If you're a die-hard sports game fan (or just like anything EA games publishes) then you already know about the new "online pass" feature that EA started placing on their games since last May 2010. Much to the dismay of most gamers, the online pass was meant to stamp out the revenue that EA games was losing when consumers purchased used games.
The logic behind this move was that EA was not only losing revenue when a purchaser bought a used game (well below the $60.00 value for a new game) but was also losing revenue by offering free "server space" to those individuals who registered with their games for online service. For example, if a user logs into EA servers to play an EA title online with friends or the general public, EA has to "give server space" to that individual to allow them to play. Online passes, have allowed EA to reverse the impact of some of the new game sales they have been losing, while also "generating revenue" to help pay for the server space that users are taking up when they engage in online play.
Most gamers have been angered by this practice because they feel like they are being cheated out of more money, and feel that it is unfair to charge them extra fees just because they cannot afford the price of a new game. Many gamers, myself included, also feel that greed may be the main motivation for the implementation of the online pass.
We now know just how much revenue that EA has been generating since they implemented the program over a year ago. Electronic Arts CFO Eric Brown stated during the Citi 2011 Tech Conference, "The revenues we derive from that haven't been dramatic." Brown then went on to say, "I'd say they're in the $10 - $15 million range since we initiated the program." For those of you keeping score, that is an average revenue of $830,000 - $1,250,000 per month, over a year period. That may not seem like a massive gain for such a large company, but it is important to remember a few key points.
For one, the overhead associated in a program such as this is very minimal. The cost to develop the online pass system was minimal, so the return here for the company is actually very substantial. It is also important to understand that the online passes not only affect used games, but also rental titles. The online pass codes are included in the packaging of a new EA title, and the code must be entered into a special menu on the game before players can access online play and sometimes other "special features." Used games that have been traded into a retailer rarely contain an unused code. The same general rule applies to rental titles. So we must also take into consideration that if a player wants to access online play in a rental title, they must pay for an online pass, generating more revenue for the company.
What is even more pressing to gamers is that other game companies are attempting to follow suit. Companies like THQ are now experimenting with implementing similar programs. Although some other game titles (made by other publishers) like; Driver: San Francisco, Dirt 3, and Mortal Kombat, have not seen the same success with the online pass when they attempted to enact it. It is safe to say right now that EA is seeing slight success in the program chiefly due to the popularity of its EA Sports titles. That does not mean, however, that other companies with popular franchises will not follow in EA's footsteps.
It is not just gamers that are showing distaste for the program either. The publisher Take-Two Interactive spoke last year about the program. CEO Strauss Zelnick said, "You don't want to use a stick punishing users for buying used, you want to give them a reason to buy new. You want to create something that's of benefit to consumers. By letting consumers know there is more stuff to come, it stands to reason they'd hang on to their titles." It seems that Take-Two is pushing the mantra that if you offer gamers things like free DLC, or exclusive access to certain parts of a title, then gamers will be more likely to keep their titles (won't trade them in) or to purchase them new, rather than used.
To be honest, Its hard for me to understand this program as nothing more than corporate greed when it comes to EA. Not because of the size of the company, but based on the amount of revenue they already generate due to the popularity of their titles. Take for example, the recent release of Madden 12, which sold 1.4 million units in its first week of release. With numbers posted like that, it is hard to see why EA would need such a "small boost of cash flow," as assumed when EA CFO Eric Brown stated that the numbers generated by the online pass program "haven't been dramatic." It begs the question, why does a huge company that is generating such a mass income from just one title (consider that EA also outputs titles such as Fifa, Tiger Woods PGA, and Need for Speed) need to enact a program onto its patrons that asks for more money, just to play the title online?
EA has not spoken about any lost revenue, but do you think that EA is losing customers because of this program? Do you view it as corporate greed, or a smart business move to help pay a small expense?
