Posts tagged electronic arts

It would be hard to find anyone betting against digital distribution as the wave of the future in video gaming, as indeed in books, music and films. Electronic Arts’ recent quarterly results record a GAAP net revenue for the quarter from digital sales of $419 million – nearly doubling the prior year quarter GAAP number of $211. the non-GAAP gap was smaller but still pronounced, and in the context of modest increases in non-digital revenues is worth paying attention to.

PC gaming is significantly ahead of the curve on digital business models, and so it should not be surprising that CD Projekt sold the Witcher 2 digitally. In the first part of this interview series with Poland’s biggest games publisher, we heard from CD Projekt Red’s CEO Marcin Iwinski on how they tempted gamers, in particular in piracy-heavy markets like Russia, to invest in legitimate product – and in particular in collectors’ editions, which supply physical accompaniments, in the form of maps, books, pendants and busts – to the game itself. However, bragging rights and swag are not the full picture.

CD Projekt have vertically integrated their own digital delivery channel – as Valve Corporation has Steam and EA now has Origin – used both to sell and deliver their own games and third-part product. However, it differs in scale and focus in interesting ways. I asked Guillaume Rambourg, the 30–year old Managing Director of GOG.com (formerly good old Games) to talk me through the digital delivery strategy.

GOG started out as a way for gamers to get old games, which were no longer in print, DRM-free and set up to run on modern operating systems. However, it is also selling CD Projekt games and, recently, has moved into selling more recent games. first, how does licensing work on the older games – am I right in thinking that there is a revenue split between the IP holder and GOG, as with games on Steam? What’s the strategy, in terms of the mix of older and newer games?

The main concept behind GOG has always been to be more than the standard digital distribution platforms, which usually focus on releasing as many games as possible without any special attention given to gamers and with a lot of restrictions on top, such as an obligation to be online to authenticate/launch/play your game, unfair regional prices, weak customer support, and the unsatisfying feeling that they are nothing more than a “consumer”. These bad practices very much explain why piracy became so popular over time, as it delivers a much easier and somehow more “user-friendly” experience to gamers.

[GOG's] mission has always been to provide all gamers with a hassle-free, fair and, rewarding experience; we’re more “user-friendly” than piracy, and that’s why we succeed. We’ve developed 3 core values that are in the very DNA of GOG: DRM Free, fair Prices, and Customer Love. Let me explain what I mean by these:

First of all: DRM Free. All our games are free from any copy protection system. We believe such technical constraints do not prevent piracy at all. Practically any game nowadays is pirated within the first 24 hours after its release – if not before it even gets officially released – and all of the pirated versions of games have no DRM restricting how a gamer plays his or her games! So, DRM only impacts legitimate buyers: the very same gamers who paid a lot of money to purchase a title pay everybody’s wages in the gaming industry. It’s stupid, and we don’t use it.

Our second core principle is fair Pricing. We believe that we should be fair to all gamers. this is the reason  we decided to sell only titles which are available worldwide (i.e. which are not banned in any country). But even more, we decided to sell these games at a flat unified price worldwide in order to get rid of frustrating regional pricing policies, which give advantage to one territory over another. All the games on GOG are sold in US dollars only, which makes British, European and Australian gamers rather happy as they usually have to face a nonsensical $1 = 1 EUR (or GBP, AUD) conversation rate on all other digital distribution platforms.

[Note - this also, of course, leaves gamers outside the US somewhat at the mercy of currency fluctuations, but the same fluctuation are generally hedged by higher prices in foreign markets .]

Our final core value is Customer Love. this consists of a wide spectrum of things, but they all have a single purpose: provide as much value as possible in our offer. for example, all the games we sell are bundled with a vast selection of free digital goodies (game soundtrack, manual, wallpapers, etc) to make them virtual collector’s edition. also, we provide full technical support for all the games as well. Finally – and probably the most importantly – we have a regular and open-hearted communications with all our users. the best example here being our community wishlist feature, which allows all users to request games or features they would like to see on GOG. our staff is looking into these wishes and shares their thoughts with our community to shape these ideas and eventually work on their implementation. We have fulfilled more than 130,000 wishlists votes in slightly more than 3 years and a half!

We launched GOG.com in Fall 2008 with these 3 core values in mind. you are correct, our historical mission is to promote and revive the greatest PC classics from the past – games that were initially released somewhere between the mid-80’s and the early 2000’s, and which we make 100% compatible with modern Windows operating systems and sell without any copy protection system (i.e. DRM-free), at a fair price worldwide ($5.99 and $9.99) and bundled with tons of free digital goodies.

There is a degree of adumbrative pride whenever people talk about their products, but it is certainly true that GOG sells on the strength of the extras it offers and the convenience – even thought it is trivially easy to find many old games online, and their small file size makes downloading them simple, fiddling with DOSBox to create a virtual machine slow and simple enough to run them is a level of complexity too far for many. the same applies to original copies – especially when fewer and fewer PCs are shipping with floppy disk drives, and the original optical media are starting to break down.

The focus on additional services – in particular installation and technical support – slows GOG’s ability to expand its offering, but it means that publishers can effectively hand over their abandonware and let GOG focus on wagging the long tale. the first publisher to do this was Interplay, with its epochal Fallout games. With little going on at the time beyond a battle for the rights of Fallout Online (or for a payout from Zenimax Media, the holders of the other rights to Fallout games, depending on one’s level of cynicism), Interplay had fairly little to lose.  However, more active publishers, including Ubisoft (Prince of Persia) then became involved, followed by Activision and, more recently, Electronic Arts. GOG.com is now selling games including the classic Gabriel Knight series and early showings in the Sim City franchise, among others. GOG.com currently has over 400 games, from over 70 publishers and developers.

The Witcher 2, however, was the first day-and-date release of a new game at the same time it arrived as boxed product in shops, however. Rambourg picks up the tale:

Of course, quite a few people in the gaming industry started asking us whether we believed our unique model would apply only to classic games, or if it would work with brand-new releases too. As we only believe what we see, we decided to run a real-world test by releasing the Witcher 2: Assassins of Kings. this game was our first day-one release ever and we obviously sold it in a GOG fashion: no copy protection system, a fair pricing policy worldwide, tons of digital goodies (we actually made digital all the goodies from the retail collector’s edition, apart from the bust of Geralt, the main character in the game) and full customer support.

Their commitment to equality of swag also means that the digital copy of the Witcher 2 Extended Edition came with a folder full of JPGs from the Polish edition of Playboy magazine.

No, really. Triss Merigold, Geralt the Witcher’s flame-haired bosom(y) companion, was interviewed by Playboy, accompanied by a series of digitally-composited photographs which radically reconceptualized the concept of the uncanny valley.

Within its first 6 months of commercial distribution, GOG.com sold 40,000 units of [The Witcher 2], while Steam (the incontestable market leader) sold 215,000 units and all the other digital distribution platforms combined sold 10,000 units. to sum up, we made slightly less than 19% of Steam’s sales – which is proportionally speaking a very good result. GOG welcomes over 1 million visitors per month, while Steam has at least 3.5 million visitors per day! our sales performance with the Witcher 2: Assassins of Kings definitely convinced us that yes, our alternative approach to digital distribution does work for modern games too!

Following this success, we launched a new version of GOG.com in March 2012 and released some newer DRM-free PC titles. up until that date, GOG sold titles that were initially released somewhere until 2006, and the new idea here is to give a second youth to some newer PC titles – one to three years old – as well. this was a logical and natural move for us. while we’re releasing newer games, we obviously still plan to release them in the traditional GOG fashion that has been so successful for PC classics and the Witcher 2: no copy protection system (as the game is being pirated anyway), but with a fair pricing policy, and also a wide selection of free goodies. We want to make these games virtual collector’s editions.

Marcin Iwinski, of course, talked about the importance of physical bonus products in selling copies of the Witcher. These digital add-ons are easy to copy, but there is a battle for hearts and minds going on here: it is not that the digital map of the game’s world (or Triss Merigold’s digital charms) would be hard to copy. it is that the fact that GOG went to the trouble of putting it into this easily-copied format brings its own credit.

GOG, and CD Projekt, trade heavily on the perception that, against businessman like Activision’s Bobby Kotick, they seem to be authentically nerdy gamers – making their relatively small scale and willingness to go the extra mile a selling point. sometimes this backfires – the “new” GOG was trailed with an announcement that GOG was to be closed, with the fact that it would immediately be reopened witheld until the day of the announcement. Faced with customers irked that GOG, which was supposed to be their people, had indulged in a marketing stunt that seemed to show a big Software disregard for their feelings, Rambourg and Iwinski doubled down on geeky, dressing as medieval monks to release a penitential apology. the “French monk” then appeared as an Easter egg in the Witcher 2.

Monk-y business – Iwinski and Rambourg get monastic

Back to Rambourg:

Historically, GOG has worked mainly with many major publishers, and these healthy relationships are how we managed to, for example, sign some recent titles from Ubisoft such as Assassin’s Creed: Director’s Cut or Heroes of might & Magic 5. And we have more to come! also, we decided to work more closely with developers – especially indie developers – as a majority of them share our values and we believe GOG can help them make their games visible among media and gamers. In this respect, we released several independent titles so far, such as Trine, Machinarium, and the Whispered World.

We also want to release brand new PC titles, just like we did last year with the Witcher 2. a few weeks ago, we released our second-ever brand-new title. it was an old-school RPG called the Legend of Grimrock. this is a lovely title developed by a few passionate people and which is reminiscent of the good old days, when players were crawling for hours within virtual dungeons with nothing but a mouse and keyboard to save them.

[He's not kidding - the Legend of Grimrock is a love letter to Dungeon Master on the Atari ST.]

We have sold over 17,000 units of this title since we launched it at the end of March, which we are really happy with. this nice sales performance is showing – in our humble opinion – that GOG can be a valuable partner for any developer. And that’s nowhere near all. We have many more great indie titles up our sleeves for the coming months.

I would note that while we’re really motivated by these great new titles that are coming to GOG.com, we are still very committed to continuing to revive great classics as well. there are still some great gems from the past missing in our catalogue and we will do our very best to bring these to our faithful users. These are the most complicated titles to sign though, as the rights behind many of these games are usually scattered between numerous rights holders. But “impossible” is not GOG!

Next: Digital versus physical