There are some new publishers out there, like Gamecock, who have eight people and low overhead, and they're trying to give a lot more royalties to their third parties and things like that. What do you think of their model, from what you know of it?
FG: I'm not as familiar of the model as I probably should be, but I do know, having run publishing organizations inside of EA, that the way that the retail channel is shifting is that it's increasingly becoming concentrated in the big accounts. I'm not talking about digital distribution, though. We'll set that aside for a moment. In order to get the meeting with the buyer and get the scale and leverage that you need in order to get to the right margins in pricing, and how you handle SRA and inventory, it's an extremely complex, large-scale operation that frankly, eight or nine people would find exceedingly difficult if not impossible to scale.
If it was an eight or nine-person department that launched one or two games a year on the PC, it could happen. But how they serve those 30,000 store fronts, make sure the products ship on time, and execute a street date -- it's just become so extremely complex and sophisticated that I would think that they would have more luck carving out a value creations side of a digital distribution operation, or something more boutique and specialized. Perhaps that's what they're doing -- I don't know that much about them -- but when you want to scale, you need more than eight people.
They're doing some full-fledged console stuff, and it's going to be interesting to see how they do. I think they outsource a lot of their stuff. They've got the eight core people, and they work with external partners for a lot of the other stuff. It's interesting to me, because it strikes me that it might be possible to be a bit more nimble when you're eight people versus thousands.
FG: Well, all of North America for us inside EA was only 360 people, and something like 120 of those were inside our deep distribution organization. When you then broke that down against our SKU plan, they're relatively small and nimble teams. It's having the systems and the relationships that allow you to scale. When you walk into a retailer and you say you want to set your net price at X, you've got one title and your one guy to say, "I'm not going to take it," or "Here's the deal: here's your price." That's just simple. It doesn't matter if you're running milk or coke or games; it's the same type of behavior patterns.
Don't mistake my feedback as being dismissive of it. I welcome the innovation, and I'd love to see how it goes. But having run those things, if you want to execute a Madden launch, or a Halo launch, or something of that scale, I think they would find it hard.
I was thinking about the 3DO earlier...
FG: I worked on it!
Motorcycle action game Road Rash for the ill-fated 3D0 console
I was wondering, would EA ever find it rewarding to partner with a hardware company again in that way?
FG: Never say never! I was the product manager on some of the titles that launched -- Shockwave, Need for Speed, and Road Rash. I was part of that team that started to build those games, and it was a very small size. I think the challenge that we had with the 3DO was platform positioning. It was the Swiss army knife of hardware. It was supposed to do really great.
When we look at our business, what's vitally important to us is the entertainment and the customer connection. If there were things like peripherals, sure. We have Boogie coming out with a microphone, and we've got Rock Band with MTV and Harmonix. When you look at a fully nailed platform, it's possible. I wouldn't say it's our top priority right now, but never say never. We'll look at any way to grow.
I've been wondering about when and how Microsoft is going to do a handheld platform. My perception was that if they did, they'd have to partner with someone strong on the software side who knew what was going on.
FG: We're ultimately a software company -- we're looking at the iPod, and we're making games for that. We haven't changed our core philosophy as platform-agnostic game makers. It goes all the way back to the Apple II, the Amiga, and the Commodore. It's just different platforms.
But even with 3DO, you were platform-agnostic. It was just that you were giving [exclusive software].
FG: The 3DO guys loved that!
Yeah, I bet they did! They thought that was great, I'm sure.
FG: It does make for some interesting meetings, I can tell you.
Did you ever have to meet with the guys at the Japan side, at Matsushita?
FG: I did. I was pretty junior at the time -- I was just a project manager. But we had those meetings, and those kickoffs. We went to Japan a couple of times.
I was researching the M2, which was supposed to be the 3DO's successor, and it was some pretty interesting stuff. They actually ended up making that into arcade hardware.
FG: Yeah, our experience with the 3DO was such that we wanted the first one to be successful, not wait for the sequel.