EA Gets Behind Sony for Online Gaming
by Joseph Moran
Electronic Arts and Sony have entered into an exclusive agreement which puts EA’s upcoming online-enabled EA Sports games solely on the PlayStation 2 platform. The deal represents a major rebuff to Microsoft, which has repeatedly tried to sign EA to produce its games for Xbox Live.
While the advent of online gaming has yet to make a significant impact on the market, the increasing emphasis on the segment by game makers means it’s only a matter of time before the market begins to take off. Sony’s recent announcement to bundle the PS2 Network Adaptor with the console for $199—essentially giving the adaptor away—could spark the heretofore slack interest in online games for the PS2 and prove highly beneficial to EA’s future sales.
EA’s decision to put all its online eggs in Sony’s basket is a departure from its historical platform-independent stance. While the company will continue to make games for Xbox and GameCube, all of its online titles will be available exclusively on the PS2—at least until March 2004, when the current agreement lapses.
EA’s history of hit games headlined by celebrated sports figures like John Madden and Tiger Woods give it an unusual amount of leverage over Microsoft. The dispute between the two companies stems from the centralized architecture of the Xbox Live service. EA doesn’t like the way Microsoft’s tight control over its network insinuates it into the relationship between game player and publisher, a stark comparison to the loose affiliation of Sony’s network which affords publishers more autonomy and flexibility to control the various aspects of the game-- including pricing and revenue collection.
Microsoft would point out that its approach saves publishers the cost of the technical infrastructure needed to support online games. But Microsoft’s desire to wield control over the emerging online game segment is not incongruous with its stance in prior endeavors. "The time is right for us to establish a position [in online games] and start setting the agenda for what the future of the digital entertainment lifestyle holds," said J Allard, Microsoft’s vice president in charge of Xbox Live.
Microsoft wanted EA games on Xbox Live, but EA executives say that Microsoft refused to share a percentage of subscription revenues with game publishers. EA and other developers complain that this arrangement concentrates too much control—regarding pricing, most notably-- in Microsoft’s hands. EA’s Chairman Larry Probst puts it bluntly: “Microsoft's strategy is very simple," says Probst, "They collect all the money; they keep all the money."
Microsoft won’t disclose the financial arrangements it has with individual developers, but Robbie Bach, a Microsoft Senior VP and head of its games division, counters EA’s argument by noting that Xbox Live benefits game publishers by boosting sales, since every player must purchase a copy of the game.
As 2003 began, says Probst, "it just became increasingly clear to us that we were not moving the needle toward our side" in discussions with Microsoft. In February, Sony announced the royalty structure for its online business. At this point, talks to give Sony exclusive rights to EA Sports Online began to move forward in earnest.
The last meeting between Microsoft and EA took place in mid-April. Microsoft’s Bach declined to comment on the meeting, but EA’s Probst says he issued a warning that Electronic Arts would build their own service, telling Bach, "Robbie, you don't need us, and we don't need you."
Admitting the two companies are not simpatico on the online gaming issue, Bach insists that Microsoft is nevertheless seeing strong subscriber growth with Xbox Live. "We're growing just fine without them, but I'd love to see them on the service," he says. He adds that there will be 50 available titles for Xbox live by years end.
Meanwhile, EA readies PlayStation 2 online versions of Madden NFL and NBA Live for release this fall, to be followed by hockey, baseball, soccer, and NASCAR titles.
I wouldn't be surprised if EA put out a console sometime in the future.