ANALYSIS:

At some point last century, someone at the U.S. Department of Defense plugged a network cable into a computer. Cut to a few decades later, and Electronic Arts says it is canning a game because it doesn’t function as an online service. The publisher announced yesterday that it is closing Dead Space developer Visceral and canceling its linear, single-player Star Wars game. We talked about this bombshell news on the GamesBeat Decides podcast this week, and you can hear that by clicking play on the video above.

EA is rebooting the Star Wars project, which has the codename Ragtag, with its Vancouver studio leading production. The rumors are that Ragtag was in trouble, and EA — and potentially even Disney — wasn’t happy. If that’s true, EA faced a few choices: It could cancel the game completely, try to save it as is with Visceral, or rework it as something less risky. EA went with the third option. It has the Star Wars license, and it had to decide how it was going to invest its resources going forward to get the most from the brand. In the end, EA decided that completely reworking it as a service-based game was a less risky way to spend that money than trying to save a messy, linear single-player adventure.

The team in charge of Ragtag now, EA Canada (Vancouver), is the same developer that is responsible for the FIFA series. It’s not a coincidence that EA is scraping work on the Uncharted-like Star Wars: Ragtag and sending it to the studio that makes FIFA Ultimate Team, the lucrative service-based mode where players buy card packs to build their own squads.

In a blog post, the company came clean about its reasoning.

“In its current form, [Visceral’s Star Wars] was shaping up to be a story-based, linear adventure game,” EA Worldwide Studios executive vice president Patrick Söderlund wrote. “Throughout the development process, we have been testing the game concept with players, listening to the feedback about what and how they want to play, and closely tracking fundamental shifts in the marketplace. It has become clear that to deliver an experience that players will want to come back to and enjoy for a long time to come, we needed to pivot the design.”

What are those marketplace shifts? EA chief executive officer Andrew Wilson explained it in May.

“EA’s games today are live services — amazing experiences that we update and evolve to deliver ongoing fun that keeps players engaged, connects them to friends, and brings them more content and grows our network,” Wilson said during a call with investors. “This strategy has been at the core of our digital transformation, and today our live services are some of the strongest and most vibrant in the industry.”

With EA doing better than ever thanks to games-as-a-service (GaaS), it can afford to take fewer risks. And you know what is a risk? Single-player linear games that don’t run as a service. Look to Agents of Mayhem, which is a fine game. That character-driven shooter bombed in August when it debuted. An EA Star Wars game is probably never going to launch to indifference from consumers, but with the expenses of producing photorealistic games at 4K resolutions and the cost of paying Disney to use the license could make the return on investment a terrible use of EA’s resources.

That’s just the reality of today’s gaming market, according to The NPD Group gaming analyst Mat Piscatella.

“The top-selling games in the console market at the moment are primarily service based games that promise significant, or even unlimited, hours of gameplay,” Piscatella told GamesBeat recently. “Single-player, non-service based games have to be nearly perfect in execution not only with the game itself, but also in the marketing and promotion around the game, to get to the top of the charts. It is a very difficult market for the $60 single-player game to hit the volumes in a launch month that service based games can reach, even if they have been in the market for some time.”

Electronic Arts’ stock price took a hit on the Visceral news. It’s trading down nearly 4 percent at $111.60 at the time we posted the story. But that’s not because EA is moving away from big blockbuster single-player games. Instead, investors are unhappy that EA won’t have another Star Wars game before the end of this fiscal year.

But EA’s stock price is only just short of its historical high, and that is a direct result of the profits it’s making from service-based games.

This sudden shift, however, comes at a time when the gaming audience is getting more vocal about their frustrations with a hallmark of GaaS: the loot box. This business model works for companies like EA because they use it to sell bundles of downloadable content that include random digital items. Only a portion of players spend money on those goods, but they can spend a lot more than $60 (the standard price for big releases). And that revenue is far more reliable and steady than story expansions, map packs, and other traditional DLC models.

But some players dislike loot boxes because they believe that publishers are tuning their games behind the scenes to encourage spending. Activision just patented a means to use player data to pair up folks with other people in multiplayer matches that may make you want to spend money.

A loud group of gamers see this as predatory, and some people have started calling for government regulation to treat loot boxes the same as slot machines.

But EA’s revealing statement seems directed at that audience. It is saying that it can’t justify the budget of a blockbuster Star Wars game if it doesn’t work as a service.

Niko Partners analyst Daniel Ahmad echoes that sentiment.

“Rising game budgets and expectations from consumers have pushed triple-A publishers to turn to the GaaS model in order to extend the lifecycle of the title and total consumer spend on the game,” Ahmad said. “This helps de-emphasize total unit sales as a measure of success and instead focuses on long-term engagement. Triple-A budget single player, linear, $60 games are becoming riskier every day as these games 100 percent rely on unit sales as a measure of success.”

But EA is also saying that it can justify service games because that is where players are willing to spend their money. But when it comes to product games, players have more options than ever to avoid spending full price — and that is driving down revenues while game production costs are rising.

Game consumers are savvy. They buy used, they wait for deep discounts, they wait for games to hit subscription services, and some even resort to piracy. All of these options drive down the average revenue per player (ARPU) for a game, and publishers have battled these market forces for years. They introduced $100 collector’s editions, season passes, online passes, horse armor, digital-rights management, and more. Microsoft even originally built the Xbox One in a way that would restrict used-game sales before backpedaling on that policy.

Publishers tried every thing they could think of to make money in other ways than just selling a game or to stop consumer purchasing behaviors that were driving down prices.

In response to most of those endeavors, the collective attitude of the consumer was (justifiably): “Publishers shouldn’t try to change consumers. Instead, game makers need to adapt or die.”

Well, guess what. Publishers adapted to the way we buy and play games. We can wait for discounts, buy used, borrow, rent, or even pirate a service game because the company could still end up making more money off of us if we get into the habit of buying loot boxes.

And while we say we don’t like loot boxes and services, EA claims that, according to its data, we actually prefer it. You can say that the industry is only thriving because it is taking advantage of the most vulnerable people — children and gambling addicts — but the burden of proof for that is on the public. I think it’s possible that the industry has enough data to know exactly how dangerous or relatively harmless loot boxes are, and if it can prove that it’s closer to a collectible card game like Magic: The Gathering than Las Vegas, then it should come out and do that. But legislation or regulation seem unlikely if opponents only show up with their moral panic and no evidence of any societal damage.

Beyond the larger impact of loot boxes, it’s still startling to have a publisher like EA come out and say that it is canceling a project because it is a “single-player linear” adventure. While we have always felt the industry drifting in that direction, it was easy to assume that the death of those kinds of games is still years off. But now EA has stood up and said, “actually, screw those games — they’re not worth it.” And sure, other companies are still making them, but EA is probably just ahead of the curve on this trend.

“Every linear single-player game from a published studio that comes out over the next two-to-three years is a miracle,” Nuclear Throne developer and Vlambeer cofounder Rami Ismail said on Twitter. “Support them if you like them.”

You can hear us go in depth about all of this on the podcast this week, which you can get to by clicking play right here:

Now, if you’ll excuse me, I need to figure out how to sell journalism loot boxes.

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