EA: 'We are going off-deck'

While there are many shades of gray, whether EA Mobile is going off-deck is not one of them. They are. At least, that's what Mitch Lasky said last Friday at the Harris Nesbitt Games Go Mobile Conference in New York City. Like IGN, Gamespot and others, EA asked us to remove the story we ran yesterday about the mobile gaming giant's off-deck plans, but EA's PR agent would not give us a reason. So we kept it. If you listen to the audio webcast EA posted on its corporate site, it becomes clear that the focus of Lasky's speech was the company's plan to go off-deck, with slides exhibiting a Web-to-mobile shopping application (slide 14). An EA press release that went out before the speaking engagement promises the webcast will remain available on the site until June 22, 2006.

Here is an overview of Lasky's speech with full quotes: "We're looking at innovative ways to reach consumers, fundamentally, we're not planning to do this again in the conventional off-deck manner." Investors had an enormous amount of interest in the Jamba/Jamster strategy that VeriSign "was propagating which was, you know, off-deck selling through the Web and through short code marketing on television. We resisted that, what I would call 'the siren's song' of that off-deck model because to us it just seemed like a blatant marketing arbitrage and there would always be somebody out there that was willing to spend more money on advertising in order to make a slightly lower margin on the content."

Here's where it gets interesting: "We are going off-deck but we are going to do it in a way that leverages our competitive advantages and our consumer reach. We've created and intend to launch a series of integrated desktop, console and mobile community applications like the one I've shown here that's gonna allow us to create network effects leveraging EA's tremendous marketing reach and packaged goods reach." Lasky then describes the off-deck application: "What you see here is a desktop-to-mobile version of this where content can literally be dragged and dropped onto the little Java application in the corner that appears immediately on the mobile phone along with the customized ringtone. In addition to providing increased marketing relevance and a deeper emotional connection to our brands these remarkable new applications will open up new ways for us to sell directly to our customers without the necessity of spending tens of millions of dollars running ads on MTV, etc."

There are plenty of other relevant quotes and you can read the larger excerpts here.

According to the slides that accompanied Lasky's presentation: EA Mobile had a 31 percent market share of the U.S. mobile game publishing sector in Q1 2006, which is over three times the market share of the next largest publisher in the U.S. The company also expects its "net revenue from games for cellular handsets to increase significantly from $19 million in fiscal 2006," according to its 10-K form.

Without a doubt, EA is now the biggest name in U.S. mobile gaming, and that's why its move into off-deck is so important for consumers and worrisome for carriers. The transition to off-deck is an inevitable one, but the carriers' role in an off-deck value chain is yet to be determined. As Anil Malhotra, SVP at Bango writes in: "While direct-to-consumer mobile content is by definition marketed and delivered outside the carrier deck, this does not mean it by-passes the carrier." Potentially, carriers can still play a role in off-deck models by enabling users to browse and buy content simply and by handling the billing end. Off-deck growing pains are sure to continue, but until a big content provider like EA stands up and embraces the transition, it's going to be a rockier ride. - Brian

Partial Transcript

Listen to the audio of the webcast here.

Check out the presentation's slides here.

"…And then finally—um—we're looking at innovative ways to reach consumers, fundamentally, we're not planning to do this again in the conventional off-deck manner—ah last year when we were a public company, an independent public company we were on the road and we were talking to investors and they had an enormous amount of interest in Jamba Jamster strategy that verisign was propagating which was you know off deck selling through the Web and through short code marketing on television. We resisted that, what I would call the siren's song of that off deck model because to us it just seemed like a blatant marketing arbitrage and that there would always be somebody out there that was willing to spend more money on advertising in order to make a slightly lower margin on the content—it didn't seem like a good defensible business that we could invest in. And I think the results over time have shown that we were correct in that assessment. We are going to go off-deck but we are going to do it in a way that leverages our competitive advantages and our consumer reach. We've created and intend to launch a series of integrated desktop, console and mobile community applications like the one that ive shown here that's gonna allow us to create network effects leveraging EA's tremendous marketing reach and packaged goods reach. What you see here is a desktop to mobile version of this where content can literally be dragged and dropped onto the little Java application in the corner that appears immediately on the mobile phone along with a customized ringtone. In addition to providing increased marketing relevance and a deeper emotional connection to our brands these remarkable new applications will open up new ways for us to sell directly to our customers without the necessity of spending tens of millions of dollars running ads on MTV, etc. We intend to go after an off-deck strategy but we intend to do it in a way that preserves our core values of scalability and profitability. So as you can see we are not standing still waiting for some mythical inflection point to create demand for us, we are actively trying to create new demand for mobile content, demand that we can monetize in a profitable, scalable and defensible way. To say it another way we're calling plays from the old Jamdat playbook, seeking growth in new markets while maintaining our dominant position in the current ones. But this time we got the brands, the resources and the reach of the number company in interactive entertainment creating a very brisk wind at our back. It's really exciting, ah.. really exciting time to be in this industry right now  I think that the quality of the companies you're going to see today is very high. I think it's going to be a very exciting day, I'm very excited to be here…"

Q&A Period

"The ability to do Web-mobile-to console—stuff that Microsoft is only talking about right now in their Xbox live anywhere initiatives and we're actually creating them… and so that's really where the dollars are going…"

"…Yeah you know I thought for some time that we're sort of coming up against the edge of what's possible given the current deck structure and the current way of merchandising content on mobile phones and I think you know some of the doom and gloom scenarios that I think have been unfairly propagated about mobile gaming out there really stem from the fact that we are bumping up against the limits of the utility of the text based messaging—the text-based menu and the kind of shopping experience that I showed some examples of in my presentation. That said, I think the carriers all recognize this. I think they're all looking for ways to do this and ways to do this where they can continue to preserve their brands and their, you know, they would like to say their "control" of the customer, well that's really kind of unfair that's not what they're trying to do, they're really trying to preserve a uniquely Verizon or Cingular experience, however, in the last year I think we've seen a lot of movement and activity toward um innovative new ways of shopping and we've brought a number of those initiatives to the carriers which they've been quite excited about—even the ones that have traditionally been the most protective. So you know expect to see at a minimum a hotter experience, more graphics, more demonstrability of the titles and downstream I think you can look at more interesting value propositions like channeling and bundling and other things like that."