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CWD -- EA Scores MSN Content Contracts
From: Dave Farber <farber () central cis upenn edu>
Date: Sat, 18 Mar 1995 12:17:29 -0500
CyberWire Dispatch// Copyright (c) 1995 Jacking in from the "Content R Us" Port: Electronic Arts Readies Content for Microsoft Network By Wendy Goldman Rohm Special Correspondent to Dispatch Chicago -- Gaming and entertainment-software powerhouse Electronic Arts is developing titles for the Microsoft Network, with plans to offer a number of new multiplayer games this September on the online service. To date, Microsoft has been mum about any relationships it has with content providers for its forthcoming online service that will be part of Windows 95, the combined DOS/Windows operating system due in August. The software giant has only said that a number of computer companies would be offering technical support and product information through the Network. However, Microsoft is said to be enticing content providers with royalty rates that developers say are more attractive than those being offered by such competitors as America Online and Compuserve. It will offer variable rates, as opposed to a fixed fee scheme, basing royalties on a individual online transactions. While declining comment on his company's negotiations with Microsoft, Electronic Arts cofounder and executive vice president Bing Gordon says Windows 95, which will include Microsoft Network, has the potential to substantially boost the market for PC-based online entertainment. Microsoft's plans with EA have still not been officially disclosed by either company, and a Microsoft spokeswoman would neither confirm nor deny its collaboration with Electronic Arts. EA's Gordon, however, estimated that PCs as an interactive entertainment platform have only accounted for about 10 percent of the overall entertainment software market. If the Windows 95 operating system makes performance of PCs as good or better as the next generation of dedicated game machines-- led by 3DO and Sony and Sega and Nintendo--PCs could account for 25 percent of the interactive entertainment market, Gordon estimated. "That's a huge swing," he said. The first offerings from his company on the Microsoft Network will be EA flight simulator and multiplayer strategy games, according to those close to the Microsoft/EA relationship. Among the titles expected to be ready for shipment by next September, around the time that Windows 95 and the Microsoft Network are also expected to hit the market, is an enhanced multiplayer version of EA's US Navy Fighters, code-named "X Fighters." The current US Navy Fighters is one of the top-10 best-selling PC CD products on the market, analysts said. For presentation via the Microsoft Network, EA will also be leveraging properties it has acquired in recent months through a string of acquisitions and investments. Among these, a joint venture with ABC in the education market, with the company's EA kids division becoming part of the venture; the acquisition of UK developer Bullfrog; and the acquisition of a minority interest in sports developer Visual Concepts Entertainment (VCE). EA holds a minority stake in San Rafael, Calif.-based VCE, which is the developer of such sports titles as John Madden Football and NHL Hockey. Also for the Microsoft Network, a sequel to a Bullfrog title known as Magic Carpet is in the works. The follow-on will accommodate multiple players in a 3-D environment. The "working title" for the forthcoming version is currently "Magic Carpet II," according to those close to the development. Bullfrog, which was purchased by EA this fall and is now a subsidiary of the company , is the third developer purchased by EA since 1991, including Origin Systems and Distinctive Software. Bullfrog develops CD ROM software for PCs. EA plans to make an even bigger splash when it announces in coming months a partnership with another leading online game developer for a title that will be sold both in packaged software form and online. By press time, the identity of that company could not be determined. The game will also be put on the Microsoft Network. Users of the game will dial online to access portions of it. At EA's Origin group, a subsidiary of EA that produces such titles as Wing Commander and Ultima, much R&D is going into development for Windows 95 and the Microsoft Network, according to company executives. While the above-mentioned EA products are on track for release on the Microsoft Network in September, "the whole Origin product line has to figure out how to take advantage of Windows 95," said a company executive who asked to remain unnamed. Microsoft Corp. appears to have inverted the royalty model for online content providers, counting on volume and "toll collecting" to pay off long-term as it has in the desktop operating system market. Currently, content providers recognize that online providers are playing the role of electronic publisher--which competes somewhat with their own roles as publishers. "And the way their economics work, is to deal directly with developers," said a content publisher who asked to remain unnamed. "We don't want to split our development clout from our publishing clout." Up to now, analysts said online providers have had a difficult time arriving at an economic model that works for content providers, seeing that on-line providers "already don't make any money," as EA cofounder Gordon puts it. "Trying to get a publishing piece of it for us hasn't been easy," Gordon said, declining further comment on his specific negotiations with Microsoft. However, according to a number of executives in talks with Microsoft about providing online content for the Network, Microsoft intends to charge content providers based on a "per transaction" scheme, offering more flexibility in its relationship with would-be publishers. The problem for game developers, like EA is that the cost of developing a network game is the same as developing packaged software. "We can do a packaged software product, spend a million bucks and plan on doing 3 million in revenue, with upside to $30 million," acknowledged EA's Gordon. "And you spend a million bucks on a network game and you get basically a rent check. So instead of owning the house you're just collecting rent checks instead of actually participating in the equity appreciation as the whole market goes up." Microsoft's pricing may soon force other online service providers to revamp their own payment schemes for online providers, analysts said.. For each transaction, content developers will owe a fee to Microsoft. This may range from a few cents to a few dollars, developers said, hesitant to disclose exact numbers. "This is opposed to collecting all of the money and passing on a modest fee, as AOL does," one developer said. " The Microsoft idea is to make it up in volume." Dispatch out... ---------------------- Wendy Goldman Rohm is an Editor-at-Large for _Interactive Week_, a bi-weekly newsmagzine covering the converging digital media industries. She can be reached at 73423.621 () compuserve com.
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- CWD -- EA Scores MSN Content Contracts Dave Farber (Mar 18)