EA’s Chip Lange on the future of gaming’s hottest sector: casual and social games

Chip Lange is vice president and general manager within the EA Play label at Electronic Arts. He’s in charge of a wide variety of properties including the company’s games based on Hasbro brands from Monopoly to Nerf. Created in 2007, the EA Play label also includes the Sims, Maxis, and casual games produced by EA. We caught up with Lange recently to talk about trends in video games.
VentureBeat: What’s the latest news from EA Play?
Chip Lange: A lot of the things we saw a couple of years ago are starting to manifest themselves. We’re continuing to see a very strong response to our Hasbro branded product. The gaming space is moving to a higher percentage of family-oriented experiences across multiple platforms. This was the reason for doing the Hasbro deal as we did. We have access to all their brands on just about every platform.
The thinking two years ago was that gaming was going to change and people would be less tied to a particular platform. They were going to get access to a wider array of options. Our Hasbro brands have performed well on the iPhone. We are seeing success on places like Xbox Live Arcade, where Family Game Night continues to be one of the top five games every week. We are seeing success with Littlest Pet Shop and Nerf at retail. It isn’t a huge revenue driver, but we are seeing success from our older catalog of games based on Monopoly.
The story is, a wider array of people are playing games than ever before in the history of games. More people are becoming comfortable with games as part of their lifestyle. You can remember when girls just didn’t play games. Today, our data shows this is one of the fastest growing markets. You hear a lot of negative talk this year. But the categories we are participating in are up and continue to grow. We have a positive outlook in the next couple of years.
VB: Can you put into context EA’s larger moves? EA has been cutting back. What’s happening in your own division?
CL: EA has been focusing. We want to make sure we have all the right bets going after all the right markets and make sure that we aren’t duplicating ourselves. In a company that’s big, that’s possible. I would say that as it relates to the Play label, we see strong performance at retail. The Sims 3 broke about every record we tracked. We see continued response to our products at retail. And we see stronger response on these newer platforms such as iPhone and social networking.
I think what you see happening is that we are focusing and making sure we have the right technology for the right consumer on the right platform. That sounds obvious. It’s what’s been happening across the industry over the last six to nine months. Retail is not going away. A lot of people keep saying it is.
I’ve been walking around here saying, “Christmas isn’t virtual. You have to put something under the tree.” EA is the No. 1 company in the world at doing that. We’re No. 1 on the iPhone. I’m sure you saw our Playfish acquisition. We are learning the expertise to drive to No. 1 spots on platforms such as social networks. We are focusing to make sure we have all the bases covered. We are bullish on our line-up for the next two years.
VB: Help me understand some things. I know the Maxis studio had a cutback. Yet it’s part of a label that seems to be doing well. The Sims 3 sold well. You are extending Maxis brands to new platforms. My guess is many of the studios need to cut back and yet expand to new platforms. How do you do that?
CL: I hear what you’re getting to. I don’t think that’s the right focus as it relates to the Play label. Others can speak for the larger company. We’re focusing and starting to invest in new places. In that landscape, there are more products in development on more platforms than we have had previously. What we are doing is diversifying our opportunity to a number of new platforms. Before, 90 percent of our business was done on retail-oriented packaged goods. We are significantly changing that trajectory over the next 12 months. We’re making sure we have the right bets on the consoles and we’re making the right investments in our direct-to-consumer opportunities. That holds true for Maxis, the Sims, and the Hasbro stuff. It’s not as much about contraction. It’s about focus and reinvestment in new platforms.
VB: John Riccitiello (chief executive of EA) said that he was disappointed with EA sales on the Wii. Is the same true for EA Play?
CL: It’s a relevant question. We’d like to see stronger numbers on our Wii products. We’re working with Nintendo on a number of programs. If you look at Hasbro and the Play label, we’re doing what we can to keep that platform rocking. We continue to talk to Nintendo about it.
When I look at some of those market trends, a bigger concern for me than a decline in month-to-month Wii sales is whether people are still buying those brands and playing with them. Or are they changing their console preference? We did way better than we expected on Xbox Live Arcade with Hasbro.
On a broader basis, if you look at the social Facebook world, obviously that industry has seen a tremendous rise in casual gamers. I don’t think people are playing fewer games. I think they have a more diverse set of choices to play them. We’re getting ready for that. Wii sales are soft, and that is a little troubling, but on a broader landscape, we have more opportunities than we ever had.
VB: What is your prediction on Facebook games? Will you participate through Playfish?
CL: Playfish is going to be our anchor. We didn’t pay all that money to not use them. Having been around EA a long time, this company is open to new expert opinions. We know what we’re good at. We’re open to new things. I spend a lot of time talking to the guys at BioWare. The mobile team has done a great job with the iPhone products. They came in through an acquisition. Playfish will take a similar role. We like the way they approach development. Are they the exclusive developer of all things social within EA? They’re probably not big enough to do that. But they will be an advisor on anything in that space. That’s going to be valuable, and that’s why they’re the biggest investment we’ve made as a company in the last 12 months.
VB: When will brands start doing better on Facebook? There are no brands in the top 10 games on Facebook now.
CL: You’re exactly right. A lot of the hits are like FarmVille games. I’ve watched the iPhone market. Brands play a big role as businesses mature. With the iPhone, there are a lot of brands. As the merchandising becomes crowded, with so many apps on the AppStore, it’s hard to stand out. You’ll see that on the Facebook line-up. It becomes overwhelming for consumers to choose. As that matures, brands increase in value over time. That’s why Hasbro has done well on the iPhone. Facebook shows that people go with what their friends like. You can’t underestimate the value of a friend’s recommendation. That’s been the thing that drove the super fast rise of these games. You covet social acceptance. Facebook is digital word of mouth. As that saturates, brands will rise. That’s what we’re getting ready for.
VB: A RockYou speaker at VentureBeat’s recent DiscoveryBeat conference said the company does 120 code releases a week. Are veteran video game people adapting to this new age?
CL: I’ve been in this business 25 years. You have to adapt. The business is changing. It has to be one of the most fast-changing industries there is. We are having a new transition, and it is different from the past. The Wii transition was a big one. This is another. A veteran developer has to pay attention to market trends. The Playfish guys have the development methodology to participate at the right pace in these new worlds. We launched Littlest Pet Shop Online and are doing another content push. Software is a living experience. Live operating teams are just part of the formula. You have to develop the expertise to build and grow the business.
VB: We saw the validation of virtual goods in social games this year. What is the big trend for 2010?
CL: There will be a streamlining in 2010 because this rate of content growth is not sustainable from a consumer standpoint. At some point you saturate the consumer with too many options. You move to a hit-driven market. Instead of 300 games a day, we’ll see fewer things done more deeply. I’m sure my competitors see that the space has been validated and they will participate in a big way.
VB: Do you think the other platforms will catch up with Facebook? Virtual goods did well on Facebook. Will ad-driven games catch up? Casual game web sites fell behind. Will it even out?
CL: We talk a lot about Facebook and social. They are validating their business model, but they are not going to replace other platforms. We’re seeing tremendous success on the Xbox 360. I wouldn’t say Facebook has stolen the show. They are a part of the show. I don’t think they are the show. We aren’t changing the development philosophies. Nintendo is having a strong Christmas. We saw strong pickups with the price breaks. I’m impressed with features being added to Xbox Live. I am encouraged by the fact that more people are playing than ever before. That’s why we come to work. We’re not riding a mature market to its extinction. We see kids from four years old to 60-year-old grandparents playing. It’s our job to focus on that growth.
VB: Where is the room for original titles in your label?
CL: It’s strong. A lot of the things taking off in new markets are original intellectual property. The Sims and Spore are the bulk of our sales, and they’re original. We just launched the Charm Girls Club [pictured] and have seen better than expected results on that. A lot of the Facebook growth has been done with new intellectual property. There is a lower barrier to entry on getting a read on how an original game is working. They get feedback within a couple of weeks after launch, it doesn’t take a lot of resources to develop. If it works, you double down on it. In the past, it took $30 million just to get one out the door. So the amount of experimentation was small. BioWare put up its Yeti app on Facebook because it wanted to experiment.
VB: Do you think 2009 was a miserable year for the video game industry?
CL: I wouldn’t classify this as miserable. The NPD results that others use to track us hasn’t been what we wanted it to be. But there are more gamers playing in different spaces. I look for this business to continue to expand. Anytime you can deliver something in a way that consumers like, then you can prosper.