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Retiring EA CEO on the future of video games

by Saleem Khan, CBC News Online

Outgoing Electronic Arts Inc. CEO Larry Probst recently took some time to talk with the Wall Street Journal about his view of an industry that has changed significantly in his two decades at the company – and continues to evolve dramatically.

In a wide-ranging interview with Larry Probst, the Wall Street Journal's Nick Wingfield explores how much change awaits an industry whose evolution can be likened to the difference between the Wild West and modern-day Silicon Valley. As the Journal's Nick Wingfield notes:

When Lawrence Probst joined Electronic Arts Inc. more than two decades ago, the videogame industry was a thoroughly undisciplined business, filled with wildcat developers who would hit it big and suffer debilitating failures in even turns. Mr. Probst changed the game by introducing better management, and marketing and emphasizing sequels, helping to turn EA into a factory for dependable hits.

But rather than seeing potential for a crash with a glut of sequels, Probst sees opportunity. First, on Sony's pricey PlayStation 3:

People seem surprised that there might be some resistance to a $599 [US] price point. By the time you buy the machine and a second controller and the high-def cables and a few pieces of software and it gets taxed, you're walking out the door with eight or nine hundred bucks missing out of your pocket. That's a lot of money.

I'm not so sure that people have fully understood what's in that box. They're getting a thousand dollar Blu-ray player [for playing high-definition movies] for free in that box. It just feels like that is not being fully appreciated by consumers and it may take some time for that to happen.

Then on the potential for new streams of revenue through online sales of virtual possessions for video games:

The microtransaction segment is beginning to develop pretty significantly. You've probably heard the story about our FIFA online [soccer] game in Korea. We did 1.4 million microtransactions at a price point of $1.60 on average [between Aug. 1 and Dec. 31 last year]… power-ups, uniforms, shoes – let your imagination run wild. In the last 12 months, we've done something like $115 million in digital revenue, and it's growing pretty rapidly. We think that number's more than $200 million in our next fiscal year.

He says he thinks projections in-game advertising are at least 10 times more optimistic about the market than he is, and like Wedbush Morgan Securities analyst Michael Pachter, he is skeptical about the potential for digital downloads.

The opportunities to get insights like this from top executives are relatively rare, so jump over to the Wall Street Journal for more on what the future might hold, including Probst's take on online games, the cost of licensing deals like the NFL's, and whether creative innovation or more licensing and sequels are in EA's future.

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