruptors to actually destroy the incumbents in the process, and maybe end up with a smaller industry at the end of the day, but they own all of that versus some small segment or share of that. I think ‘free’ is changing things pretty rapidly. I think digital distribution is changing things. I think the shift from ‘ship and forget’ to ‘games as a service’ is changing everything.”
Adjusting to the digital transition is no easy task, but EA’s been slowly working at it for years, while Activision has seemingly done nothing. “The amount that you have to learn to be able to do those things effectively is really hard for a big company to absorb. If you think about Electronic Arts, EA’s been doing FIFA with Neowiz in Korea for four years now. It had Battlefield West and Battlefield East for two years. It’s been building MMOs, it’s built online products, it acquired Jamdat in 2003/2004, so it’s been playing in the mobile space for a long time. It bought Playfish two years ago. It’s been amassing this institutional knowledge that I think is going to give it an advantage. For Activision to think, ‘We’ll sit on the sidelines until it’s essential, and then we’ll use our cash and stock to go buy a really meaningful player that has all this institutional knowledge’ – who will they buy that will suddenly change things for them?” wondered Young.
Ultimately, as good a job as EA seems to be doing, it may not be the traditional publishers that are able to rule this new, evolving digital world, as former Sony Worldwide Studios boss Phil Harrison told us: “The chances are that the leaders of social and mobile are not going to be from traditional packaged goods game companies.”
Referring to EA and Activision, Young added, “[Maybe] we’re going to see someone else come in and push these two guys aside and take that leadership position. Maybe that’s Zynga, maybe that’s [ngmoco parent] DeNA.”