CWD -- EA Scores MSN Content Contracts

[Dave Farber <farber () central cis upenn edu>]

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.