Welcome to EA's Analyst Day. It's great to see so many of you here today. Just going to run through my name is Chris Evenden. I'm the VP of IR here at EA. I'm just going to briefly run through some logistics before we get on with the presentations with the real content as it were.
So you have power at the front of your desks, if you notice that. Snacks will be available throughout the day in the corner there. Restrooms at the back on the right. And just to round out Maslow's hierarchy of needs, there's Wi Fi in the room and there's 10 cars on the table to give you SSID and the password as well. So we have a packed morning ahead of you.
We've got representatives from EA's executive management team. I'll let them introduce themselves and run through the content. We have a break at about 10 a. M. And then we finish for lunch at around 12:30.
We will be doing Q and A at the end. So if you could hold your questions until then, that will be great. One final duty I have is, of course, this, which I won't even pretend to have memorized. So I'm going to read it out for people listening on the webcast and for the transcript. The presentations here today will include forward looking statements regarding future events and the future financial performance of the company.
Actual events and results may differ materially from our expectations. We refer you to our most recent Form 10 Q for a discussion of risks that could cause actual results to differ materially from those discussed today. EA makes these statements as of today, May 17, 2016, and disclaims
any duty to update them.
Fortunately, I'm not asking anyone else
start with a short video and then Andrew will come on stage and give you a view into the company. Thank you.
We're going to skip through this and this. So thanks to everyone who came last night and had some drinks and we got some early questions and some chit chats. Thanks for being here today. We've got long time investors, recent investors, long time analysts covering us and some people who have just started covering us more recently. We're at a really, really, really amazing time in our industry.
We're going to spend a lot of time today giving you a sense of why we believe Electronic greater opportunity So as long as there are more players, there is greater opportunity for us. When I started this business in the year 2000, we would squint to see 200,000,000 players. And most people, if you ask them what a gamer looked like, they would say a gamer is a 14 year old boy who spent a great deal of time playing games in his mother's basement. Today, I would argue that almost everyone in this room is a gamer. You may not have played on a console, you may not have played on a PC, but you likely have played something on a mobile device.
And that's a tremendous onboarding device for us as we think about mobile as a business overall, but also to bring new people into the funnel and convince them that games are in fact the best form of entertainment. So given all of these new players, we end up with more people playing more games on more platforms through more geographies and through more business models than ever before. So part of what's happened in our industry is we've had this unbelievable evolution that said, we understand that when you consume media, you consume it different ways in different contexts. Just the same as you watch television on a big screen TV, you might watch it on your computer screen in your office or you may watch little snippets on your iPhone or in fact go and sit in front of an IMAX theater screen, the same is true for games. As more platforms have got to a point where they can deliver interactive entertainment, we've had more people play.
As we have changed the nature of the games we make in geography, so culturalization of our games, we've got more people playing. And as we've given a more diverse set of business models, we've said we love it when you give us $60 upfront. We think that's great and we're going to continue to provide you value. But at the same time, we also understand there is a real movement on certain platforms in certain geographies where you start for free. And then we convince you that the things that we're making are so positively profound that you're willing to give us both your time and your money.
And then at the other end of the spectrum, the notion of subscriptions that says, hey, I don't want money to come between me and my gaming experience. I want to give you an amount of money. I appreciate that you build great content and I'm going to build a relationship with you over time. We're going to talk a little bit more about that today. So our world is growing.
Again, as you always want to be in an industry where you see the line going up into the right. The more interesting thing about this slide is there is consolidation afoot. In almost every media and entertainment business on the planet, as the industry has grown, there has been consolidation, whether it's movies, music, TV, books, games is no different. And we're seeing great consolidation in terms of the top titles driving a great deal of market share. We're seeing fewer companies who are well positioned for the future driving those top titles.
And as we look to the future, we believe there's going to be a real opportunity for a network multiplier, how you bring people in, build relationships with them and facilitate connections between them in a social interactive phase and with them and games across devices. We're going to talk a little bit more about that today. But the big news, of course, and the thing that makes our industry most interesting is it's becoming more digital. And that continues to grow and that doesn't look like it's going to stop anytime soon, in no way different from any other media or entertainment business. The thing is, is brands are rising to the top.
So in the early phases of mobile, in the early phases of PC free to play, in the early phases of digital, anyone can kind of come in and build something and hope for the best. What we're seeing today across all platforms, all devices, all business models is that brands are rising to the top. But it's not just about brands. And it's not just about downloading a single piece of content digitally. Social connection is key.
More and more games are a form of social connection for every player in our industry. And beyond that, the expectation now is that I'm going to play games for a really long period of time in this digital ecosystem. And my expectation is that you're going to continue to update, extend, enhance, provide dynamic gameplay for me and my friends to play. So as we think about Electronic Arts in that growth trajectory, right now we're 8,400 people. What I think is 8,400 of the best people in our industry who come to work every day to do amazingly creative things.
We're in 31 global locations and in our past fiscal year, we need $4,600,000,000 and again, we've guided to growth in the coming fiscal year. As you start to look more deeply into us as an organization, it's really important to understand what our value system is. It's really important to understand those 8,400 people, what are they thinking about when they come to work every day? And typically, this wouldn't be something that would form part of an investor presentation, but I thought it was really important for you to understand how we're made up. The fact that creativity is at the very core of everything that we do.
The fact that pioneering is a value that we believe is our responsibility as a leader in the industry to continue to drive and do new things. That passion is an important part of entertainment and that we are at our best when we're doing what we love. And if you talk to anyone from Electronic Arts, they love coming to work every day and building amazing interactive entertainment. The determination is what got us to this point. Many people have judged electronic art in the past and said, we don't think they're going to make it.
We don't think they can turn it around. We don't think they can transform. And what our organization has done through determination has got us to this point. But it's also determination that's going to get us through and forward around all the things we're going to talk to you about today. Learning, we're an organization that has learned how to get from high def to mobile.
We're an organization that has learned how to get from offline to online. We're an organization that has learned how to get from units sold to hours engaged. And we've done it as a team because there is an expectation at a player level that when you interact with any one of Electronic Arts' experiences, whether that's a game, whether that's a website, whether that's a trailer for one of our upcoming games, the expectation is that the experience, silent organization. Creat with a siloed organization. Creativity, pioneering, passion, determination, learning and teamwork.
But we believe entertainment is a fundamental human need. Chris referenced Maslow's hierarchy of needs. Once you get past air, food, water, shelter, you get to social connection, sense of belonging, you get to self esteem, overcoming challenges and building self worth and you get to self actualization, creation in a living world. All of those things are embodied by entertainment. But we believe games are the most valuable form of entertainment given their ability to fulfill those fundamental human needs.
I've already talked about the fact that games now are the predominant form of social connection for many of our players. We are providing challenge in the games we make and people are growing inside those economies. And in a world of digital content and user generated content, we are providing self actualization for a great many of our players. So as we think about why we're here to exist, we think about it this way. We exist to inspire the world to play.
We believe the world is a better place when we all make a little time to play, whether that's as a discrete experience in front of an 80 inches TV or whether that's an indiscreet experience as a series of 2 minute sessions on our iPhone. We come to work every day with this in mind. How do we think about growing the community? And every day that we come to work and we believe there is some element of a community or some element of a country or some element of a group of people who have not yet been inspired to play, we see that as a call to action. And as we talk to you today, what you're going to see is everything that we're doing is about building the growing player base around the world.
And it's about compelling them to invest both time and dollars into the things that we make, because we believe we make them of a high quality and we believe that we are fulfilling the fundamental human need for entertainment in doing so. So how are we doing? So right now, we've got over 300,000,000 people in our database. The reality is we've probably got nearly double that number with varying levels of information. So our job is to grow that number and grow what we know about those players.
And our expectation is that over the coming years, we will absolutely double that number and better. We're the number one publisher on HD consoles. Again, a great business, a business that's ahead of the curve of the last console generation, where more people are logging into play and playing more time and monetizing at higher levels. We're the number one most downloaded publisher on mobile devices last year and PC free to play with the number one sports game in both Korea and China. And in Korea, perhaps one of the most competitive free to play markets on the planet, FIFA Online 3 on any given day is in the top 3.
So we've demonstrated an ability to deliver great content across console, across mobile and across PC, across premium, across subscription and across free to play. We've done that through what we believe is the most interesting deep broad portfolio of intellectual property as it relates to games on the planet. We have completely reoriented the company from shipping games to the provision of 20 fourseven live service, that social connection, that dynamic content. We've moved the company from what was 20 plus engines some years ago to being on a journey to get to a single engine, frostbite. I had a question last night about what's the real value of that?
Well, in a world where we no longer build for 2 or 3 platforms, but we build for 20 or 30, in a world where the transitions aren't every 6 years, but maybe every 6 months, our ability to get all of our games to any and all new platforms that players want to play on is really, really important. But what's more important is being able to do that in a cost effective manner. When we went from PlayStation 2 to PlayStation 3 and I lived through that journey, our R and D costs almost doubled and the quality of our games on the new platforms was not that great. And the reason that was is because we were investing at a team level on every engine to get every game across at the low level technology, not just at the feature set, but at low level rendering technology, artificial intelligence, animation, audio. When we went from PlayStation 3 to PlayStation 4, Xbox 360 to Xbox 1, we got more titles to launch than any other publisher at quality and our R and D cost was essentially flat.
So you've got high quality games, highly differentiated at a feature set level, but in a way that was cost efficient and quick from an organization who had moved from 20 engines on a journey down to 1. That's going to continue to pay dividends for us as we think about the future, as we think about multiple teams innovating on top of that. That's going to make exponential leaps forward in its ability to deliver unbelievable gains every year that we build with it. And then lastly, our technology platform, you've heard us talk about this before. But in a world where more people are playing more games across more platforms and connection with their friends is one of the most important things in their gaming life, having a single ID that travels with you, having a single set of infrastructure so your service is consistent, having it be secure, having a single data platform so that we have a 3 60 degree view of every single player in our database, the leverage that we're going to get at on a go forward basis is going to be profound.
And we're going to talk a little bit more about how that feeds into our network over time. So I talk about the portfolio and I talk about how we're delivering. Again, I'm not going to go through every one of these, but it's a very diverse portfolio and the reality is this doesn't even cover all of them. We've got cupboards in hallways with unbelievable IP in them. And just like the movie business and the TV business has reaped benefits of going back into the closet and taking IP from many, many years ago and reinventing it for a future world, we believe we're going to be able to do the same thing as well.
When you get all this right, you get unbelievable engagement. Again, as a company, when we've moved and you've heard us talk about this from just measuring ourselves by units sold to measuring ourselves in engagement. These are just a few numbers that highlight the level of engagement that we're getting, 54,000,000 players in our sports games, 9,400,000 active users in Q4 alone around our Battlefield franchise, months, years after launch. Our mobile device, again, a lot of people believe that mobile devices are many experiences. We're getting on average 2 hours a day across Star Wars Galaxy of Heroes, 1,500,000,000 matches played in FIFA in Q4.
Amazing engagement and it's happening because we've moved into the live services orientation. And again, I don't have to spend a lot of time on this slide because you know our story or at least most of you do. We've gone from a world where we're making $3,800,000,000 and on the bottom line a couple of 100,000,000 to adding $1,000,000,000 to the top line and $1,000,000,000 to free cash flow in a very short period of time. The leverage that we have in our business is unbelievable. When we do the right things at a core technology level, when we do the right things at an organizational level, where we focus on the properties that are going to drive the greatest entertainment for our players and the greatest growth for us as an organization, the opportunity is endless.
So as we think about the future, then where does growth come from? Well, at our very core, we're a games company and we have this unbelievable core portfolio. FY 2017 alone, we're going to relaunch Mirror's Edge. I talk about taking a property that we haven't launched for a long time and reimagining it for a modern generation. We've got Mirror's Edge coming out first.
We've got a whole suite of sports titles that are going to be the most innovative sports titles we ever made. They're going to make the biggest leaps in terms of technology, visual fidelity and experience of anything we've done. Again, I came up in the sports business, what I think anything we've done for over a decade. Who's seen the Battlefield 1 trailer? You and 35,000,000 of your closest friends.
We set out on a journey with Battlefield to create an unbelievably epic war experience. The team said, we want to build something that has unbelievable interlocking storylines. We want to build something that's truly global in scale. We want to build something where the weaponry evolves over time dramatically. We want to build something where the gameplay evolves over time dramatically that will engage players not just for weeks months, but for years.
And World War I was the setting. And what you saw in our trailer was an opportunity to deliver for what gamers have been asking for, boots on the ground, all out warfare with unbelievable epic gameplay at an epic scale. But we also have Titanfall 2. Titanfall 1 was a spectacular launch property for us on the Xbox 1. We're bringing it to the PlayStation this time as well, fast, fluid gameplay.
Again, the shooter category is this giant category, dollars 4,500,000,000 We're a big player in that category, but really only have about 25% market share. We believe that we are supremely well positioned in FY 2017 with a combination of epic scale battlefield and fast and fluid Titanfall to have tremendous growth in that category. And then finally for the year Mass Effect, a whole new Mass Effect story emerging, a fan favorite, something as a category real role playing games or RPGs continues to grow and break beyond what was the core gamer audience. We've seen other games in the category do this and we believe Mass Effect will do that. On mobile, we're adding to our existing suite of strong live services that have been providing consistent mobile revenue growth with FIFA and NBA Live built and delivered in the same way we've built Madden.
Again, we set up sports as a category on mobile devices this past year. We were told that listen, don't worry about EA Sports on mobile because sports isn't really a category. Mobile gamers don't want to play sports and sports fans aren't playing their mobile games. Madden proved that entire thesis wrong. And we're going to launch FIFA and NBA Live in the same way this year.
We've got a great property in Plants versus Zombies Heroes and we've just launched Bejeweled Stars, which again early days, but the feedback so far from players and press is that this is the most dynamic upgrade to the match 3 genre they've seen in a long list of clones. But how do we grow beyond that? Where does the growth come beyond just organically getting more players to play in our core platform? We think about it on a few different vectors. There's portfolio growth.
There's geographic growth. There's new engagement models that might come through platforms or business models. And ultimately, we have this unbelievable tailwind right now that is digital growth. So as we think about portfolio growth, again, we are underrepresented in the action category. You're going to hear how we're investing there and how we've got great leaders like Amy Hennig, who came out of Naughty Dog and Jade Raymond, who came out of Ubisoft and built Assassin's Creed, who were investing in the action category.
We're pushing into mobile. We're pushing into console. We're pushing into VR. We have been pushing into streaming. These are all opportunities for us to get more people playing more games across more platforms and growth will be the result.
As we think about a property like FIFA, I started work on FIFA in 2004, 2005. At that time, it was kind of a $200,000,000 business and it was kind of sold a little bit in the U. K, a little bit in Germany. America wasn't a particularly big territory for it. We weren't in Asia in any meaningful way.
And we went through a systematic plan of taking FIFA into every country on the planet. We went out and we got content from Poland, from Greece, from South America, from Korea, from Japan, from China. We localized into more than 17 languages. We started to deliver through new business models, FIFA Online on PC, free to play in Korea. We believe there is a tremendous opportunity.
We're just touching the surface of Asia and South America. But if you think about the value of our IP in those markets, China is going to continue to grow around football. Need for Speed is a brand that resonates extremely well in China. In fact, the movie that we made, which most of you probably haven't seen, or at least I hope you haven't, went to number 1 in China, shows the value of the brand there. We're going to continue to push in with local people on the ground.
We have studios in Shanghai, Japan, Seoul, Korea, and we're looking at how do we push into South Again, I talked about how we've moved from a company that has been just a premium unit, things shiny discs in plastic boxes on retail shelves. Things like EA Access demonstrate to us the growth opportunity. It continues to engage players beyond our Here's what we see. People who come into EA Access very often are new to EA. Even those who are with EA, more than 80% of them play a game of ours that they've never played before.
When they play on 2 games inside of EA Access, they engage and monetize higher in both the non EA Access players. And those that play games inside of EA Access show a high propensity to buy the new Frontline title when it comes out. And given that we provide discounts against digital versions of that content, they have a much higher propensity to buy it through digital channels. But it's not just about business model. Peter Moore is going to come and talk to you a lot about competitive gaming.
And there's been a lot of talk about competitive gaming and the elite level of gaming and the revenue that may be generated from broadcast rights and sponsorships and team ownership. And yes, there'll be revenue there. That's going to take time just to say, again, I grew up in sports. Broadcast rights, sponsorships, team ownership, that's a long journey and it's a journey that we're going to drive towards. But in the meantime, think about sport.
Rugby World Cup is it's tough to get broadcast rights for that. The UFC, which is one of the biggest growing sports on the planet went out for apparel sponsor and Reebok, I think gave them $70,000,000 over 7 years. Giant brand, huge viewership and the sponsorship they're able to generate was $70,000,000 over 7 years. But here's the thing, kids are out buying soccer boots and balls and socks and shorts and shirts and boxing gloves and skipping ropes and weights every day of their life. The same way people are going to play FIFA Ultimate Team, Madden Ultimate Team, Hockey Ultimate Team at renewed levels of engagement as they aspire to get to that elite level.
There's an opportunity we can double Ultimate Team revenue through the ongoing push for engagement that comes from competitive gaming. As we look to the future again, we don't want to be limited. We don't want to have to take bets. What we want to be able to do is get to where players are playing in a way that they're playing. Our core Frostbite engine facilitates that.
The breadth of our IP has broad level appeal for a growing player base to the extent that it doesn't matter what it is, whether it's VR or AR or discrete gaming through an Internet enabled fridge that gives you rewards inside of FIFA for how much milk you have. We have an opportunity to benefit by virtue of how we've set the organization up and by virtue of the IP that we have and the connection that we have with the global player base. Digital growth, this amazing tailwind, provides us growth on 3 different vectors. The first is, we have a much deeper understanding of our player. We know more about what they want to play and more importantly where they're struggling with play.
We know more about how to build just the right things for them and present them gameplay in just the right way that causes them to play more, bring their friends to play and engage for much longer. We see as a result of this an elongation of both the engagement and the revenue curve. Looking here at Madden Ultimate Team, the reality is for the longest time people stopped playing Madden after the Super Bowl. And in fact, a bunch of people stopped playing Madden as soon as it became apparent to them that their team wasn't going to make it into the Super Bowl. And now what you see is we're getting long term engagement and monetization through the delivery of live service to football fans around the world.
And you are seeing beats of engagement and monetization that are high well after the Super Bowl. Everything that happens in football life is an event in your football gaming life. And finally, it's higher margin revenue. It's higher margin for a couple of different reasons. 1, we're not dealing with the issues around hard goods and I don't have to talk about it in detail.
Been talking about this a lot. But you don't have to deal with warehousing. You don't have to deal with plastic. You don't have to deal with boxes. You don't have to deal with SRA.
But more importantly, we get tremendous leverage out of our R and D dollar. So the core investment that goes into FIFA every year that is then extended for at least 12 months of play beyond that comes at very high margin, because we're delivering tremendous value to the player by extending and enhancing experience they love to play with their friends, but we're able to do it with a much, much smaller team. And that presents a profound opportunity as we think about the elongation of engagement in our games. But where do we go to from here? So we've got this great core portfolio.
We can see a world where portfolio growth, geographic growth, new engagement models through both new platforms and new business models and digital as a tailwind is going to drive tremendous growth for us. But how do we think about the future? When we think about the future of more people playing more games, a couple of things are going to be true. 1, I as an individual, I'm going to play games across more than one device. In fact, I'm going to play different games across different devices.
I'm going to refresh those devices on a much faster cadence. So again, our industry operated for the longest time on a 6 year refresh rate. Now it's a 6 month refresh rate. And it's asynchronous with our friends. We don't all necessarily upgrade our phone or our TV at the same time.
So in that world, as we're moving from device to device, as we're moving across devices and across franchises, how do we find our games? How do we find our friends? The simple action right now of moving from an iPhone to an Android device is extraordinarily problematic if you're a gamer. Finding friends in this new world that you're going into is really tough, especially if they all set an iPhone. Maintaining all of the progress that you've made in a game is really tough, because it's setting on a different operating system.
So there is an opportunity for us as we think about the future through that core digital platform I talked about earlier, through a single ID, through a single data platform, through a single set of infrastructure, irrespective of what device you play on or when you upgrade that device to keep you connected to your friends and keep you connected to the games you love. And the opportunity here for us is to do this not just for us, but to do this for the industry. There's a world where other players in our space are going to want to get to gamers. There's a world where other players in our space are going to want to participate in a connected networked world, where this is not just a database of players. A database is in a network.
A network is directly proportionate to the strength of the connections, connections between players and connections between player and game. What we know to be true is where players have 10 friends in a network, they are less likely to churn out of that What we know is where gamers play 2 games inside of a network, they're less likely to churn out of that network. But in a world where there is 1,000 new games hitting app stores every day, the opportunity for churn is great if you don't build a network. If you are not able to fulfill 2 fundamental player needs, which is remaining connected to their friends, remaining connected to the games they love, and then adding to that the provision of new things they might love. We're going to hear a lot more about this today.
For the opportunity, billions of players as a network engaging daily, weekly, monthly, connected in game and beyond in a growing digital world. We believe we are uniquely positioned to disproportionately benefit from this growth because I think we have the best talent in the industry. I think we have the deepest portfolio of IP both now and in development. I think we have taken the time to invest in core technology, both as a digital platform level and as an engine level, And we have reoriented the company away from units sold to hours spent. And what I hope you get today is a deeper understanding of that transformation.
Thank you so much.
Good morning, everyone. My name is Patrick Soderlund, and I run the EA Studios Organization. This we don't need to cover. We'll pass this. I want to start by showing the trailer that Andrew spoke about, the Battlefield 1 trailer.
So why don't we just run that first so you can see what it looks like? That's pretty cool. That was actually Battlefield was one of the first games that I ever worked on. The first Battlefield game in 1942, Battlefield 1942, was something that I was a part of creating from my first apartment 15 years ago. So this game is close to my heart.
The thing that Andrew spoke about in regards to the setting and why we decided to go for World War I, it wasn't the most obvious choice. If you look at what other partners are in our industry are doing, they're going into sci fi. We've had a lot of success in the modern military space, but we felt like there was a need for a change. And when the team presented to me the idea of World War I, I absolutely rejected it. I said World War I is trench wars, it can't be fun to play.
But anyway, the team continued and persisted in the fact that this can be fun and showed up with a very short demo that convinced me at least that this was the right path. The good news is whenever you take creative risk and it works, you actually can get to substantial success. And I think what the Internet is telling us with 31,000,000 views and the most seen trailer in the history of EA is that I think the World War I theme is resonating with players out there. I think we're we have done something that I think will be right for the franchise and right for EA. Now as Andrew and I spoke about yesterday, we have to remember that so far we've only showed 1 trailer.
And yes, it's gotten a lot of success. But what's important is now that we have to go back and make sure that we deliver on the full promise our Battlefield can be and that we will do. So over the next 25 to 30 minutes or so, I'm going to give you an insight into EA Studios, who
we are, what we do and how we do it.
And EA Studios is a large organization which actually represents about 80% of EA's total revenue in turnover. We're all about making the world's greatest games, telling great stories and creating great gameplay experiences is of
what we do.
We have developed some of the most popular games in our industry Battlefield, Mass Effect, Need for Speed, our whole EA Sports portfolio of course Dragon Age, Dead Space and more. We have 13 locations around the world, about 4,100 employees. We have 4 major development sites. We have Vancouver, which is the largest one where we make FIFA, NHL and UFC Plants versus Zombies and a couple other things. We have Edmonton in Canada where the BioWare studio sits, so Dragon Age Mass Effect and a couple of other things we're working on.
Orlando where we make our Madden business and NBA and we will make golf. And then Stockholm in Europe is Sweden where I'm from, where we make Battlefield and also where Star Wars Battlefront was made and we'll show you Mirror's Edge here in a second is also made there. So those are our major kind of largest development hubs. Our studios range from about 120 to 1000 people depending on where you are in the world. So Andrew touched this briefly.
Our games portfolio, I believe that we probably have the most diverse game portfolio and IP portfolio of all publishers in the industry. If you look at the just sheer breadth of what we can offer both from an IP but also from an experience and depth perspective on everything that we do, our sports portfolio, we have with all the sports games, we have Plants versus Zombies, we have Titanfall, Battlefield, racing games with Need for Speed, our RPG category with probably the one of the strongest development organizations in the world in BioWare with Dragon Age and Mass Effect. We have a large diverse portfolio. And frankly, just like you guys, we manage risk. This is about breadth.
This is about going as wide as we can, but still keeping control of what we do. We for the sake of this presentation, I decided to split up our IPs into 3 categories. The first one is the intellectual properties that we own. And if you think about it today, about 25% of the resources inside a studio organization today, so roughly 1,000 people, are working with new projects, new IPs or incubation, new conceptual ideas, projects, R and D. That's a pretty large amount of people that doesn't work on maybe things that we have announced as of yet.
Obviously, our own IPs are the cornerstone of our portfolio with Battlefield, Dragon Age and
the ones I've mentioned in the past.
So Andrew also mentioned first game that we launched in this fiscal year. And I want to show you a trailer of that that we just launched online. So can we please run the Mirror's Edge trailer?
I once knew a young woman who would defy anyone and anything in order to do what she felt was right, but you're clearly not her. You're broken. Anything having to
do with Gabriel Kruger, we need to stay miles away from her.
I thought this would be awesome.
No, you didn't think, Faith. You never do. Don't get lost.
Barely out of prison and already stirring things up? Your parents will be proud.
Mister Kruger, he is out for runner blood. Whatever it is you stole from him must be very valuable.
Stop. You keep this up, I swear you'll
be dead in a month.
Using every weapon at our disposal, we've got to
Get out of my sight.
That's it? What else is there?
You're wrong. I'm not broken.
Prove it.
So the spider and you afterwards.
So I had a question yesterday during the cocktail discussions around Frostbite and Engine and the fact that if you're moving all your games to 1 Engine, aren't they all going to look the same? And I think the first game that we showed Battlefield 1 is running on frostbite. The second game, this one we showed, is also running on frostbite. So the engine isn't actually a barrier for how a game looks and feels. It's totally up to the development team to our direction and how they choose to build the software.
You've seen a lot of other games made in the industry using 3rd party engines. They kind of tend to look the same. I agree with that. And that is actually because when you don't own the engine and you have to use someone else's property, you can't change as many things as you can do when you control everything yourself. So that's why we're going to get more into frostbite a little bit later, but that's just one piece that I felt I should touch when I saw this.
The second category for us, which is not that, which is that, is obviously the license IP. This has been a tremendous success story for the company. And again, it's something that we value extremely. We have partnerships with among the best and biggest brands and IPs in the world. If you think about our whole sports portfolio and the success of that, that comes from deep partnership with the NHL, the FIFA, the NFL organization and more.
But we also have other types of licenses with Disney on Star Wars, which you've seen with Battlefront and some of you were also asking questions around Star Wars yesterday, which we'll touch a little bit later. So again, in the spirit of showing more trailers, I'd like to show you a different trailer from NHL this year, which will give you kind of a sense of our vision for the game how we bring it to life for our players. So if we can please run the NHL video.
Legacies aren't shaped overnight. Whether they're built on the ice, behind the bench, or in the front office, no 2 NHL legacies are the same, and we took that idea to heart when we set out to build NHL 17. From making that clutch save that changes the momentum of the game to battling for that critical inch in front of the net during the dying seconds, our focus is to make sure we're improving gameplay in all three zones. Through deeper and more customizable experiences in our most popular modes and by engaging fans across all aspects of development, we're creating new experiences that add up to our biggest and most exciting hockey game to date. Whether it's shaping the future of your franchise, making a splash in international competition, or rewriting the record books, in NHL 17, you'll get to experience the defining moments that only hockey can deliver.
No matter if you're challenging a friend on the couch or masterminding a team at
the elite levels of
competition, with NHL 17, you can shape your hockey legacy where it matters to you.
Categories are own IP and licensed IP represent what those 4,100 people work on, on a daily basis. The 3rd segment is external partners that we work with. Sometimes we choose to work with an external partner to create different experiences that we can't get to internally. It could either be a game idea or a team that has a specific talent that we feel like we should partner with because we don't have the opportunity to build that inside the company inside our own portfolio. So Coldwood on the left here made a game for us called Unravel.
It's a very different maybe an EA like experience, but we felt like we wanted to bring that to players. When I saw the game, we just felt this game deserves to be built. We should help them get this to market. And as you probably saw today, we just signed a new agreement with Coldwood for the next version of Unravel. We have others like Hazelight who we have only spoken about briefly, but you'll see more of a little bit later.
And obviously, our partnership with Respawn is deep now today. With Titanfall, we are obviously working with them as we also announced on a Star Wars property that you will see more of a little bit later. The next thing we're going to show you and I'll stop showing trailers in a second, but the it's actually something that we have in common with the movie business. So big brands like Battlefield or Titanfall or FIFA, we will often very often tease first. And when you tease something, the reactions can be sometimes incredible frankly.
And when we release this what they thought they were seeing. And what's interesting, the questions what they thought they were seeing. And what's interesting, the questions you get from people seeing this is so deep and so varied that you wonder what are they seeing? What am I missing? Because it's only 20 seconds of basically nothing.
But they get super excited about the fact that we're confirming that we're building it and the gamers out there love this kind of stuff. So let's just run this quickly.
People like you always want to be the hero. The problem with being a hero is you have to be willing to die for what you believe in. If I were you, I wouldn't try so hard.
Yes. So as you saw not a whole lot, but again the excitement it generated was pretty profound. So this is also something that Andrew touched and which I believe is center and very important for not only Studios but the whole company. Our industry have gone through a a substantial shift in the last 5 to 7 years where we've gone from almost a fire and forget mentality where we would launch a game into market and then let it sit and see what happens to now when we launch a game, it's almost like the start of a journey. This is when we get something in the hands of players and we will then start communicating with them and to see what if they like what they like and what they don't like about what we've both made.
And that gets us into the live service layer of the product, which means the game connects to you as soon as you turn it on or open it up. It means that for us we are constantly monitoring what's going on. We run game updates. We connect you can connect and play with other people if you want to. You can purchase more content or expand the game even more, which we'll talk about shortly.
So I believe that players today play fewer games, because the ones that are out there that do the live service component layer well will actually drive longer engagement, meaning people will stay more connected and more loyal to games that they play. For us, this is really central to how we think. If you look at what we've done with FIFA or with Battlefield or many of our other games, we can actually have people stay with us for the period of several years and continue playing our games instead of going to someone else's game. This creates happy engaged players and expands revenue and margins for us of course. If you look at our support business and what we've done there, I think that we I can say this without sounding arrogant.
This is probably the most successful example of a console based live service player that I can think of. Last year alone, we launched more than 200 updates for our EA Sports games, 200. This means we have teams dedicated 20 fourseven to just updating and servicing the games that are out in the market. We do things like roster updates, player events and challenges gets connected to the real world of sports. Again, being Swedish, Zlatan Ibrahimovic, a Swedish football player, are leaving Paris Saint Germain and there was a big event around his final game and the fact that he scored 2 goals and was kind of the hero that the next day is fed back into FIFA and you can experience something similar in the FIFA game.
So we try and tie everything that happens in the real world to the games that people love to play. Obviously, one of the or the biggest success we've had for sure in monetizing and staying engaged with players is our Ultimate Team business. And we've told you guys and the rest of the world that last year we reached $692,000,000 in revenue that was generated because of Ultimate Team. So I'm going to briefly touch on what Ultimate Team is. And this is something that we have across FIFA.
We have it across Madden NFL. We have it in NHL, UFC, NBA. We have it in most of our sports games where it kind of fits and makes sense. And the way it works is it's essentially a virtual trading card mechanic inside the games. So what you do is you assemble your best team of players from packs that you can earn or buy.
You then go you can then trade or acquire individual players if you want to. There's a marketplace where you can sell, trade or buy new players. What you then do is your goal is to create the best possible or your ultimate team. So you have to be kind of a manager of your own sports team and pick players that you buy or acquire through playing the game and make up your own team. Then you have to think about deeper kind of levels of data like chemistry.
Can these players play together? You have to think about an Italian guy won't play well against a Spanish guy maybe and that will create a problem in your chemistry. And then you have to think about certain player attributes. Do I want a speedy player on the right side? How do I look at my defense strategy?
So there's a lot of depth that goes into Ultimate Team and that's why it's so successful. But it's also how easy it is to interact with Ultimate Team. It's we have to be very careful how we craft the UI on the console and how people can buy, trade and manage their teams, but they can also do it on the app on the phone. So when they're on the bus or when they're away from their game, people trade and buy and manage their squads on the run. This has proved to be a significant driver for engagement and frankly monetization as well.
One interesting fact. Right now in FIFA Ultimate Team there are about 2,000,000 trades happening just now. So there's 2,000,000 trades happening almost every 2nd inside the FIFA Ultimate Team business, which is a staggering number if you think about it. So for us, this will represent a big option or opportunity as we look into competitive gaming, which Peter Moore will come up and talk to me talk about after I'm done. Battlefield and the live services that we've done here.
Battlefield, we started doing a deeper live service layer with Battlefield 3, and we launched something called Battlefield Premium. Again, we at the time didn't think that we had an ultimate team mechanic that worked for Battlefield, so we had to come up with a different strategy on how to keep players engaged and feeding them more content. So we do this in the form of expansion packs, which is maps, weapons, vehicles and other things that you that we think the players want. We also do this through a micro transaction layer, where you can actually buy what we call battle packs, which is basically a way for you to buy the things that you are missing that you haven't unlocked in your progression through the that you haven't unlocked in your progression through the game. And then there are other things that we also can do such as to keep people engaged, we create something called the community test environment.
And what this is, is it's a way where the players, the really hardcore players get to take part in a community, a community that helps us design the game and change it as we go. So we are in constant communication with these players. There are thousands of them. And they will feedback and test things in development. So it's like a secluded layer where they partake.
And they will we will get proper feedback not only from our QA team but from real players out there on a continuous basis to whether the things that we're doing with the game are the right ones or not. We've been even going so far to take it to the community designing maps that then make it into the game. So it's like a controlled user generated content place, which has been really important and been really important for us and been very successful. I also want to touch briefly on a subject that's dear to my heart, what makes a great game. So if we strive to be the world's greatest game company, we have to make the world's greatest games.
It's that simple. And I'd like to give you guys an insight to how I look at it and how we look at it inside the studio organization. So 1st and foremost, this is not easy to define. Quality is sometimes subjective. It's something that you may think you've done something that you believe will be the right thing, but then it's proven to be the wrong thing.
You sometimes think that you've made a mistake that proved to be the right thing. So again, this is not easy to define. But for me, games are art. Games are entertainment. They're art.
And we have to dare to take creative risk, to push boundaries and challenge conventions as we go after games that we make. But games are also science. You have to have you have hundreds of people working on a game. So maybe less creative things like scheduling, development process become really important in how we make a game. We talked briefly about technology, also a big part.
But the most important aspects of a game team are to the people. So for us to have the best possible people to make sure that they're motivated and that they know what we expect of them is key. So all these three factors play in when you want to make a high quality product. So we all have maybe you guys do, but I spent a lot of my life Googling and looking for Metacritic, which is like an aggregation site of review scores that tell us how we're doing. This is a way for us to be measured and publicly see did what we do make sense.
I wouldn't say that quality is that Metacritic is the only factor that we look at, but it's one of many that we look at. Over the past 6 months or so, we've tried to define a process and a framework to better help us identify and understand what makes a great game. So the way I look at it is craftsmanship is the number one part. So what is craftsmanship? Craftsmanship means what fidelity?
How is the controls? Is the game done right? Is it does it have the right depth? Does it have all those things that are important to craftsmanship of making a game? Is the audio correct?
Or how are the animations? Those things. The depth and breadth is something that is proving to be more and more important. In a world where we want $60 upfront and where we expect people to stay with us over the course of a long term over a long time, the depth of what we offer is important. We've actually had some dialogue.
Star Wars Battlefront came out. It totally nailed a lot of these factors out here, but we got criticized for the depth and breadth of it. And so as we look at why that was, we have to go back and course correct that for another version if we were ever to build one Blake. The differentiation, again, push the boundaries of what gaming means. So we can't be making the same game over and over again.
We have to be we have to push our teams to come up with new ideas, to dare to innovate, to dare to be different. If you look back at the Battlefield 1 trailer, that's one way of differentiate you what you're doing. Mirror's Dance, the whole game is a large differentiation. It's a first person game based on movement where you can't shoot people. So that is one way.
But again, you have to take creative risks to be successful. Service and stability, something that you guys know very well is important. We've had tremendous success this year with a lot of stable launches. C2 CTO organization have done in making sure that we are buttoned up and that we know what we're doing when we launch a game. This is incredibly important.
So these are the things that we look at and they help us make the right decisions at the right time. If you go into a review of the game team that's presenting you with a game pitch, you can actually look at the framework and you can start asking questions around the things that are up here. So not only does it help the developers in EA, but it also helps the executives and the people that are looking at what's being built to make the right decisions. And what's important for us is to test many things but to also kill many things and to pick the ones that make sense and keep those. Leveraging our scale is something that I believe is an incredible advantage for us.
With 4,100 people inside of studios with a large with an equally large part of the rest of the company helping us, I believe that scale is an incredible advantage. If you think about how we are collaborating not only within Studios but across Studios, That remains something that I would be honest we maybe haven't done greatly in the 1st years when I came here 10 to 15 years ago, but we're doing a lot better now. If you think about the FIFA team today working with BioWare and there's a collaboration with them. You have actually developers from BioWare who makes RPG games Mass Effect Dragon Age working on FIFA today. When teams are done with the game and they kind of ramp down, instead of them working on things that may or may not make sense at the time, we actually put them on other games.
And the developers love this. For the BioWare guys to work on FIFA for a while is interesting for them. It's creatively challenging for them. And this is something that we do across the world all the time with all our teams. So another part of scale is obviously our central content team.
We have about 800 people in low cost locations that actually create the majority of all the art seen in all our games. And this gives us a flexible workforce and it can decrease the studio sizes that we have by instead of having every single studio staff up to have a full art team on-site, we can actually have 1 large art team that can scale up and down between projects, much more efficient and actually is now driving higher quality and more consistent across our games. Motion capture is another thing that is super important to how you make games today. Before, a lot of the animations that were made were handmade. Today, almost all of it is done in motion capture.
You put a suit on, you have a bunch of cameras, and the cameras will register what you do. And then we can transfer the movements into the games in the form of game animations. We have a large facility in Vancouver. We have actually even more motion captured horses seen in the Battlefield trailer. And obviously, we have smaller locations around the world for teams to do more simple things.
But this is also an incredibly important part of our organization. Test and quality may be not as sexy as motion in the conversation. Test and quality may be not as sexy as motion capture or making games, but again going back to the stability part, a very important section. And this is an area that's actually developing more than one would think today, Again through the dialogue through the work with EADP that Ken Moss runs, we're seeing progress made in automated testing. Testing that usually were done by humans can now be done to some extent by machines, which can do it faster, will find other types of problems and again helps us leveraging our scale and give us a greater economy so that humans can focus on more sophisticated testing and actually give qualitative feedback.
And the machines can focus on does it run the way it should. Frostbite, again something that Andrew spoke about briefly. When I joined the company, there were 16 engines in development around the company. I started the Frostbite initiative probably 12 years ago, 10, 12 years ago. And I started it for the reason that Andrew mentioned.
Whenever we made a game, we also made a game engine. That doesn't sound particularly economically savvy nor is it particularly fun because you get to spend 70% of your time building a game engine and 30% of your time building a game. We would like to spend 90% of our time building a game and 10% working on an engine. So quickly, what is Well, a game engine is actually the framework and the technical platform that we use to build the games, but also it's also the technical platform that actually runs the games. So when you turn a game on, you start our game engine and the things that are inside of the game engine are what you play.
So we're going to show a short video to get you some insight to what frostbite is and how we can use it. So if we can please run the frostbite video. So our journey to get to 1 engine is almost complete. And this year you'll see us move more games on to Frostbite, but more on that at EA PLAY in June. So going back to leveraging our scale with Frostbite, here's a couple of tech examples that show you why one engine is important.
On the right hand side, you are seeing something that it's not so maybe easy to understand, but it's actually a crowd technology. So that was developed for PGA, the golf game, and essentially after that was adopted by the Mass Effect team to have big crowds that you walk through. That was then adopted by the Mirrors Edge team to have a large crowd layer on the street level that you go that is now being adapted by other game teams. So instead of every game team having to build a crowd technique and or technology for themselves, now all teams can use one set of crowd technology. On the far left, you're seeing a character from Mirror's Edge that is using a multitude of technologies to look that way.
It's how you render the character on screen, everything from the hair technology. Yes, we have a team working on hair technology. How is hair depicted in the game? Does it move accurately when you move around? How is wind affecting hair?
All these things are factors that we have to think about. And if you do that again in one set of tools, you can then share it across all the games instead of having to build it specifically for one game. So I can't you can't underestimate the value of 1 engine and what it means for the developers out there and what it means for EA. Almost done. So again in the spirit of valued shared technology across the company, this is not something that happens in EA Studios in isolation.
There's a great collaboration with the EA DPIG team, which is the CTO organization. Even with marketing, the data analytics layer and other parts of EA does this and collaboration is key to success. With these components at scale, we can drive disproportionate growth to be honest, very important. Looking at the future, I'm a those of you who know me, I'm a big believer in the need to constantly push and constantly innovate and to try and be better. And I've had a lot of questions in the Studio organization but also across EA.
Kind of we've had a dialogue around innovation and who gets to innovate. And what I've told everyone inside the Sutter system, innovation is not something that you have to ask permission to do. This is something that has to be in our DNA. It's something that should be ingrained in the culture of the company. We don't have an innovation squad running around inside the company innovating.
This happens at a team level. It happens at a tech level. It actually happens even on the executive level, which I think is profound and very important from a company perspective. And I believe if we so with that to say though we have created something that we call EA Labs which is or Frostbite Labs, which is a set of very talented people that are working on longer term things that I believe could be profound for the industry and for the company. There's a couple of examples of what they're working on.
They're today in Stockholm and we have a cell in Vancouver, selected few, maybe 30, 40 people, so not that many, but highly specialized, highly talented that are working on things that are kind of out there. We have a project on virtual humans. When virtual reality becomes important to us, which I think it will be, how you're seen as a virtual human in that world is something that we need to for. For us to make believable characters becomes more and more important as we drive innovation on the narrative and character part. But then the question becomes, if you want to create a virtual human, how does a virtual interactive human function look like?
This is the stuff that they're working on. They're kind of out there long term. You guys have probably heard about deep learning and what that other companies are talking about it. This is kind of a new trend in technology. And deep learning is something that we're using today to drive maybe unexpected things like what can we do with deep learning and neural networks to build up procedurally generated content.
So imagine a world where a creator comes to work and instead of having to, a, work with the conceptual artist to build a level and figure out whether it's winter, whether it's nighttime, he can go into the Frostbite editor and apply certain attributes. I want the level to be at winter. I want it to be located in this location. I want a certain level of attributes. Then essentially push a button and out comes a level.
Now we will never get to a point where the level is then just taken from there, put into a game and shipped. That won't happen. But if we can get a base set of levels created that the artist can then go in and level designers can go in and alter it, imagine just how much time we've won and how much more time we can spend on iterating on the game instead of actually making the game, which in a sense should drive economy of scale and should also drive a better product. I think it's important to stay relevant. We need to dare to look into the future and dare to go deep into the kind of crazy corners technology.
It's our responsibility as a company. It's something that I'm passionate about and something that I think we have the right people to do.
So what I want
to take away from what I've said. I think that we have an unmatched and powerful IP portfolio. I believe that games as a service is nothing new. I gave you multiple examples and so did Ando of how it's transforming our company. And on our path to become 100% digital company, this is probably the single most important component.
We have a well defined development process for how we make our games and how we make them great. And I believe that everyone in the industry, in particular companies in the Valley here, are looking for the next amazing thing. And I'm actually thrilled by the progress that we're making towards our next big thing. So I've been in this industry for more than 20 years. I think this sums up what I think we need to do to be successful, to continue to grow and lead this industry long term as well as short term.
So thank you for everyone for listening, and I hope you enjoy the talk. Up next is Peter Moore to talk about competitive gaming.
Thank you, Patrick. As a company that relies on creative talent, we are so fortunate to have somebody of that level leading our development studios around the world. I've been in this industry a number of times throughout the years with the SEGA and Microsoft, now with EA. I have never met anybody that has the depth and scale and passion and determination for success as Patrick Sottal and we're incredibly fortunate to have him. So let's talk about competitive gaming.
From the perspective of what we are looking at in Electronic Arts, of course we're looking for growth. And Andrew touched on this with more platforms, new business models and deeper engagement, which becomes the key for us. So what I'm going to take you through about 20 minute presentation is our view of what we see with competitive gaming, which might be a little different than you're hearing in the marketplace right now. But why EA is uniquely positioned to be able to take full advantage of what we see as the future of engagement at a deep level. Both Patrick and Andrew talked about live services, about our games being truly 24 hours a day, 7 days a week, 3 65 days a year.
And what we're going to take you through is a little bit of a whistle stop tour of what that means and how we apply our competitive gaming elements to our games to drive deeper engagement to be able to have more gamers, play more games, have more fun and ultimately to be able to monetize at a very effective level. So let's start off with our safe harbor. Let's start off with a quick video and give you a taste of eSports. Play that video please.
Hearing the cheers of 40,000 people echo throughout a World Cup stadium made it clear that gaming was finally getting its Woodstock moment.
I think it was about 18,000 people in the stadium live and then 32,000,000 watched the final. This is what kids are doing. This is what people want to see. Esports has kind of taken over. It's become a sporting event.
So that's eSports, exciting, big arenas and yet expensive and aspirational for 1,000,000, if not 100 of 1,000,000 of people. What it's not is competitive gaming. The focus of esports at the top end is on a few 100 gamers, all of whom professional in some level or another, either getting through prize money or their subscriptions on their YouTube channels and it's an exciting part of the business. And we will take full advantage of that at Electronic Arts. Our ability through our Global Media Solutions team to be able to do these sponsorship deals is huge.
I have a 50 person team based out of Los Angeles, based out of Chicago, New York City and here in San Francisco that for many years has been doing sponsorship and advertising sales and is absolutely chomping at the bit to take advantage of the excitement you see there. But let's think about where we're really at. That's what we're talking about in e sports. Let's look at competitive gaming because the pyramid you see here tells the real story of where the opportunity is for a company like EA, for what the structure of esports, I. E.
Competitive gaming truly is, and where we can really bring value both to the players as well as to our shareholders in being able to drive extra engagement, to drive extra monetization. Let's start at the bottom of the pyramid, what we call competition oriented game experience. There are 60,000,000 to 70,000,000 of Alex Citrons in this world playing a League of Legends or a DOTA 2 or Counter Strike GO or a Battlefield or a FIFA or a Madden. And they play because they aspire. They aspire to be in that arena that we showed in the video.
They aspire to move up the pyramid to play better, to have more interaction with their friends and ultimately maybe win some money or certainly win from a motivational perspective the type of elements that make gamers really feel part of our Secondarily, we move up, we've got community run online events. Here's a photograph actually Super Smash Brothers. Dorm rooms around the world, bedrooms around the world, 6 or 8 guys or gals getting together and playing like LAN parties of old, a very important part because as we move up the pyramid, this is where the value chain starts to kick in. 3rd part, now it gets really exciting from a scale perspective. Photograph Santa Clara University, again, 2, 3000, 4000 people arriving for a weekend, paying entry fees, paying for prize money.
In the back of the area there you can see watching the best players and learning from those best players. We think there are millions of these types of events now being formulated over the years that we'll be able to drive towards the top of the pyramid, which is now we start thinking about studio events. This is a photograph from Gfinity Studio above the Fulham Road Tube Station in London. Built for TV, 200, 250 people streaming through Twitch, on demand through YouTube and certainly with broadcast partners now getting involved, a huge opportunity for us to be able to drive the media rights we talked about. Let me just talk about that a little bit though, because when we get to the top, yes, this is exciting.
As Andrew pointed out, you've got companies like Reebok coming and sponsoring UFC, huge media property, but it's $70,000,000 over 10 years. My prior life, I was Senior Vice President of Global Sports Marketing for Reebok, very valued and involved and embedded in doing these deals. Complex, decent money, but not what we as a company were doing it for because we were doing it to sell shoes. And in the same way that we will get involved in electronic arts in sponsorship and marketing and ad sales, we're doing that to be aspirational to be able to drive the rest of the pyramid forward. We have a vision, make stars of all of our players, not just the top.
Everybody wants to be a Messi. Everybody wants to be idolized on a global basis. For the world that I grew up in, kicking the ball around in Liverpool, I was going to play for Liverpool. No, I wasn't. But did I spend money on footballs and boots and programs and newspapers and magazines and going to the game itself?
You bet I did, as did millions of other aspiring young footballers that wanted to play at that top of the pyramid. Because for every Messi, there are tens of millions of boys and girls around the world kicking a ball around. And the global economy of a sport like soccer is huge. And that's really where the action sports at the top of the pyramid is aspirational. It's So the eSports at the top of the pyramid is aspirational.
It's expensive. But where the real value we see, particularly when you think about our games, the ultimate teams, battle packs in Battlefield, our games are built to monetize at a mass market level. And the more engagement we get, the more monetization opportunities we drive. Four real goals for the competitive gaming division, very simple, increased session days for all of our gamers globally. A session day is defined by the fact that you log in and you go play a game on a particular day.
Our data analytics team will tell us that for every session day
extra
that we drive on an incremental basis, we have the opportunity to monetize that gamer between $5 $10 incrementally versus what they would generally spend. Secondly, increased engagement at a game. We'd like to talk about the Super Bowl being a huge media platform.
Well, the Super Bowl is about 4 and
a half hour broadcast of which there's about 20 minutes of actual action. And when you think about the shoulder programming as we call it that leads up to the Super Bowl those 2 weeks, that's as much where the money is as it is in the actual event itself, Driving user generated content, driving programming, making heroes out of all of our players gives us a huge opportunity to build a bigger platform so that our consumers become engaged, not just when they're playing, but finding out about the game. The 30 odd 1000000 that Patrick talked about for the Battlefield 1 trailer is huge, right. Content that we can drive to shoulder around the actual events itself is monetizable, it's engaging and drives players to play the game deeper. Thirdly, increased acquisition of new players into our games.
It is irrefutable that if you drive competitive gaming modes big and hard the games itself, more players want to play. They see it as more fun. They love the competition. They see the opportunity to be aspirational to drive their way up the pyramid. We will sell more copies of the games, whether it's a FIFA, whether it's a Madden, whether it's a Battlefield.
At EA Play, you're going to see the opportunity for other franchises from an esports competition. What both Andrew and Patrick put up there with our brand portfolio gives us 6 to 8 games, 6 to 8 games that I think have the potential to be competitive gaming games going forward here, all built with competitive gaming modes in there and all built with the opportunity to monetize deeper. And finally, increase NPS of our brands. NPS, Net Promoter Score, very simple. Question we ask millions of gamers every day.
On a scale from 0 to 10, would you recommend this game to our friend? And Patrick talks about Metacritic. We also look at MPS as being a real indicator of the quality of our game. We do it daily. So it goes up and down and ebbs and flows.
And as we bring more content in and as we bring more modes in, we find our net promoter score of our games grow. And if you have a better net promoter score, you have a better opportunity to retain that customer to the next iteration of the game. So putting competitive gaming in there will drive up the NPS. And again, that allows us to retain our customer. We're engaging them 24 hours a day, 7 days a week, 3 65 days a year.
So when the next Battlefield or the next Need for Speed or the next UFC or FIFA come along, it's so much easier and cost effective to move them on. 2 ways to engage. And this is very simple. First of all, playing itself. Make competitive gaming meaningful no matter your skill level.
There is nothing more frustrating than going on and playing in an online event and getting your ass kicked by a 12 year old and having to go back and get kicked out of the tournament and feeling embarrassed about that. 1 of the keys that we're working on as part of our platform team led by Ken Moss, our CTO, 2 things matchmaking becomes critical. There is no fun whatsoever being completely destroyed every time you go online and we've all done it. The ability for us to find the right people as a player becomes critical to on time and online and increased engagement. And if we don't get our matchmaking right, then the frustration level goes high and people churn out of the game.
Secondarily, to entertain and teach. And we found out, we talk a lot in the entertainment world, there's only 24 hours a day. And the ability for us to be able, when you look at the spectating element, whether it's through a streaming partner, whether it's through our own platforms, to find entertainment through watching people play video games and one 130,000,000 people do last month via Twitch and YouTube and our channels and channels around the world that focus on competitive gaming. They love to watch, They love to learn. That pushes them back up to actually being a player.
3 year plan, top line for us, very Focused franchise participation. Under a dedicated leader in myself, I've got a team that we're building now in our absolute standalone division that is both a vertical silo, but takes advantage of the 8,400 people that Andrew talked to that are EA employees who all are chomping at the bit to get going with competitive gaming. Building competitive gaming features and our platform out. We're not in denial as the work we need to do. We have incredible brands, but to be able to leverage those brands, we've got to build our modes in them.
Our studios around the world are doing that and doing that right now. Thirdly, established partnerships. It's a fragmented industry if you've followed it. The ESLs of this world, the FACEITs of this world, the Gfinitys of this world. We have met with just about every major player in competitive gaming around the world, forming partnerships, looking at platforms, looking at companies that can execute against 18, we the end of this fiscal year and going forward.
As we move into FY 2018, we start scaling our audience. Very important that we build scale. A, because you want to build a massive community that you can take advantage of and provide more fun and entertainment to and B, obviously from a monetization level as we start thinking about kicking our sponsorship and media rights sales into full gear, you need the eyeballs. Secondarily, select additional franchises. Again, I can see a world where we've got between 6 8 franchises going down the line that have competitive gaming tournaments that allow us to be able to drive towards prize money.
And again, that will increase engagement, that increases monetization. And thirdly, white what we call white label capabilities. If we look at the middle of that pyramid, the ability for EA to come in and help organize through white labeling of tournaments providing those folks right now to walk around with a clipboard and a pen say, did you win, did you lose to build the tournament ladder? We're working on tools that we can apply so that we make that more seamless that brings EA closer to the action there in the middle of the pyramid and ultimately drives up the pyramid, drives up the value chain. As we move into FY 2019, we're seeing players compete, spectate and share and that's very important.
There's a platform capability required there for us to be able to share the content. And again, the platform team is driving towards that. We're only 24 months away here. That's when you get to large scale audiences in the tens, if not 100 of 1000000. That's when you're driving true engagement.
That's when you're driving real media. And as we move forward, we think about our franchises and particularly the sports franchises tying in to the real world As we think about World Cups and European championships and Super Bowls and NBA championships, you can see how we can definitely do that. Pay to spectate, we also see a world where subscription channels become part of the business model and the ability for us to be able to drive content that people actually pay on a sufficient basis to watch, so that they do spectate and learn and ultimately they actually then start playing the game. A lot of talk about where the money is in competitive gaming. And this is how we see it.
Our good friends at Newzoo in collaboration with our own internal estimates see that this is how the pie chart breaks out. Our focus is pretty simple. It's within Pac Man there as you come back as you can see where the money is in micro transaction lift, full game sales and then competitive gaming crowding micro transactions and crowdfunding towards prize money. So from that perspective, our focus is here. Yes, is there ad revenue right now?
Absolutely. Are the sponsorships available that will drive media rights, that will drive engagement? You bet. But our real focus right now is getting our games right for competitive gaming and building the modes and taking advantage of the dark blue areas. And that's FY 2017 and into FY 2018.
As we get further down the line between FY 2018 and FY 2019, you can see how we can move more aggressively into what remains as the value chain that is competitive gaming. So bottom line, EA incredibly well positioned because of the breadth of our franchises, building out a competitive gaming standalone division, taking full advantage of its Global Media Solutions Group, building out engagement models that to Andrew's point could double our ultimate team revenues of $694,000,000 which will be margin rich digital revenue that flows to the bottom line. Not only that acquisition of more customers, players that come in buy more copies of the game. So the regular net revenue we see with extra copies of the game also flows down to the bottom line as well. Early days, excited about what we're doing, excited about the progress we've made so far.
Again, we take a slightly different look where we look at a mass market level of how we can bring value to competitive gamers. But going forward here, we think there's a huge opportunity both for the industry and more importantly for EA's bottom line. Thank you.
Right. We'll break now for 15 minutes and we'll be back at 10 o'clock exactly when Samantha will talk us through her mobile business.
Thank you. If everyone could take their seats.
There must be a place where you can buy those little xylophones just three notes for exactly this purpose. I don't know if they have any other reason for existence outside of this. Amazon. Amazon has it. Right.
I think we're going then.
Thank you. So I'm going to
introduce Samantha Ryan now who's going to talk you through our mobile
Thank you. Let's talk about mobile.
We are going to start by talking a little bit about the evolution of mobile, which has been pretty crazy over the past few years. Then we will move into live services. We'll show you some of our games, come back and talk about advertising as well as what is happening in the future. One constant to mobile for the past few years and that is rapid unprecedented growth. Growth in new territories, growth on new devices and growth, most importantly, in new players, bringing in new generations, folks that had never played a game before into our ecosystem.
And you cannot have this kind of unprecedented and rapid growth without evolution. And evolution is hard. Evolution is messy. I've been a developer for 20 years. And evolution is something you really have to embrace.
And let's take a look at what this has looked like over the past few years. We're going to pick a point in time. And that point in time is Christmas for 3 very pivotal years business and let's see what we can learn by digging into the past. We can see, 1st of all, that there's been a big shift, we're all familiar with, of the business model. Literally, in 3 years, the entire business model of mobile changed from premium to free to play.
And you can see that over the course of 3 years. But there's been other more subtle shifts that are really interesting to think about, and that is the rise of winning formulas. So if you think about 2010 2011, you see a lot of sort of strange games on there, experimental efforts, not a lot of standardized genres. But as you move to 2012, 2012 is pivotal because it's really the 1st year in mobile that you start to see the rise of the modern genres. You start to see 3, you start to see strategy, casino, even things like Rage of Bahamut, who would have thought back in the day, but that was actually a precursor to the RPG genre, which is huge in both the East and the West.
If we extrapolate this further and we look at the evolution, let's look at 2015. 15. So here are the top 20 titles from Christmas of just a few months ago 2015. And you can see EA has 3 titles in the top 20 with Star Wars, Madden and The Sims. But what's more interesting is to dig into the background of these titles and figure out what kind of trends can we really learn that are going on in the mobile marketplace.
And there's 3 really important trends that we can look at.
The first
is the right game. What is the right game? And there's some really key elements that all of the games at the top of the chart share that you really can't overlook. They have a lot of social play. We're inherently social beings.
We like to collaborate. We like to compete. We like depth, and we're going to talk more about this in a little bit. And innovation has become increasingly more and more important. The next piece of the formula is that you have to be able to execute at scale.
You need technology, you need analytics and you need these things to be supported across millions of people. And finally, acquiring users is incredibly hard. There are thousands of mobile games that are launching each year. My publishing group has given me some data and they tell me that to be featured above the fold, which is sometimes key to success or failure, that means at the top of the App Store on either Google or iOS, your chances of getting featuring are less than 1%. And that is a make or break for many people.
So user acquisition, acquiring people into the top of the funnel is really hard. We're going to talk more about that as well. So let's take those learnings and compare them on a couple of case studies that reveal some important trends that are going on in today's marketplace. Here's 2 excellent games, Marvel Contest of Champions and a game put out by a small independent, Stormborn, both released around the same Both excellent, very high quality games. Contest of Champions, sub elements that we just talked about.
They're pretty much hitting on all cylinders and they're doing very well. Here is the challenge for the smaller developer these days. Sure, they have a great game, but they simply do not have the scale, the technology, the network, the ability to do player acquisition. They just simply cannot break through. And that's why all of these elements are so crucial to today's success.
And this is why you're seeing real consolidation in these markets, because a lot of these elements are extremely expensive, time consuming and they take a depth of talent that a lot of people simply can't afford. There's another really important trend that's going on and that is that gamers are becoming incredibly sophisticated. If you think about the console market and how it evolved over many, many years, we started with fairly simplistic games such as Pac Man, and we've evolved to incredibly sophisticated games such as Battlefield 1. Same thing is happening in the mobile market. Our gamers want more depth.
And here are 3 different games that look very different from each other, but they all offer very deep strategic choices. And if you cannot provide this strategic choice to players, it is increasingly difficult to keep them engaged over the long term. They may come in bloop as a blip, but you can't get them to stay. So let's take a look at our own games and give you a little bit of a case study on Madden. I'd like to introduce Mr.
Dan Box, who is the General Manager of our Mobile Sports business. And he's going to walk you through
Madden, show you some gameplay elements
and talk about why this formula works. Thank you.
Wow, We had another great year with Madden Mobile. We had millions and millions of new fans coming into the game for the first time and coming into the franchise for the first time, firmly positioning Madden Mobile as America's favorite sports video game. Now before we get into too much detail, I'm going to kick off this presentation with a short video that includes some of the highlights from the game for the last year. A great year with a lot of learnings, a lot of learnings about what it takes to build a great sports game. And we're taking those learnings and creating a framework for how we think not just about Madden for the year coming up, but also importantly how we think about all of our sports mobile games for the year ahead, which is incredibly important for us because we have a number of very important releases in sports mobile over the next year.
We have NBA game already in soft launch doing very, very well at the moment and we have a big release for FIFA planned for later in the year. So I'm going to take you through what I believe to be 4 key drivers behind Madden's success, starting first with designing gameplay to fit into the life of a mobile gamer. Now what I mean by that is mobile gamers play differently. They often on average play more sessions per day, but those sessions are shorter than HD. And one of our goals with Madden, with the new version of Madden was to build a fun gameplay experience that could be enjoyed within 30 seconds.
And it's that objective that led us to what I believe is one of the key product innovations on Madden, which was taking the AAA quality gameplay directly from Madden HD and building a mode called live events. Now live events is short fun gameplay that can be completed by our players within 30 seconds, earning them a reward each time they play. If we look at live events in the game, we start with a map, which is the home screen of the game. Multiple live events are added each and every day. So every time you come in, it's different.
Different types of live events, this one is a passing touchdown challenge where I've selected running as my strategy. You can see I've been successful there. Here we have a passing drill where I as the player have to run through a number of zones and turn to complete that pass. And then finally, there's a different version where there's a running drill where I evade the opposition as well as the obstacles to get to the end to complete the touch down. Really simple gameplay, but super fun and hugely addictive.
A lot of variation and importantly when you complete these events, you get a number of rewards, you get immediate positive feedback and you use those rewards to continue to build your team, which is one of the more longer term strategic goals around the game. So the second point is just that goal. Now it's important for us to create clear and meaningful goals for our players when they play our mobile That gives us the best possible chance of keeping them in the game for as long as we can. Now for a goal to be meaningful for a mobile gamer, it first must be based on gameplay that has enough depth. Secondly, it must give our players strategic choices along the way.
And then finally, we must give them a reward at the end of that gameplay that they view to be valuable and then a use of their time. So if we look here, I'll show you how our ultimate team mechanic is the best framework for us to establish those goals with our players. We'll go into team management. We'll look at my team based on the roster of players I have. If I want more players, I can get them from packs.
Now I own packs either by playing the game or purchasing them. Now if I get good players in my packs, I can update my team by clicking that button. Then I have 2 choices. I can manage my team on an individual player. If I'm a hardcore user or I know the sport, I can pick which players I like.
But if I'm more casual, I can hit that best lineup button top right and it automatically creates the best formation with the players that I have. Now that's a super simple feature, but incredibly important because the last 2 years have seen us welcoming millions of more casual fans into Madden than we've ever seen before. And a lot of those casual fans are from a younger demographic. So the simplicity of what you just saw is a very important enabler. Thirdly, I'd like to talk about how every day we add new live fresh content into the game, giving all of our players a reason to come back.
Not just live content every day, but every month, we're also creating bigger campaigns with stories attached to them. And we link all the game modes in the game and all the content we're putting into the game into those stories and we give them a theme as a wrap up. Now we can link those campaigns to not just events that are happening in the NFL like the Super Bowl or like the draft, but we can also link them to events that are happening in the real world, things like Halloween, Thanksgiving, Easter, Christmas. And the beauty of that is it gives us a platform to engage and connect with our players all year round and not just in the 120 days of the NFL season. Let me show you quickly how we presented the draft recently in the game.
As soon as you come in, it looks and feels different. It's branded for the draft. The message of the data pops up directs you to draft related content or live events. And the important thing is everything that you touch as a player is branded draft. So if you go into live events, there'll be draft branded live events.
And ideally, the concept of the live event will link to the draft in some shape or form. Now like normally playing the game, I go for quite ambitious long pass here by the way, but I've ensured that I'm successful. You play the live event, you earn the reward as you do throughout the game. Now the beauty of this is the rewards contribute to sets that you can collect, keeping people coming back, draft branded again and ideally giving me ultimate rewards, which is players and collectibles as well as players. And those players as you know come in the form of a Now as with every campaign, we brand that pack consistently with the campaign.
So in this instance, draft. Now this is where it gets really fun. The content in these packs, in particular the players, are players who were drafted only hours before on live television and they're in the pack in the new team that they've been drafted onto. Now this is the first interaction that anybody gets playing with the players that have just moved onto their new team. So this is live service 2.0 in my opinion and this is the area that I believe personally we can't be matched by anybody else.
And then finally, I wanted to really quickly touch on social and how our social features in Madden Mobile are driving record engagement and record spend amongst our players. Now really quickly, the social feature set in Madden allows our players to either play cooperatively within a league that they join or play competitively with their league against other leagues. Now we know that players who interact with the social mode, which is called leagues, spend more sessions in the game every single day and those sessions run longer than an average user. And we also know that that increased engagement drives improved conversion to spend, which is important and also an increased volume of spend per spender. And then finally, we know that our social feature set in the game had about a 600% increase in interaction amongst our player base, which can be tied directly to the continued growth of Madden Mobile.
So it's really, really important and something that we think a lot about when we think about the game. So really quickly, if we look at the league's mode within the game, which is the core social feature, this is my league. I'm part of the Pirates League. I can see all the other leagues that we have active competitions against. If I click on 1, I can see that tournament that I'm currently participating in, how I'm performing, how our team is performing.
I can jump in there. I can chat. I can speak to my team members. I can maybe a bit of banter with the guys that I'm competing against, how I'm going to kick their butt. And then I can pick the 3 players that I want to compete against in that tournament.
Ideally, we then get into gameplay and I can have the chance for another win in Madden Mobile, which gives me the ultimate bragging rights for another victory in the game. And that's how social works. So that's it. That's a really quick run through the learnings that we've taken away from the last 2 years of Madden and how they're going to help us deliver our strategy for this year around replicating the success of Madden, but across multiple sports games. And when those games are combined, it gives us a huge global reach of potential players.
Thank you.
The real beauty of Electronic Arts is that we have a very large portfolio. And so we can take learnings from the industry, we can take learnings from our own games, and we can apply that across a very wide breadth of services that can run for many, many years, 4, 5, 6, who knows how long some of these games will last. And the way we look at running a live service is we are on call 365 days a year for our players. They are important. And we manage them, we look at them through the lens of acquisition, engagement, and monetization.
Acquisition is what drives installs, and there's really 3 ways that we look at how we acquire people. The first is through paid acquisition, performance based marketing through Facebook or Twitter or Google, Apple and others, so we can earn acquisition, we can Google, Apple and others, so we can earn acquisition, we can get features or special promotions. And finally, we have the benefit of a very large player network. And so we can push gamers or prompt them to go from one game to another. Perhaps they're tired of one game and we may be able to offer them another game so that they can stay in the family.
When we think about a live service, it is an ongoing flow of content. Here's an example from SimCity over the past 12 months, and you can see that there are many large releases in addition to small daily and weekly events and other elements that we bring to our players. And we can track how these events are driving our installs over time, which means that we can tune what we're doing. And when we tune what we're doing, this has an impact on monetization. So for example, here is the last few months of SimCity and we recently added an event called Contest of Mayors, which is a new social feature for SimCity where players can compete and collaborate to have the best city.
And you can see once we launched Contest of Mayors, we have had a spike in our monetization. Every single piece of content that we release, we can track. We can understand what players are responding to and we can give them more of what they desire and less of what they don't desire. Let's take a deep dive now into our very successful Star Wars: Galaxy of Heroes. I'd like to introduce you to John Solera, who heads our team over at Capital Since
Star
Since Star Wars: Galaxy of Heroes launched 6 months ago, it has become one of the highest rated and highest grossing titles in both Android and iOS. And a key reason we have been this successful is because we keep the game fresh and exciting for our players through our live services. And so that's what I'm going to talk about today. But before I get into it, in case you're unfamiliar with the title, I'll show you a brief trailer and give you a high level description. Galaxy of Heroes takes place in a cantina far, far away.
Through the hall of table, players are able to collect, battle and upgrade characters from all of the films and all the TV shows. The game features classic strategic turn based combat and enables both solo play as well as combat alongside and against players from around the world. Here's the Cantina. This is what the players see when they first start up the game, and this gives them access to all aspects of the game. And this is considered the steady state.
Well, the live services kind of fit on top of that, and they grow the experience. And when I talk about that, we're talking about new functionality, new characters, new packs, new promotions, new events and new epic multiplayer battles called raids. I'm going to talk about some of those examples. Fundamentally, the game is about collecting characters and building the most powerful parties. In order to see their characters, the ones they own, the players click that button in the upper left characters to bring up their inventory.
And I know this looks maybe a bit daunting if you haven't played the game before, but players as they progress in the game learn the iconography here. I'm going to go one click in and show you the character detail page to give you some sense of the depth of the game. So each character has 4 progression systems. That's level, rarity, gear and abilities. And the mix of these, along with a few other elements of the character, make it so each character presents a unique strategic option for the player in and of themselves, but also how they fit into a party and what compositions they want to build.
And so it's up to the player which way they want to go with the characters. And so when we look at this collection, right now, in the game when we launched, we had 64 characters. As of right now, we have 82 and actually later today, we're launching another one, so we'll be at 83. We've got to keep that game alive for the players. And each character we add adds new strategic possibilities, new party compositions and new ways for them to play the game.
So those are characters. Now we'll talk about events. Events are special time limited experiences, and we've run a bunch of those. Here's an example we ran back in April. This was a charitable event we ran, which benefited the World Wildlife Fund and featured Ewoks.
To access this, players came over to the events table there, tapped on that and found the right panel to jump into the event. The way this one worked is you could only bring Ewoks into battle. So you either needed to have had them before the event started or you could buy them in special packs that ran alongside the event. One of the cool things that happened here though is that while Ewoks had been in the game really since launch, a lot of people weren't playing with them. But through this event, players have really rediscovered Ewoks.
They're fun to play with. They have full strategic options. They're cute and furry and people are into them. Now this is one of the party compositions that a lot of people are chasing because they fit into other parts of the game in unique ways. So those are events, and I've talked mostly about content, but let's talk about adding features and functionality.
3 weeks ago, we brought out our most successful update so far. We brought out guilds and we brought out raids. And the first raid features that big ugly guy, a rancor, and we'll see him again. The way players access this is they scroll over to the left and they see this big red curtain, which has actually been in the game for a while, but that guild button wasn't there. We were hinting that something cool was coming.
Now with the release, players can tap that and go behind the curtain into this kind of VIP room for their guild. And what is a guild? Well, it's a collection that players form or group that players form, and they do that for various reasons. In part, it's just to meet up with other people and get to know them. But it's also in order to access new features, new content, new rewards.
And so there's a button down in the bottom, the chat button. And if people want to communicate, they just tap on that and we've had this whole tech system for the guild. And this is where they get to know each other, but also they share tips and tricks. Someone has a question about the game, other players can help them. And this is where they can also strategize around the main action right now, which is the raids.
Raids are epic battles. What happens is the enemies in the raid that the guild is taking on share a massive and persistent health pool. And so each member of the guild comes in and takes multiple parties and takes a whack at that raid and tries to fight it all the way down until it's fully defeated. And so these battles are pretty big and pretty epic. It just kind of puts some scale on that.
Thought it'd be interesting to kind of flip it around and think about it from the rancor's perspective. So here's the poor rancor living in a cave. So there's a guild coming out of them that has up to 50 players and each party has 5 characters and each player gets 5 attempts per day. So that means this poor rancor is facing 12 50 characters per day from this one guild, but doesn't stop there because in the game we have 60,000 active guilds. And that means the rank wars in the game right now are facing millions of combatants each and every day.
Here's an example and this is actually a raid that I participated in yesterday. So you'll see we're making good progress. There are 4 phases there. We're in the last phase. We're down to the last little bit there.
And I can see that there are 3 members of my guild, not me, that are actually at the top of the leaderboard. And why does the leaderboard matter? Well, depending on where you're placed and actually, I'm number 13 here at this point, where you're placed in the leaderboard determines your prizes and there are chances that better gear, better loot at the higher up you are.
Let's go into the raid and give you a
quick example. And this is a very accelerated look at the raid because these things can take hours and they can even take days depending on the difficulty and also the strength of your
guild. Because
these are special experiences, we're able to put in nice little cinematic moments.
So as I mentioned, this
is classic turn based combat. You'll see the health bars of the characters down at the bottom. You'll see the massive one for the Rancor at the top. He's the one at 98% right now. Each character has different special abilities and the player gets to choose which things they're going to take on.
Something new we also added in this release is the ability to target objects. So you see Greedo shooting that door. And when he does that, the gate comes crashing down on the rancor. And now the rancor is effectively pinned and very vulnerable. And this is a great time for the player to bring in as much damage as they can and really do their worst against the Rancor.
But of course, the rancor isn't going to sit there and take it the entire time. Eventually, he does shake off that gate and now he's pretty upset. And now he'll go after the player's party with great ferocity. It's various attacks. One of my favorite is actually coming up right here where he basically has enough and he picks up the character and eats them and they're fully out of the battle.
So at the end of that attempt, all my guys are dead in that party and I get a little read of all the damage that I did. And now you'll see I went from number 13 to number 9, and I still have 4 more attempts. I can keep working away at this rate. And so basically, that's it. That's my time.
And I hope I've given you a sense of the ways in which we can continue to augment and improve this game that players and we are already loving. Thank you for your time.
So we have another really important lever that we can pull as a part of our live services and that's advertising. But we believe that it's really important that we're respectful to our players and that we really understand what is bringing them into our game, so we can present the right options at the right time. So for example, if a player has very low engagement, they're not spending, it could frankly be that they wandered into the wrong game. Here we have an example of a Sims FreePlay, screenshot with perhaps they might enjoy SimCity better. And so we stick to pushing players to another game within our network if they're casual visitors.
If they've proven themselves to be highly engaged, they're playing a lot, but they're not spending, this is where we believe there's a great opportunity for advertising. And what we can do is we can present them with beneficial reasons to watch those advertisements, such as to speed up timers or receive special content or something of the like, so that they can really receive something in exchange for their time. And finally, if they are highly engaged and they are perhaps spending a lot, we want to treat them very respectfully and we believe the right presentation mechanism is then things like VIP programs or concierge concierge services or something like a special offer. And so we really try to tailor the different options depending on what our analytics tell us that our users want and how they're coming into the game. So that's a look at how mobile has evolved, the different forces that are shaping what we're building today and how that's manifesting in some of our games and our live services.
And so what that brings us to, we believe, is a very robust year. We have a very strong portfolio of live services. And in addition to that, we're layering on some new launches, which we are very excited about in a nice variety of genres as well. And from this, we also believe that this becomes for our future. And when we think about our future, we believe we have a really nice formula for our future success and that starts by concentrating on some of the excellent brands that we have that are not being tapped currently in our live services.
There's a lot of content, a lot of things that players love that we still haven't brought to them. And we can add to that with something that is unique to EA, such as our large player network, as well as our ability to innovate. Innovation is hard, making quality is difficult. It takes people. It takes scale.
We have a lot of depth of knowledge from our many, many, many years of history in the console space. And we believe that we can really over deliver in this space. And finally, scale and technology, which we also feel very strongly about are required for us to succeed in the future. And so that's a little bit of a look on mobile, where we're going in the future. Thank you for your time.
Thank you, Samantha. I am up here and will be up here together with 2 of my colleagues Ken Moser, CTO and Chris Bruzo, our CMO, to talk about something that we've mentioned today we call the EA player network. If you and this I think represents a major new strategy for us as a company and something that I believe will be profound for us as a company and us us and our industry as well. If we think about a network and you ask the question why a network, we already make amazing games and we have amazing services. Why don't we start talking about a network?
What is the actual opportunity? That's why I hope to give you an answer to today together with my two colleagues. So if you think about the lives that we live today and how we interact, We all live in networks, both online and offline. Whether that's with Facebook or Instagram or whatever it is today, we all interact with them and we all use them. They all deliver something unique, but there are limitations within them.
And then with those limitations, you can start to see our opportunity. There are 2,600,000,000 players out there today and we see this growing to 2,800,000,000 by 2020. We have a big and unique opportunity. Networks help you connect, share, discover and create. That's their value.
So what is our opportunity? Well, imagine if our 350,000,000 players were acting as a network or in a network, engaging in connected play daily, weekly, monthly, connecting to each other, engaging in economies, competing in esports, streaming, playing games that actually adapted to how they played and what they did and taking the experience of playing games beyond the game itself. This could actually prove
to be huge for us. So if
we deliver a network around play that is much more than games and services, we're delivering a network for our players that connects them to the games they love, to each other and to services and experiences beyond the games that we're only scratching the surface of today. I look at the network as the connective tissue of the global gaming community. It will be as big as Netflix or Twitch or many others, unique and personalized experiences. It's always there and it's always on. And playing games that again are personalized, unique and adaptive.
Connecting players to other players both inside and outside the games that they're playing. I think that would be pretty amazing. So that's what we're talking about when we talk about the EA player network. I'm going to give you a little bit of an insight to where an experience what an experience looks like today. So if you think about FIFA, I play a lot of FIFA and I'm a Barcelona fan.
And whenever I play online, I probably play with Barcelona. But here's the problem. When I play with Barcelona, I can go online and I can play with other players, but there's no way for me to meet other Barcelona players, to socialize with them, to there's no fan groups. I can only, if I'm lucky, meet other people that play as Barcelona, but I can't connect with other people like me inside the game. So there are no social functionality or at least it's very minimal.
Battlefield, another game that I've played a little bit, I'm a good helicopter pilot. I'm flying around. I'm shooting at other planes and helicopters. And when I play the game, that's kind of what I can do. There are no way there's no way for me to get skill based recommendations.
I don't know if there's other great pilots out there and what they look like. I can't connect with them. There are no special game modes catered for how I play. There are no recommendations for what to do for me to get even better at what I'm doing right now. And if you think about Madden and Madden Mobile as an example, today there's no way for me as a player to refer other players to come play.
I have to step outside the game experience. And in this instance, I can send a text to someone and say, hey, come check this out. Come play with me. I think that's a limitation. So where can we be and where will we be?
Well, imagine if FIFA connected you with other Barcelona fans. What if FIFA gave you the option to partake in Barcelona specific events? What if it gave you information regarding Barcelona that happens in the real world on an ongoing basis? What if in Battlefield, the game knows that I'm a great pilot? What if it connects you with other great pilots?
What if it takes me to a place where you can go to pilot only matches
and where I as
a player get challenged in a different way. And for Madden, what if it had contextual rewards? What if I as a player got something for inviting someone else from the actual game instead of me having to step out and do it outside the game. These are kind of fundamental kind of rudimentary ideas, but I hope you get the point. And again, I'm just coming up with some ideas.
There's a
lot more than this that we can do.
So again, a couple of examples how a network changes how you play. And the good news is it gets smarter with more people. And if we have 350,000,000 people in our network, it's going to be pretty smart already from the start. So I'll pass on to Ken who's going
to talk about how we make this possible.
Thank you, Patrick. Thanks for the opportunity. So what Patrick is describing here and what you've heard talked about in the other presentations is how profound this can be, how this can really change how our company develops games in the future and really how the industry moves forward. I want to talk to you a little bit about how we actually make this a reality and how we build it. It starts by tapping into a simple concept called the network effect.
The network effect means that when you play a game, that it actually gets better when more people are joining the game. When your friends come in, it gets better. When you make new friends and new connections, it gets better. The more data that comes into the game, the actual gameplay gets smarter, better, more personalized. So you feel this as a player.
This is very powerful and this is what we're aiming for. And of course, we bring some pretty good assets to the table here to develop this. You've heard about the scale of our player audience, where it is today and where it's going to be going as we move down our roadmap of games. We have a lot of players playing with us. And the breadth of our portfolio, when you look at the newest mobile games up to the most established of console games, the breadth is incredibly exciting and that's key to building this network because we can now leverage those games.
We can bring it to life through the games. The live service expertise that we have, where we know that a game the day it launches, it's just the beginning. And then over the weeks, months, years after that, we know how to keep it live and create this incredible user base with the deepest engagement, I think of almost any activity in people's lives. We have this incredible amount of time people are spending with us, which gives us this opportunity. So how do we pull it together?
I'll give you a little sense of the very high level blueprint, the architecture for what we have to make possible in order to actually turn this 100 of millions of users into a network. It starts with identifying the players. We can't do that, we can't do anything. And we have to identify them through any device they come in. It might be on a console or PC, they might be on a mobile device or some new device connected to their TV or even the Internet enabled fridge that Andrew talked about.
We have to be able to identify them at every moment. Once we know the player we have to give them powerful tools to socialize with each other. We have to have them have stable friends list so that they can interact with chats, groups, all sorts of social tools, a portfolio of social tools that they can use. You heard from Peter Moore about our competitive gaming. And this is a key part of the network is creating and consuming content.
Our users in this network want to create content, they want to share it with their friends. That's a key part of having the network effect. And then you also want to consume all this awesome stuff, whether it's the top of the competitive gaming pyramid or it's just something cool that your friends did. You want to be able to consume that, you want to share it and you want to share your own content. Within the network, you want to be able to transact.
You've heard today about the ultimate team dynamics, incredibly powerful. Patrick talked about how you can have players, you can trade them with people, you can auction them, you can buy new ones, you can aspire to own to participate in these digital economies as part of the network. It's to participate in these digital economies as part of the network. It's incredibly fun, drives really deep engagement and of course it's a great business as well. And the last piece is the most important piece.
You need to have an experience that really is different because you're in the network. It's got to be deeply personalized. It's got to be the network knows me. It knows my friends. It knows my play style and it's better because it knows me.
And this is where every game team around the company gets to build on the network and bring it to life in unique ways. And there's a rich set of tools behind each one of these. So this is kind of if this is a high level blueprint, let me give you a sense of what's happening right now. What we've been doing in the last year to start to build the network and where we'll be focusing in the months to come. And I will say that one of the exciting parts of this is the company being able to operate as one team.
You saw teamwork is one of our key values. None of this is actually possible without us having great teamwork and luckily we do. So these are the real pieces that are going on right now. In the identity space, we've had as a company really good sense of our users on console, a good relationship with them. On mobile, it's all about getting in quick, having a wide funnel at the top.
You download a game, you got to start playing it in 20 seconds or you might lose interest. You may not even ever get into the game. So we have to go from fully anonymous users. We have to know them and allow users over time at natural moments, maybe to move to another device, maybe to save their investment in time and money, they'll give us a little more information to identify themselves, all the way up to fully registered. We have altered our core identity system in order to support that scenario and are now adopting that in our games going forward.
Data. So underlying everything that you're hearing about, everything in the network, so many of the innovations that are going to be driven in the company in the future is based on our data. And we have central data systems, of course. But one of the things we're doing right now, we've already adopted in some of our games and we will across the portfolio into the future, is having a set of data that is standard across all our games. And imagine that through the portfolio, we have this wide sense of genres in our games, right?
Picture a match 3 mobile game, like Bejeweled, all the way up to the new Battlefield 1. And imagine all the different types of data you want to get, maybe it's a story game like a Mass Effect. And what we're doing is making sure that this data is incredibly usable, so that all of the scenarios that you've seen today and 1,000 more can be built on top of that data. So this is real and this is being adopted across the portfolio. Those social tools I talked about, we're developing those as we speak and those are now starting to be adopted and that'll be an area of innovation that we keep pushing forward.
We need to be able to communicate with our players in a unified way, in game, out of game, maybe in email, maybe in push notes, maybe on websites or whatever way players are connected that we can reach them. We have to have unified messaging that we can give them, so that we can really have that relationship and they can feel it as a relationship, not game by game by game, but actually with Electronic Arts. And lastly, the tool to allow the game makers around the company, any studio to personalize their experience. Every game will do this differently. Every game has really interesting ideas.
The creativity of the company comes to life here. And we have to give them the basic tools so that they can easily know important things about the player and personalize. So this is a little taste of the technology that's going on right now. We feel this deep desire to do this because as a company we strive to build the best games to move the industry forward, to create ever better games. And our players, they need this.
They need to connect to
each other. Gaming is social. They need to discover these new games and where their friends are playing and what the hottest new games are. And personalization in games is going to be an amazing thing once we get it right. So Chris Peruzzo is going to come up next and he's going to tell you more about how we view the player relationship and how the network will allow us to really drive it into the future.
Thanks Ken for that.
Well, it's a really particularly interesting time, as a marketer, as a lifelong marketer. We're at a fantastic place where you saw Patrick Sottel end up here, Head of Game Making at EA and now our technology leader Ken Moss. There's really never been a better time for the marketing organization, the technology organizations and the game makers to be working really closely together. I feel lucky to be at this place at EA and being able to build those kinds of partnerships. But why?
Why does it matter? It matters when we put the lens of the player on. And why does it matter to this audience, to those to everyone who's here today? As our investors, as the folks who the experts who help the world understand Electronic Arts, of course, you're thinking about what's happening right now with the company and what's happening right now with the and creating solutions for players. And why is that important?
Andrew touched on this. The dynamic environment for games today is it's incredible. The number of people across platforms, across games, across geographies, even in different business models, is exploding.
But that also creates a challenge.
And that challenge is how do we make sense of it? How do players make sense of it all?
How do they know that they
can kind of consistently really great experiences? And how do we unlock the fun that comes from connecting with others in a meaningful way? And so that's really our orientation. We're thinking about how do we create that value for our players. So we've talked about sharing a lot today and about players sharing with each other and connecting with each other.
And we had this. This is our innovation in gaming. You all know what that is, right? That's the share button on the PS4 controller. There's a version of this, the Xbox 1 as well.
And we know what this does. You press that button and it captures what just happened for you in your game. So you can share, you can post it. And that's great. But I'm here to tell you that sharing is actually much more than a button.
I want to open up that definition more broadly. I want to think about the network as more than just capturing that last chunk of gameplay and posting it. Let's think about it as self expression. Let's think about it as fueling my desire to compete. Let's think about it as how I'm participating in the community of like minded players.
Let's think about it terms of my reputation in that community and the way I'm interacting with others. And what's my motivation for playing? And that actually varies for a lot of our players, certainly for me. My motivation for playing a particular mobile game, which is very different than playing an EA Sports game and how do we bring that to life. So I want to open up our minds a bit here when we think about share and we think about sharing and the power of a community.
And I also want to redefine a bit what the landscape for what we're talking about. Today, you've heard from a lot of great leaders at EA about experiences and the way that we're driving quality into our games. But there's also been a theme, I don't know if you've heard it, but a theme, which is what I call the meta game. There's experiences that actually surround the game and build beyond the game. What happens?
Where is that connection for you? Where is that experience when you've stepped away from the console, when you've moved out of the play session? And I want us to start thinking about the network of players and how do we enhance their lives and how do we organize and kind of be that strand that brings together their full lives of play. And that includes things like conversations and content that we provide to them about our games, some of the stuff that Patrick was just talking about, that are smart skill based recommendations that are powered by the technology that Ken is building. And certainly, we can bring that to players, but they can also build and contribute themselves.
There's nothing better than when an individual can participate and add to the community themselves for creating long term connection. We actually have an awesome example of the meta game experience that just happened 11 days ago. So we posted the Battlefield 1 trailer, which you saw. And yes, there's 31,500,000 views so far, which is great. There's also over a 1000000 likes.
That's just one level of a thing. I watched the trailer, but I also got to say, you know what, I'm going to vote for that. I liked it. And actually there's this sort of big thing happening on YouTube in the 11 days about which trailer is getting more likes than other trailers, etcetera. And that's a component of the story and of the engagement.
But another funny interesting thing happened. If you go to YouTube and you just search on Battlefield 1, you'll get our trailer,
but you'll also get a
lot of other videos that were created by players. In fact, influencers with big followings, social channels and YouTube audiences. And do you know what they're doing? They're actually posting videos of themselves and their reactions to watching our trailer. It's like an unboxing video that you might see in other parts of YouTube.
And so they want to share their community how excited they are to anticipate what's coming in Battlefield 1. I mean the game launches in October and here we are in May having those kinds of emotional reactions that content being created. It's amazing and there's real power in the meta game.
So kind of
connect this for you and help you understand how this powers the way we think about what we're building, what we're investing in. We're really in an era now where social networks are not one size fits all. They're really purposeful. Applications. I mean those have become incredibly power.
In some cases, they're usurping the size of other core social networks like Facebook in terms of their size and reach and frequency and engagement, we're seeing purpose built networks come to the forefront. And that's our intent here as well, to be that purpose built network for play, to create that central strand of DNA in your life of play to make that experience rewarding around play. So what do you need to be successful? When we study social networks that are successful, they tend to have a series of characteristics and there's a few from here. 1, you have to have critical mass.
That's hard to get. The good news for EEI is we're starting with 350,000,000 people in our database who we can see and we're getting to know better and better and the data that Ken talked about makes us smarter and smarter all the time, critical mass. The second is you want to have an experience that actually drives daily engagement, daily, weekly, monthly engagement. And with the breadth of IP that EA has and the breadth of our player base, we actually have great engagement. And that's the 3rd piece, which is you've got to have great products.
You've got to have a core experience that's fantastic. So everything we say today and we're talking about the player network and we're talking about the meta game, we really only have the right to do that because we're delivering the amazing experiences that Patrick talked about, that Samantha talked about today and that's incredibly important. And yet these are characteristics that EA has a pretty good start, a nice momentum, a head start momentum in creating a purpose built network for play.
So let's talk about some
of the other things. Very quickly, a few little highlights of things that are also underway at EA and have been going on and you've seen some of these already that are good indicators that we've got momentum and we're building this concept of a player
network. The first, we can put
it under the banner of knowing our players. In this last 2 years or so, EA has pivoted to thinking about measuring player engagement in a consistent way. So what you're looking at up here are what we call the 4 core player metrics. And we measure this at the highest levels of the company, but also in every one of our game teams. And we talk about the 4 together.
So how many more players are you bringing into your game? How happy are they and excited? And are they advocating? Are they referring this game to a friend, which is a great indicator of loyalty? Are they investing in the game?
The average player spend is a great indicator of value that the players are telling us they're seeing value in the game and they're willing to invest with their dollars. And the last one is their time, session Looking at driving that next play session, that next point of engagement is incredibly powerful. In fact I was saying last night, some of us were talking about marketing and about player acquisition and the best marketers in our space understand that job 1 for marketing is to keep players engaged. The best form of converting a player into the next game is that they're still playing the game, the last game. And the closer we can get them to engaging and loving and feeling a part of that community that's playing that game, the more likely they are to convert into the next title, into the next content, into the next great experience that we can offer them in the player network.
So these are incredibly important standardized measures that are now driving the way we think about player engagement, and we think about them collectively. You can't take any one of these or 2 of these. This is not a pick 3, it's a all 4 working in concert together. And that's, incredibly important and a real clear indicator of EA pivoting toward player engagement. Secondly, we also have begun to think about players across a much broader time horizon than just that moment where they make a base game sale or where they make an app install.
And so what you're seeing up here is the player journey and this is again common language at EA. We're teaching all of our teams in marketing and in our studios to think about what's the player's experience from the first moment they hear about a game all the way through to, of course, how they get the game, play the game. And then as they get into those that elder state of the game, what are the experiences we're creating for them there? I mean the global analytics and insights team is within the marketing organization at EA and it's there for a reason because we're constantly measuring where players are reaching those points, where they're either getting exhausted by a particular mode or a particular type of game and we can help to keep from
losing that connection to them.
And that's the player journey helps to understanding the whole player experience over the long haul. And then finally, I want to share with you some of the things that are also underway that are live experiments that we're running. EA Access is a highly successful subscription service on Xbox 1, creates all the things that Andrew was talking about at the beginning of the day, that connection to I want to be part of a subscription that's just going to continuously deliver great games and that works and matters to a subset of our players a growing community of players who want to offer that. We've just now rolled that out to our own platform in PC Origin, the Origin Access Program looks just like the EA Access Program, but on PC. We're also pulling together all of our loyalty programs, all of our rewards.
You've seen a number of them here today. Madden Rewards is a great example of that inside the mobile game and its connection to the HD game as well. So again, creating consistent recognition of our players and rewards for them. That's underway. And then of course, you heard from Peter Moore today and the importance of competitive gaming.
We want you to think about competitive gaming as another enhanced experience, as another meta game experience that players are going to have and that they're already having today and that we can do a lot more to create that connection to their lives of play. So we hope that we've given you an indication of the momentum we've got in this longer term idea called the EA player network. Our imperatives are really to do 3 things. The first, Patrick talked about it. We got to unlock the full potential of play.
We've got the beginnings of a number of things that are going right now. We've got to really deliver on that full potential and connect them in ways that we're not doing yet And then as Ken talked about, the network has got to be indispensable. It's got to feel better playing a game and engaging in the meta game inside the network and with those connections than it does without, create that sense of why would I play a game outside of the EA player network. And then 3rd, we ultimately want to deliver value. This is all about delivering great value to players.
And the more that we can connect them to each other and to smart recommendations for the next best experience for them, whether that's another game or another mode within the game that they're loving, the more we create that incredible multiplier of engagement, of loyalty, of growth for EA really is measured in players and how they're enjoying the games that we create. So we hope we've given you a good sense for and some of our can share with you some of our excitement about what we're building here and why it's important. It's certainly for us the right time for Electronic Arts as a company, but also within our industry. It's we believe it's the right time for us create something like this for our players, and we hope that you share in that excitement. Thanks very much for your time today.
Here's Blake Jorgensen.
Thank you, Chris. So, thanks everybody again for coming and joining us here. I had a few questions last night and a few today. I think virtually everyone's asked me the same question or same two questions. One is, are you going to announce the title slate for 2018?
More than I've already announced it, I guess, according to some people out there. No, I'm not going to.
We're going to keep that
a mystery still. There a couple of mystery titles in there, but excitement. The second question is, are you going to give us 5 years' worth of guidance? And the answer is, of course, no. But I will try to help you understand and tie all the things that you've heard together today.
First, let's just go back a little bit. And remember, I think the last time there was an Investor Day was before my time, but I think it was around our fiscal 2012. I'm glad I wasn't there because it was probably not a very happy Investor Day and not a lot of smiling people and for a good reason, our business wasn't doing very well. We were under $300,000,000 in earnings, dollars 100,000,000 in cash flow, only about 29% of our business was digital and the gross margins were close to 60%. Fast forward, just a few short years and things are a little bit different, and I think many of you are a lot happier.
55% of the business is digital today. That is an incredible growth. I'll show you that in a moment, but you can see almost all of that's come out of extra content, mobile and full game downloads, huge up Huge value driver for us as a business and all of our management teams razor focused on how do we continue to drive that. As you can see, in doing that and controlling OpEx at the same time, does a wonderful thing for your bottom line, over $1,000,000,000 of earnings and $1,100,000,000 in free cash flow, pretty different than the last time you were all sitting here at an Investor Day. The question though, as I always get, is what are you going to do for me next?
And I don't have all the answers, but let me walk you through where we think the potential is. So the first thing that jumps off on this is the rest of the business goes digital or at least a majority of it, And a huge portion of that is driven around extra content. Now for those of you here or at home that are going to take a ruler out and try to measure all those pieces, we don't know. But what we do do is we have had constant communication with our board around the journey that we're on and how those pieces are starting to fit together. And we run on a 3 year cycle of planning, which the 1st year becomes our operating budget.
We all lock hands on the operating budget. It becomes part of our guidance, and we've done that for the last 3 years, and I believe we've delivered that or beat it every time. And the focus of the organization is continue to try to drive that, and the key driver is digital. So we've talked today about all these things. Why don't I try to add them up a little bit to at least give us a sense of what that 5 years out might look like?
Now one of the first pieces of that puzzle is platform independence. You've heard about frostbite, you've heard about being agnostic around the platforms. One of the questions I still get every day is what's the impact of the next console cycle? And what I'd like to show you as a starting point is we actually don't think there's much of an impact even if there is another console cycle. And there wasn't a lot of impact in the last console cycle for us.
And so for those people who are worried that it's not a growth issue, but it's a shrinkage issue because of console cycle change, I would just like to show that that's not part of it. We think our platform independence is going to be key to our growth in the future. As Patrick mentioned and Andrew mentioned this morning, genre growth is also critical to us and we see that as a huge opportunity. There's no magic there. It's just the magic of building great games.
Geography for us is also a huge opportunity. And digital is not only just a top line opportunity, but a massive
opportunity for us on the bottom line.
And then the player network, that's cake. That's the one that's hardest for us to try to understand how that might impact us. But I would hope as you listen to the team today, you understand that there's a lot of opportunity there drive deeper engagement with our games. So let's start with platform independence. We look at platform independence as simply as being able to address technology changes very quickly.
We feel like we're the best in the industry in it. We feel like we can minimize the cost of transitions as we have in the past, and it helps us continue to invest in the future. If we're building VR, we're building it on the Frostbite platform. We're will be able to do over time. Here's our business.
This happens to be through the last console transition. Business and is very lessened the dependence on any new titles coming out. Sure, new titles are important, but far less important than they may have been many years ago or may have been in some of the early console transitions. You guys all know this very well. I've seen many analysis on peak earnings and so forth.
This is the console transition. The good news about this is the market's grown through every console transition. So as you can see, from Gen 1 all the way up to the last generation where we are today, we saw massive growth in each of those console transitions. But historically, that dip between console transitions was a problem. Let's look at the difference in our business on just 2 simple measures.
There's the console transition from Gen 1 to Gen 2 on the far side there. Our business was 100% packaged goods, traditional ship and forget business into a retail channel. And that was a painful console transition because all of your business slowed down as people stopped buying software until the new consoles came out. 2nd console transition, major transition, 2007, our business was starting to see the light of digital, but very, very little. There were virtually no full game downloads and virtually no extra content whatsoever.
Contrast that to the fiscal 2015 year where we went through the last console transition, our business was 52% digital. We have a huge component of live services across all different products, making that console transition on a revenue basis fairly simple, fairly straightforward, not a big impact. And remember, that 52% continues to grow and we'll continue to see that part of the business become more and more stable over time. 2nd piece of the puzzle was we were 22% of R and D back in the early days, and over time, we had more and more operating systems or engines in place. And so by the time the second console transition happened, we were running at 31% R
and D,
fairly painful transition. And as Andrew mentioned this morning, that's because we were moving from every single engine had to move not just to Xbox, but to PlayStation. We had to build titles on the old generation and the new generation. Surprisingly, we were able to maintain 31%. In the last console transition, that 31% has come down to 23%.
We had steady declines over time. And today, we're running under 22% as an R and D expense and still investing in the future. So we're seeing far less impact from a cost standpoint because we've moved to almost one single engine. And by the time the next console transition comes around, if there is one, we don't believe we'll see any impact because we'll have 1 single engine frostbite. So simple point, don't spend too much time worrying about the console transition.
We're not sure there's going to be 1. And if there is, we think we're very well prepared with a diversified revenue stream and a very strong control of our costs across one engine. Oops, it went backwards, sorry. So let's talk about genres for How big is that opportunity for us? Well, here's the marketplace for just console and PC software, no mobile in this, this is just console and PC.
As you can see, the 2 largest genres out there are action and the shooter category, the 3rd largest being sports. So great opportunity to be able to address a wide range of different consumer groups. If you look at our share, we've traditionally focused on sports and shooters. We've done very well there. As you can see, we own the sports category.
We do well in shooters, but there's still an opportunity for us there. And we do well in RPGs and racing and Sims, but there's probably still some opportunities there. So our actions over the last year have been to invest in growing shooter and actions and the action genre. And as Andrew mentioned and Patrick mentioned, we brought in new people. We're building a new studio in Montreal around Jade Raymond and a very deep or very talented group of people that are in that huge.
All we need is one new franchise, and you can probably think about that as driving $200,000,000 to $400,000,000 of incremental revenue off of a single franchise. If we can do multiple franchises, remember, we have a long relationship with our IP owners like Disney or our sports relationships, huge opportunities to try to leverage some of those as well. So we see those 2 as giant, but we're not forgetting about RPG, for example, or the sim category or racing, still opportunities across the board, but a huge potential for us to add incremental revenue simply by looking into the action genre where we haven't traditionally spent any time. 2nd piece of the puzzle is geographic. Now granted, games in other parts of the world aren't as simple as waiting for people to buy consoles.
They'll most likely not buy consoles in some parts of the world. They'll play games on PC or more likely they'll play games in mobile. And if you look at our share of Asia, which is really dominated by China, Japan and South Korea, Our share is a mere 2%. It's a huge market for games, dollars 44,000,000,000 between Asia, Latin America, Eastern Europe and the Middle East. Our biggest share in this whole piece is in the Middle East, where FIFA does extremely well and many of our mobile games do well, but we're still a fraction of where the potential is.
And we know this is hard and what we've decided to do is be very, very focused on this. And FIFA, as Andrew mentioned, is a tool to try to drive that. How do we drive deeper engagement with our FIFA online and our FIFA mobile title in Korea and Japan and most importantly, China. And our relationship with Tencent there is very important. It allows us to get deep with a large customer base of theirs.
And the early days are still it's still very early and there's still rapid growth to be seen there as the popularity of the underlying sport grows in China. So big chance for continuing to grow FIFA. We're also focused on 2 other brands in that marketplace. Need for Speed, as Andrew mentioned, is very popular there. And Plants versus Zombies, believe it or not, is extremely popular in China.
And so you'll see activities around all three of those on both PC free to play and mobile to try to go after a small slice of this big market. But even if we can double or triple our share, it's a huge incremental opportunity for us over the next 5 years. Digital, I think everybody knows this is where the market is going, right? Full game downloads are still nascent in the market. Extra content is really driving that user engagement that we're so focused on.
The subscription model is just getting started and there's some interesting data I'll show you on what that looks like. And obviously, we've talked a lot about mobile. We think there's still a giant opportunity for us in mobile. Full game downloads, As you can see, full game downloads have been a major driver for our business over the last couple of years, 63% gross margin back when full game downloads were a small fraction of our overall digital. We're now north of 20% as a portfolio in full game downloads, and we think that's one of the largest reasons why we're continuing to see digital growth like we are, that plus the extra content component.
Our estimates are for full game downloads to continue to grow. We believe they'll move into the low to mid-40s over the next 5 years. Some people believe that, that may be conservative and will even grow faster. And that puts our gross margins in the mid-70s, assuming we continue to see also extra content growth. If it moves faster, we think that's a bigger opportunity for gross margins.
And I think everyone knows where full game downloads have come and the economics around it. For us, a full game download is a low to mid-80s gross margin versus a mid-60s on a console game, 20 to 25 point advantage for us in a world of full game downloads. Today, the PC business, 75% full game downloads. We think that people have been buying things on their PC. When was the last time you bought a PC that actually even had a disk drive in it?
I mean most PCs don't have the ability to do anything other than a full game download. And while we don't see that the console market goes all the way to 75%, there's a pretty good potential we'll see a lot of growth over the next 5 years with full game downloads, which continues to drive our overall ways to engage in our business digitally. Here's one that gets pretty exciting. So that's FIFA from 'ninety seven up through 2010. What do you think happens when we introduce Ultimate Team?
So granted, it created some extra content, right? Look what it did as a base game. That bottom line is the base game FIFA and the addition of Ultimate Team drove a huge incremental revenue spike, but it also helped drive the base game. If you had Madden, you'd see the same thing. If you had Hockey, you'd see the same thing.
And so to the earlier points today, we're looking at engagement models for every single product, which grows that extra content piece, but it also grows the underlying game. We want to try to drive engagement to drive both the top line and the margin. And that's a huge opportunity for us going forward to think about how do we adopt some of those same mechanics inside of non sports games, inside our mobile games. What did you see today on our mobile games? You saw live services and you saw engagement models that are constantly changing.
That's the future and the opportunity and that's what drives people back to play the games. So, subscriptions, early days for us in subscriptions. We have EA Access on Xbox. We were very pleased with the early response there, so we brought out EA Access on our Origin platform. So Origin Access, we think that's important.
And here's why we're seeing it's important. These are some EA Access statistics. We look at non subscribers versus subscribers. And in the case of playing more, we found that they play 2.5 times more games. So we took a static point in time and we compared the 2.
When we reduce the friction for you to play games, you don't have to go to the store, you don't even have to do a digital download, you're going to play more games. It's kind of common sense, right? The time played was almost 4x, 3.5 more than 3.5 times people played longer. That engagement model works when you reduce that friction. And at the end of the day, people spend more.
They invest more in that time that they're playing and we see spend levels of 3 times. Now I know someone's going to ask, well, why don't we turn all of our businesses into subscription? Not everyone's yet ready to be a subscriber to a game subscription, and we only have it on one platform right now, but there could be a day in the future where you'll see more subscription options. And we see this as a continued way to drive what we talk about all the time as more engagement. If we engage you, you'll invest time and money in those games.
And mobile, I get the question, geez, when are you going to when's your next big mobile hit? When are you going to have a Candy Crush? We kind of like being diverse. I took the titles off, but that's the diversity of our portfolio. No one title represents a majority of it.
In fact, no 3 or 4 titles would represent a majority. It's a fairly diverse portfolio and that's safe and consistent. It's not only a diverse portfolio, it's long lived. That's the Sims. Sims FreePlay, it's been going on now for 4 years and still growing.
We're getting better at what we do with the game. We're keeping people there. That's a long life for a mobile game. And we've continued to grow the business profitably, continue to improve profitability as we've gotten scale and as we've gotten smarter at how we develop games, how we test games and how we bring them into the market. So huge opportunity for us.
Leverage the IP, as Samantha mentioned earlier, build live services into the games to continue to see this as a growing component of our future. And then the network. As I said, we don't really know exactly how this monetizes. It may simply make everyone's life easier so they play more games. But we know there is power here and a huge opportunity for us because we have such a large network and what we are focused on is how to make gameplay better, more fun, more exciting, more connected, more social, all the things that we believe will help people spend more time and money in their games.
So what if we put all this together? You guys were waiting for this. What's the big number? I'm not going to tell you the number. But I will tell you, if you're standing here today going through what we just went through, you got to be thinking there's at least $1,000,000,000 in incremental revenue in the business over the next 5 years.
I mean, this is a business that people thought you couldn't grow. Organically, we're growing in mobile, as everyone's seen over the last couple of years, in mobile and new titles and new ways to serve digitally. But we haven't even scratched the geographic opportunity. Small slice of China, if we can continue to grow FIFA, continue to bring out new products on both mobile and free to play in that market. I think there's an opportunity there.
And as we talked about genre, if we build 1 franchise, new franchise in the genre of action,
could be huge for us.
Subscriptions, it's going to grow. We just don't know how fast it's going to grow. And you heard Peter more earlier, competitive gaming will help drive that engagement method. We have the easiest way to monetize competitive gaming. It's called Ultimate Team.
Huge opportunity for us to continue to grow people into the funnel of Ultimate Team. And so while we don't know exactly how big each of these components are, as we look at our plan and we have the discussion with our Board over where we're focused, this is how we're focused. And we believe, as I said, there's probably at least $1,000,000,000 of incremental revenue there over the next 5 years. Okay, everyone's going to go change their models. If they had $2,000,000,000 they're going to bring it down to $1,000,000,000 So, now someone's also going to ask what's that going to cost?
All this must be expensive. All this network stuff you're doing, these new products, what's built into our costs right now? We've been investing in the network for the last 2 years. And Ken's team is very focused. Patrick's team is very focused on how do we continue to do that.
So it's built into our numbers. We're doing more product development. You saw that in our guidance for this year, about $70,000,000 a little less than $70,000,000 of the delta in R and D expense or in expenses is R and D driven. New studio in Montreal, for example, new mobile efforts, there's investment in there in those numbers. Sales and marketing, we actually have some increase in sales and marketing dollars this year because we've got a bigger title slate.
But as a percentage of revenue, it's gone from 12.5% or 13% to 12.5% this year. And I know Chris is going to nod with me when I say, but our goal is to get that at least to 12%, if not lower over time by leveraging that player network. If we're successful in the player network, we should continue to see benefits in sales and marketing. Product development, we've been right around 21% to 22%. This year, we'll be under 22%.
We think that's the right target going forward a percentage of revenue. Sales and marketing, we've talked about 12%. In G and A, we're right around 8%. We think we can probably get that to around 7% with more scale or more systems in place and trying to drive consistency across the or around the business. So you put all that in place and you go back to my chart, let's for a moment dream.
If we can add an extra $1,000,000,000 in revenue and remember I said I think gross margins can probably be in the mid-70s versus 71.5% where we're at today, if you can do that and hold OpEx at around 40% of revenue, which is where we are basically in the model we just talked about, That adds over $1,000,000,000 in new earnings. And as everyone knows the beauty of this business, our CapEx requirements are fairly limited to technology, new servers and new office space or office upgrades. That's roughly been $100,000,000 ish a year over the last 3 years. We think we can continue to hold that. So that means $1,000,000,000 of new cash flow.
And I'm not giving guidance, but that's where we're focused. And to some, that might be boring. To I hope most of you, that's pretty exciting because I don't know how many people are talking about $1,000,000,000 in new earnings over time. And so we've got a lot of work to do, but I would hope one of the things you saw over the last couple of hours was the team and the quality of the team and the way the team works together. And one of our biggest secrets has been trying to drive a mindset in the company of of one team.
And we live it as a management team every day and we're driving everyone in the organization to do it. And that's how we pulled off the last 3 years and that's what's going to drive the next 5. So huge opportunity for us. And I think as most of you know, when you generate that much cash, you're going to get a lot of cash flow and you're going to get a lot of or when you're in those earnings, you're going to get a lot of cash flow and a lot of cash, and our view is it should go back to shareholders. And we've demonstrated that in fiscal 2016 over $1,100,000,000 back to shareholders.
We've talked publicly about trying to target at least 50% of free cash flow going to shareholders. And if you generate more, you probably end up moving that number up over time. And at the end of the day, some of you have asked about M and A. We may do some M and A over time, but this is an industry that's fairly consolidated already. And so most of that M and A will be smaller talent based M and A versus large acquisitions.
And if there's a large acquisition, trust that we're going to be very disciplined about how we think about that and we're investing your money and we think about it that way to make sure we get a return on it. So I'm not announcing any acquisitions today, no surprise, but I will say that we feel like we've earned the right to at least look at things that we hadn't done before because we've now got the model working better. But our real focus, as you can see, is on organic opportunities. We think talent driven and in the genre space, focus in Asia is a critical way for us to continue to drive the both top line and the bottom line. So there is the story.
We're going to open it up to Q and A. I'm going to bring everybody up on the stage. But hopefully, we've given you at least a glimmer of where the future is for the company. We believe it's a very bright future with a lot of opportunity, and we haven't really started to scratch the surface in a lot of areas. So I appreciate everyone's time, patience, willingness to sit in here all morning.
And we've got a few people with microphones that will come around because this is being webcast. Wait until you get management team come up. J. Rice:] management team
come up.
We're not going to sit here that long. So there's people thinking, oh, I got chairs out, it's going to be 2 hours of Q and A. No, no, no. I'm hungry. I want lunch.
Andrew can't speak because he doesn't have a mic yet, so lean into Patrick's mic. All right. So I will try to call him. Hello? Hello?
There you go.
Okay, I think we're on now.
Share around fewer franchises with what you talked about in terms of expanding into new genres as well as dipping into the cupboard. Andrew, I think you mentioned, if you could talk about that. And then secondly around the player network, like you mentioned, a lot of those expenses are built into the forecast. But if you see good success there and traction, is there a scenario where you would invest incrementally into headcount, data centers, other infrastructure
Hello. Great question. So as we think about consolidation of the industry, the consolidation is really driven by player expectation. The content that they create. So what that means is in order to break into a category of games like action, like further penetration of the shooter category, the expectation for gamers is much, much higher.
So there's going to be fewer and fewer companies that are going to be able to break into those power, really can't break in. And it's larger scale companies that have the combination of technology, IP, talent and kind of live service orientation that are able to gain disproportionate share, and we think we're well positioned for that.
In terms of the cost side, and Ken can chime in on this. There's 2 things at work, right? We are investing in the network and that investment is obviously additive, but at the same time, we've learned how to operate in a much more efficient way. So as Patrick mentioned, in the old days, we might have had people doing something all across every studio. Today, Frostbite allows them to take from the Frostbite code and not have to replicate that.
And so we're seeing a counterbalance in some of those investment costs by bringing our costs down to other places. Data centers, Ken is all over this, is a huge opportunity for us to continue to get better efficiencies out of it.
Yes. No, it's exactly right. It's the same dynamic is on the server side. As we get these savings and we are realizing savings as we're going, we're using that to organically we're putting that back in. We're leveraging cloud computing in a really big way and cloud platforms and that gives us more opportunity.
So we see that opportunity going forward, but it's something we will constantly reevaluate.
There's kind of 2 other things to think about as we think about kind of how we invest as a team. So in a world where you have lots of siloed entities inside of an organization, then each member who each executive member who's leading one of those siloed organizations is always trying to protect on
a
on a regular basis and we say, right, what are the most appropriate investments for us as an organization and how do we actively and quickly and efficiently move investment around the organization to generate the greatest return. Given that talent is our number one resource, again, what you need is tremendous mobility of talent in order. So it's one thing for us to decide we want to invest somewhere else. It's another thing to actually be able to engineer an organization and move an entire organization against that investment. So part of the reason why you hear us talking about a single central digital platform, a single engine is it creates tremendous mobility of our engineering base.
So that we if we decide as a management team, we think that the network now requires more investment than some other element that we've been building against, we can mobilize an entire workforce against that fairly frictionless.
Ben Schachter right here. I'll start over here and then you can give Ben for the next question.
It rhymes with Schachter, it's Pachter here. I have a couple of execution risk questions, and I guess any of you can answer. But game quality is kind of paramount to executing on your strategy. You've had a series of missteps on execution. You've had essentially blown it with the NBA brand.
You probably killed Medal of Honor. You really didn't make a super highly rated Star Wars game. So first question is what can we look to ensure us that game quality is going to improve? And I think that was the centerpiece of the last EA analyst event. It was Larry Probst first and then John Riccitiello talking about how great your game quality was.
You guys were top of the heap. And the second question is on mobile, I just looked at the top 20 games, 3 of them come from some other medium and the other 17 were built only for mobile. They are mobile only properties. None of the top 10 come from another medium going to exploit on mobile. What are you doing to come up with new IP, mobile only IP, because that seems to be where the money is flowing.
I want to take the quality. I'll take
the quality one. So I would agree with you on NBA. That, that is something that we've struggled with as an organization. And as a result, we have a different plan in play right now that we hope to rectify that. Overall, if you look at our overall portfolio, I would say that we're in good shape.
We are as good or better as the other people in the industry on average. If you look at our sports portfolio, we've Star Wars, I think, is a game where you have to be you have to look at it maybe from a slightly different perspective. Yes, we know that the one thing that we got criticized for was the lack of a single player campaign. There was a conscious decision that we made due to time and being able to launch the game side by side with the movie that came out to get the most possible to get the strongest possible impact. I think the team created a really good game based on the premise that we had.
And I would say the game has done very well for us and reached a very different demographic than a traditional EA game would do. So from that perspective, it's a success. Are we happy with the 75 rating? No. Is that something that we're going to cure going forward?
Absolutely. But I think overall, we look at everything that we do in isolation. But if you take a step back and look at our overall portfolio, it's actually in pretty good shape.
Samantha, do you want to address the mobile question?
Sure. I actually don't believe that it is our IP that is holding us back. I think it is more about understanding the depth that is required for mobile games and making sure that we have the right talent in the right place at the right time to build those opportunities. And we are building mobile games from scratch. These are bespoke mobile games with a much deeper understanding I think than we've ever had before across all of our teams.
And that is really where we're putting our focus back into the talent, the depth of understanding our player motivations. And that can manifest, I think, in any IP.
And don't forget, that one of the dirty secrets of mobile is a lot of companies don't make a lot of money in mobile because they spend so much on acquisition and retention. And part of our strategy has been to leverage our strong IP to minimize the cost of acquisition or retention. And it's worked to drive a great profitable mobile business and we think there's huge opportunity for that still to come. Ben?
One of the slides you showed showed the sports business sort of flat year over year, sort of the stable piece of the business, but yet other shows massive growth that we've seen in the past. So why shouldn't we expect that to grow more going forward, particularly as a number of the slides showed golf possibly coming back, relaunching NBA. Why wouldn't sports rise? Why should we think that?
Yes. That chart, if you get your ruler out, you'll see that sports is growing every year, even though there's not necessarily every title every year. And the biggest driver has been obviously the extra content component of that of the live services. And we think that will continue to grow. Our forecast for sports this year is growth, and we'll continue to see growth both in base game and in extra content.
It's just such a large portion of our portfolio growing it and the titles are so large, growing it at double digit rates is difficult. So but we have full confidence we'll continue to grow the sports portfolio, particularly the extra content component around that should continue to grow.
Just a couple of other quick questions. Battlefield looks great, but you're aligned with a special relationship with Xbox and yet Sony is doing so well this cycle. Will that hurt you? How are you going to make sure that you can do well and compete on PlayStation as well?
Chris, do you want to? No, I think this is a game for PlayStation as much as it is for Xbox, as much as it is for PC. I think what Dice has done and the game that they're building is going to satisfy the Battlefield core that continues to play Battlefield 4, continues to play Battlefield: Hardline and it's actually going to bring a lot of additional players into the Battlefield franchise. So, I don't see any limiters to our ability to reach a really broad audience of gamers across the whole shooter spectrum of players who play those games and also bringing more players in to that genre with Battlefield 1.
Yes. And as we think about marketing partnerships that we do and we do them and other people in our industry do them. And certainly our console partners want to stand right next to the biggest and best games in the industry. Typically what we see is that just aids awareness. And it aids awareness whether you're a PC gamer or an Xbox gamer or a PlayStation gamer.
And of course what the console partner hopes to achieve is some disproportionate awareness around the game as it relates to their particular console. But what we have seen and we could we've seen the analytics against it is if you're a PlayStation gamer, you do not reject it because it is brought to you by a potential console partner. You understand deeply that it's also available in your console. And what we get is just a multiplier effect of greater awareness in the marketplace.
Back in the back here.
Thanks. Just a couple of questions. One of the main growth drivers that you cited was geographic growth in Asia in particular. That's a market with a lot of entrenched competitors and where distribution often has to go through some of those competitors. So I guess the first question is if you wouldn't mind talking about the strategy there and how you plan to get distribution?
And then just a second question for Peter on eSports. I think everyone sees the huge benefits of the indirect benefits of usage and engagement. But if you wouldn't mind talking about the direct revenue opportunity for Esports over time, and also any costs associated with building that business for now, what type of drag that's going to be on earnings for the next few years?
Yes. So as we think about Asia, the best way to kind of look at how we're thinking about the future is really to look about how we've grown the business to this point. So a couple of things have been true is that focusing on key important IP has been a winning formula. Partnering with key strategic partners in region has been a winning formula. And then ensuring we are able to fulfill the local needs of culturalization with local EA teams on the ground ensuring that everything we do is culturally relevant.
And if you think about what we did with FIFA in Korea, we launched FIFA Online in Korea, I want to say in 2006. After the growth phase, it's been in the top 5 and often the top 3 or top 2 in Korea on any given day. We've since taken that to mobile, so we've expanded across platforms in region. We took that same model and we took it into China with our partner Tencent there. We're seeing great growth.
I recently had the fortune of having dinner with a new President of the FIFA organization who had just come from China and said their plan at a Chinese regulatory level is to have 50,000,000 professional soccer players in China in the next 5 years. So I mean that's more than the total population of the United Kingdom. So you can see how a focus on the right IP, FIFA, Plants versus Zombies, Need for Speed, partnered with the right strategic partners in region, double down with local talent ensuring that what we're doing is culturally relevant is going to continue to drive growth for us.
Yes. And on Esports and competitive gaming, it's not indirect. We can measure where that revenue is coming from. We see 2 funnels. We see 2 flows of revenue, obviously at the top of the pyramid, something we've done well for many, many years, which is drive sponsorship and advertising dollars, and we'll continue to do that.
And there's 1,000,000, if not maybe tens of 1,000,000 available there. But more importantly is the basis that sits underneath that, the balance of the pyramid, where we see 100 of 1,000,000 of dollars directly attributed to competitive gaming through our ultimate team, our battle packs, all of the mechanics that are already built into our games today. And one thing I want to point out for both our FIFA and Madden, other words, you'll be playing as
ultimate teams, regardless of what you're going to see in the coming months
here, those will all have an ultimate team basis to them. In other words, you'll be playing as ultimate teams regardless of the team you're playing on, whether it's an NFL team, it'll be Madden Ultimate Team, about
the
have a strategy be about the chemistry as it comes together is going to be key to those competitive rule sets. And Ultimate Team is the core of those. So again, 2 funnels, we see sponsorship and marketing. If you remember the pie chart that was up behind me during the presentation, that's interesting. I think that's probably a fiscal year away, 2 fiscal years away.
But boy, and when we announce Madden and FIFA in particular, our challenges coming over the next few months here, I think we'll see a direct positive impact to our revenue that will be attributed to Ultimate Team.
And the way we think about the cost side of the equation, clearly there's an investment there, but what we're really trying to do is prioritize that investment inside of Patrick's World, for example. How do we prioritize what needs to be done inside of a game? And so we might not do something in an effort to prioritize this. How do we prioritize marketing dollars to help spend or pay for the activities inside of esports? If they're all driving the same outcome, which is greater engagement, we know will drive revenue that way.
And so we try to think about it in a prioritization versus simply an additive of costs over time.
Thanks. So thinking about the player network and the journey slides that you guys put up earlier, it seems like to me you're talking about maybe having a more direct billing relationship with the consumer over time. So I guess you're in the data gathering phase right now. So where are you in terms of using that data to to inform your game development or even ultimately the merchandising of the content to consumer? And if you're also managing the billing and the paying relationship for the consumer, what happens when people want to buy other people's content?
Thanks.
Yes, I think it's a great question. First off, we see the EA player network as a means to connect your gaming life irrespective of what are the other network you are part of. So it's not supposed to supersede other networks, but it's supposed to connect your gaming life as it relates to how you interact across networks. And so it's purpose built for play. That in many instances where networks facilitate will also include direct billing and transactional and we're gathering a great deal of data on a day to day basis about how our players engage both in terms of time and in terms of spend.
The question around is what happens when someone wants to play another game? That's very real in our world. And again, we're not trying to be the only game developer or game maker in our industry. I don't think that's realistic and I don't think it's actually good for the industry. But what we do believe to be true is that you will as a player, access any number of games and any amount of content through our network.
So right now, you can buy other people's games through Origin. Right now, we are getting knocks on the door on a very regular basis for other publishers who want to be in EA access and Origin access because they see the value of being part of that player network. And as we think about the build out, as we think about both how we build games, how we build technology infrastructure and how Chris orients the organization that he manages, it's really about let's not just think about how we can get you playing EA games, but how do we enhance your life across all games and how would we generate return for the provision of that service to players over time?
But the data is just to make that point, absolutely, the data that we have about players and their behaviors in our games across that broader journey that I put up there today, is teaching us all kinds of interesting things and allowing us to optimize messages and offers for players. So when you think about the amount of information we have that allows us to then show you the next best experience for you based on what we know about you. That has great opportunities for us around revenue, around growth and offers and messages and becoming far more efficient in keeping players engaged. Over here.
Great. I guess, first of all, in the past when you've launched large multiplayer games, sometimes there's been server issues and people having trouble getting on. This year, you're launching 2 fairly large games. So what are you guys doing to make sure that those launches happen smoothly? And then secondly, in terms of the player network, what are some tangible things that
the first?
Yes. I can I mean from a stability perspective, from at least the game team side, and Ken's going to add to this, We've had one launch with the Battlefield 4 launch that were problematic? I think there are multiple reasons to why that happened. One of them is the fact that it was a complete we were launching on completely new platforms and then a bunch of other things. What we've done over the past 20 months, I would say, is to take a bottoms up approach around everything that has to do with launching a big game like this on all platforms.
Again, that has when all our games are built on 1 engine, if it works on 1 engine, it works. That in collaboration with, I think what Ken's going to tell you, has made a profound impact on how we launch our games. So I something we will continue to monitor and something that's super important to us, but I think that we finally have a handle
on. Yes, exactly. So we work super hard across the company to ensure that we have the highest odds possible of having the perfect experience at launch and that matter 20 fourseven after that. And some of these big events actually drive incredible volume as well. It's everything from how we test the scale, how we adopt cloud, so that we can actually burst if we have higher demand than we expect on a game.
We would sure as heck like not to be limited by that. And that we know that we can do better bursting really deep partnerships with the game teams. There is a in our we are always thinking players first. And the very basic here is the game available. We all feel incredible pain when we as a company create an amazing game and people are blocked from using it.
So we have a long list of things we're doing. We take it extremely seriously. It's It's actually the number one thing we focus on in many parts of the company is trying to ensure this past year Star Wars, we had some great experiences. We had Battlefield Hardline. We had the sports titles.
So now we have all the learnings coming from these successful launches that all go back into the next upcoming launches. So we're always paranoid about it, but it is our it is something we're very excited and we will forever improve and we're pretty optimistic that
things are trending well.
Yes. As we think about value in the EA PLAYER network, I think there's a couple of key premises that have to be foundational to the network. One is you can't be bound to a single franchise. In an entertainment world where players' tastes change over time, you have to have a breadth of the portfolio. The second is you can't be bound to a single platform because people's play habits change.
I hear a lot of people say, hey, we should be mobile first, we should be mobile only, we should be mobile focused. Well, guess what, 5 years from now being mobile only focused may be as silly as being console only focused today. So as we think about foundational elements, it's really about how do we provide the deepest and broadest connection today and you look at what we see with respect to our EA Access subscription. So what we see there, again, what you heard today was we're getting more new people into that subscription who have never been part of EA's network before. Once they come in, they spend more they play more games, spend more time and spend more money than non subscribers, right?
So you think about non network people. If we think about those outside of EAX, as you think about something like a FIFA Ultimate team, those that engage on with FIFA on both console and mobile monetize at 50% higher rate. If we think about Madden Mobile right now, so we brought in a whole new element, a whole new demographic of gamers, kind of 7, 8, 9, 10, 11, 12 year olds through the mobile game. And 2 years into Mad Mobile, we're now also starting to see those people migrate into console. So they're growing up inside of gaming.
They start on mobile, but then ultimately they want that 80 inches TV experience. So across entire business right now, we're seeing very strong indicators that network play is how our players want to interact with us and that network play and the facilitation and provision of a network around play is actually going to drive significantly higher engagement and significantly higher monetization over time. And if we can do that across franchises, ours and other people's and across platforms and devices both known now and new devices in the future, we think we're in a really, really strong position and we're uniquely placed to benefit disproportionately from that shift in play.
I'll hand it over to him. Okay. So it's Mike from Piper. So you have a relatively more exposure to license IP and Patrick talked about the importance of that earlier. And a question that we often get from investors is just the status of the various licensing deals.
Is there a risk around future renegotiations? Certainly, there's a symbiotic relationship with the various organizations that you partner with. But can you just talk about the license IP deals and how investors should kind of think about risk around those and maybe the positives of having relatively more license deals than your counterparts? Thanks.
Yes, I think just an easy reminder is very few of our licenses are sole licenses. FIFA, for example, is a collection of many, many licenses, over 300. And you try to set those up so they come due at different times to balance some of those risks. But more importantly is really the relationship that we've built with our partners. So we spend a lot of time with the NFL or with FIFA or the underlying teams looking for ways to provide them benefits beyond simply setting up a Royal Mailjack.
So we can tell where all the Arsenal fans are in the U. S. Because if you play Arsenal as your team on your console, you're an Arsenal fan typically. And that's a great set of information that they do not have. They have they know who their fans are that they sell tickets to in their own stadium, that's it.
And so there's an opportunity for us to continue to share that data to help NFL people on board new young kids playing football, for example. We try to do that with all of our licensees to build that symbiotic relationship, which keeps the connections there and minimize the risk of turnover
down the road. And all those are long lived
licenses, so it's rarely our licensees
too. When we leave with the NFL, we talk about, are licensed these 2. When we meet with the NFL, we talk about, what we are seeing in the youth community that's playing Madden Mobile, for example, it's actually quite valuable to the NFL as well.
Two questions. First, Blake, can you just clarify your statement about $1,000,000,000 of incremental revenue generating $1,000,000,000 of profit? Is that cumulative over a 4 or 5 year period? And then secondly, for Peter, can you talk about the balance between sort of like the story mode of a game versus the online play? Michael mentioned Star Wars is one
of the issues. One of
the things you said was timing. You've got Titanfall 2 coming out just 2 years after the 1st Titanfall game. Is that a long enough time? And how do you think about that balance?
So on the economics piece, the way we were thinking about it is if we're finishing the year at roughly our guidance for this year, 6s in terms of 5 years out. We could be looking at a $6,000,000,000 business. And a $6,000,000,000 business at the gross margin profile that we're talking about can generate close to an extra $1,000,000,000 in earnings. We finished this year at 1,000,000,000 dollars 3,000,000 if our guidance sits, and we think that could put you close to over $2,000,000,000 in new and maybe as close as $2,100,000 $2,200,000 rough math. But it's all about the leverage on the gross margin that's driving that earnings expansion in the business and combining with cost control.
So but rough math was the intent, not as I said, don't go redo your models quite yet. So Peter?
I think it was Patrick.
Yes. Patrick, sorry.
Yes. So in regards to the depth and breadth question, it kind of goes back to our the framework I described where depth and breadth is one of the points that we look at. And what we've learned over the years is that certain games and certain genres have different requirements for depth and breadth and also if you want to reach the maximal audience. So the shooter category as an example, we know to be true that in order for a game to truly break out and become really large, you most likely need both a single player campaign where the player can get familiar with the game and practice playing the game to then hop on and play online. I think that maybe should serve as a steer for how we're thinking about Other games are more single player focused and may completely lack an online component.
That's rare in our case. But the sports portfolio is also
we have
to look at the sports portfolio in the same way. What types of modes do you have? How do people play them? And where can we add to the experience so that we get more players in there? But overall, we believe this is something that we're working on a daily basis to make sure that the games that we take into market have the right depth and breadth.
So let's do one last question. 1 in the back who didn't get as you go all the way back. I was thinking further back, sorry. No, go ahead.
The thing we're seeing about mobile VR, things like Gear VR is a big upgrade to silicon and smartphones. So displays are getting bigger. We're seeing a move to 4 ks. We're seeing GPUs get better in memory. So how does that become as a platform for you guys?
Do your titles become more relevant in mobile? And what about Frostbite? Does that can that be leveraged more into mobile as we see smartphones maybe move towards a more of a console spec platform?
I think there's kind of 3 vectors a little bit, and I think different people kind of take a stab at it. On balance, any time there is a new motivation for someone to play on a new platform, that's good for us, whether that's VR or otherwise. And we look at every one of those new opportunities in the marketplace as a potential motivator or mechanism to drive additional engagement in games. And I think as it relates to the delivery of VR experiences in the mobile context, I think we are in a better position than most mobile developers given history around building deep immersive three-dimensional worlds, to actually deliver against that promise.
And I think there are
some challenges. I think the price point is positive in terms of mobile VR, but I also look at how many kind of appendages we carry with us to attach to our mobile devices. And that you actually want to have that device out and using it on a fairly regular basis?
Yes. I mean, at the same time, mobile devices represents probably the most frictionless path to VR today. They're not tethered. You've slide it into a tray basically that holds it. The experiences are actually surprisingly good from at least from watching or from a VR video perspective.
So I personally believe that that's mostly how many people will start experiencing VR will be via their phones. It's also from a cost barrier, a very low cost barrier. And while the experience will not be as good as it will be on the high end PC based platforms or console based platforms, it is an interesting kind of open market that I think we need to look at. From a tech perspective, the Frostbite engine will function on high end mobile devices with some work and but it's not a crazy path to get to that.
So let's wrap this up. We are going to do lunch right next door. The management team will try to sit at different tables around the lunch, so people feel free to continue to ask questions. If you can't stay for lunch, thank you for coming. We would hope that you get a chance to eat before you leave.
And once again, thank you for making the time. Many of you flew from halfway across the world to get here. We really appreciate it. It's a great opportunity for you to get to meet the management team and see the power of what we've built here. We probably don't do one of these every year, but we'll probably do one every few years as a way of continuing to refresh people around our thinking.
But obviously, we'll have many conversations with you each quarter as well as we come visit your offices and organizations around the globe. So I appreciate everyone taking the time and continuing to have confidence in EA. Thanks.