The Sexual Tension Between Nintendo and Electronic Arts
by Emily Rogers on March 25, 2013
Electronic Arts and Nintendo are an interesting couple. They don’t have much affection for one another, but they can never seem to get away from each other. Like a great television sitcom, the relationship between Electronic Arts and Nintendo has provided great comedy over the years. I thought it would be interesting to reflect back on their history throughout the years.
In an older issue of Game Informer, Bing Gordon, a former Chief Creative Officer for Electronic Arts, remembers what it was like dealing with Nintendo during the 8-Bit/16-Bit days.
“Nintendo was operating with near monopoly power,” Gordon says. “They had like a 95 percent share of the console business, and they had earned it because they took a huge risk. If a publisher wanted to get in bed with the NES, they had to fly to Japan, state its case for a development system, and if Nintendo deemed it worthy, there was only one deal on the table. Nintendo would sell the company a dev kit for what Gordon calls “a ridiculous price,” and after a game was finished the publisher had to send it to Nintendo, which would ultimately decide whether our not it would be manufactured.”
Gordon couldn’t believe what he was hearing.
“Wait, we spend all this time and we build a game but we don’t know if we can bring it to market?,” Gordon remembers asking.
Nintendo responded, ‘That’s right, and if we decide to bring it to market, we manufacture it and we’ll tell you how many we’ll build. You pay us half the cost, and then we manufacture it when we feel like it. When it’s done in Japan, you pay the second half of the cost, and we release it and you figure out how you want to ship it.”
Nintendo had the ability to block your game from coming to the market if they didn’t like your game. Especially if the game was similar to one of Nintendo’s first party games, negatively impacting Nintendo’s profits. EA had zero interest in a relationship with a company that punished their developers. A company called Sega would release a brand new 16-bit console called the Genesis (MegaDrive), and Electronic Arts saw an opportunity to bring their games to that platform.
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Madden for Sega Genesis.
EA wanted a different licensing deal from Sega than what Nintendo was offering, and EA realized Sega would need all of the third party support it could get if it wanted to compete with the SNES. After long negotiations, EA scored a very attractive licensing deal with Sega.
Game Informer writes, “EA would be allowed to manufacture its own Genesis cartridges, could make as many games as it wanted, and received a more favorable royalty rate. The next day at CES there was a wall of 16-bit Electronic Arts titles running on the Sega Genesis.”
Sega Genesis became the place to go for sports games. Genesis would receive the best versions of sports games like Madden and NHL, while SNES received much inferior versions.
“It turned out that was the best thing that ever happened to Sega, because Madden became a killer app,” Gordon says. “Nintendo never needed third party killer apps. Sega and the power of a slightly open platform vaulted the Genesis.”
By 1996, the Nintendo 64 was coming to the market in North America. Although Electronic Arts had planned to bring some games to the Nintendo 64, the console was not a big priority for them.
Shelly Eckenroth of Electronic Arts told PSXPower, “Nintendo hasn’t provided us with an economic business model for publishers. We have no plans for any other product (other than FIFA 64) until we can hammer out an economic model.”
In October 1996, Patricia Becker, a PR director for Electronic Arts, told N64.com that the company didn’t plan to produce many games for the system. She said Nintendo 64 development costs were too expensive for high production, concluding that slimmer profit margins were keeping third-party developers away from developing for Nintendo 64.
Bing Gordan, executive vice president of marketing at Electronic Arts, didn’t see any reason to continue investing in a cartridge format when the CD format paved the future.
“We’re pretty strongly in the camp that low manufacturing cost in media is important to the overall growth of interactive entertainment,” Gordon said. “I doubt we’ll ever ship as many products for the Nintendo 64 in any year as we do on the PC or the Sony PlayStation.”
According to a 1997 article from Bloomberg Businessweek, “EA’s chief had long refused to create Nintendo games, saying the royalty fees and up-front costs were too high. But Lincoln went wooing, and in mid-March EA agreed to produce six N64 sports titles by Christmas, 1998. What changed? Nintendo was anxious enough to make financial concessions, and the N64 is gaining momentum.
“The economics now work,” says Probst. The Bloomberg article reads, “Lincoln has been trying to work similar magic elsewhere and says that by year end, the N64 will have 40 games.”
Unfortunately, Nintendo 64′s economics did not work in EA’s favor.
By December 19, 1999, EA and industry analysts blamed Nintendo 64 for EA’s weaker than normal sales. During that year, Electronics Arts’ would experience of their largest drops in stock ever, falling 27 15/16 to 81 1/2 in trading of 11 million shares on that day.
“Our relationship with Nintendo in the past was a distant one that didn’t work very well,” - EA’s senior VP for worldwide studios, Bruce McMillian (Source: money.cnn.com – 2003)
With the 32-64 bit eras coming to an end, the next generation would soon emerge. Electronic Arts decided against supporting the Sega Dreamcast after Sega decided they would not discontinue their 2K Sports lineup. On May 2001, EA’s financial officer said, “We strongly believe that Sony will be the leader, but we think that both the other platforms (GameCube, Xbox) are very good with good opportunities and we’ll support them.”
With Microsoft jumping in with their Xbox, the console war had become a three-way race. This meant that third parties had more options of where to bring their software, and it would put significant pressure on Nintendo to play nice with third parties.
“When you have single platform environments like Nintendo 8-bit, basically all you do is what Nintendo tells you to do, back then at least. When you have a multi platform world, that increases the leverage of the third party publishing companies, because you can take your goods from one place to the other.” said Frank Gibeau, executive vice president at Electronic Arts.
On January 30, 2003, Electronic Arts released a statement saying that they previously expected a sales growth of 20-25% for its 2003 GameCube line-up of software titles, but disappointing sales made them drop this figure to only 15-20% growth. PlayStation 2 and Xbox remained at their original forecasts of 25-30% and 20-25% respectively. The news caused Nintendo’s stock to hit a four-year low in Japan, closing at 9,480 yen (down 6.14%).
EA began reconsidering its upcoming plans for GameCube, and considered shipping fewer sports titles for the system in 2003.
EA’s senior VP for worldwide studios, Bruce McMillian would admit that EA and Nintendo’s relationship wasn’t always very good.
“Our relationship with Nintendo in the past was a distant one that didn’t work very well,” says McMillan.
Nintendo had to do something to save their relationship with Electronic Arts. After Sega Sports had ditched GameCube in 2003, the last thing Nintendo needed was EA to ditch them too. They sent Miyamoto over to EA to figure out a way to improve sales for the GameCube versions of their games.
Nintendo would allow EA to add bonus content in GameCube versions of EA’s multiplatform titles. For example, gamers were given the ability to link up accompanying Game boy Advance versions with GameCube versions of The Sims Bustin’ Out and The Urbz. For the GameCube version of Fight Night Round 2, the SNES classic Super Punchout!! would become an unlockable game.
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On January 27, 2004, Electronic Arts released their extended third-quarter financial results.
Instead of their GameCube sales going up by including Mario characters in their games, their total revenue for Gamecube went down.
PlayStation 2 – $732 million (49% of total revenue, up 59%,
PC – $220 million (15% of total revenue, flat growth),
Xbox – $205 million (15% of total revenue, up 75%),
GameCube – $104 million (7% of total revenue, down 7%)
After EA had faced two straight generations of underwhelming sales on Nintendo platforms, EA would finally find some success on the Wii. After Wii Sports became a massive phenomenon, EA used the opportunity to capitalize on their own sports franchises. It paid off for EA, and they would soon become one of the Wii’s biggest supporters. Electronic Arts decided to significantly increase their Wii support after a successful performance on the system.
EA chairman and CEO Larry Probst released an official statement: “We are pleased with the performance of our products on next-generation consoles. In the year ahead, we plan to build on our leadership position on both the Xbox 360 and the PlayStation 3, and to significantly increase our support for the Nintendo platforms.”
All of a sudden, the relationship between EA and Nintendo would take a more positive turn. The Wii, which launched with EA titles like Madden ’07 and Need for speed Carbon, would receive more upcoming EA titles. For the first half of 2007, Wii would receive SSX Blur, The Godfather: Blackhand Edition, Tiger Woods 07, and Medal of Honor Vanguard.
Larry Probst declared that EA already had 15 titles in development for Wii at this point.
By July 17, 2009, Electronic Arts was dominating the Wii charts. Ranking at third on the charts, EA Sports Active ended up selling 289,000 units in its second month on the shelves. Tiger Woods PGA Tour ’10 for Wii ended up outselling Nintendo’s first party software, ranking above Wii Fit and below EA Sports Active. Even more interesting, the only console where Tiger Woods ranked in the top 10 was the Wii. In the company’s conference call after their quarterly financial results, Electronic Arts later announced that it has 40 titles in the works for both Wii and DS. EA’s CEO John Riccitiello also revealed that its recent Wii title Boom Blox enjoyed success, shifting some 450,000 units in the last quarter.
John Riccitiello stated that Wii would get majority of EA’s console support because of its dominance in the market.
“We’re bringing core intellectual property to the Wii,” CEO John Riccitiello said. “Wii is the market leader — they’re getting half of our emphasis in terms of title count.”
Peter Moore says EA staff were ready to walk off because they didn’t want to keep working on casual Wii games instead of core titles. Much of the challenge came from creating sports titles that were as good as Wii Sports.
“But then this thing [the Wii] came along and presented us with some challenges,” he explained. “The dynamics changed with the launch of the Wii–play and fun was coming back in, the demographic was changing enormously, and the amount of time to play was being compressed.”
He mentions employees at EA becoming frustrated with Wii.
“[They] couldn’t take the change of pace,” says Moore. “It was hard. A lot of people at that time thought they would move on from our studios–they wanted to chase the core consumer.”
Regardless of EA’s success with the Wii, they noticed that many third parties were struggling with the console.
“… There’s no question that having the lead platform be a platform with two-thirds of the unit sales occurring to the first party owner is a really unusual thing. We haven’t seen that since prior to the PlayStation.” says Riccitiello.
After success with their sports and casual titles, Electronic Arts wanted to test the adult core market for the Wii with “Dead Space Extraction”.
Jens Uwe Intant, European VP at Electronic Arts, said “One of the explanations we have is that there’s a lot of double ownership. So people having a Wii and a 360 and/or PS3. They’re really playing different types of games on those two machines, and historically up to now we assume those people will have played the more mature content on the more high-tech machine. Dead Space: Extraction is going to be a very nice test of that hypothesis, because we’re really building a game where the Wii version is very different to the Dead Space game on 360 and PS3, and we’ll actually see whether we can reach more people with a) a great game and b) interesting content. If that’s not going to work, then obviously the whole proposal from our point of view at least of more mature games on the Wii just does not work.” – Dr Jens Uwe Intat, European VP at Electronic Arts
NPD results for that month showed that Dead Space Extraction had bombed with only 9,000 copies in its first week of sales.
The latest September NPD results show the title only sold just over 9,000 copies in its first week of sales.
According to a NeoGAF post from a Visceral Games employee: “It is a shame that no one bought this (Dead Space Extraction). As much as everyone made fun of Frank Gibeau’s ‘experiment’, it will actually influence the SKU plan with respect to the Wii”.
EA would begin cancelling M rated games like The Godfather II for the Wii, and develop them only for Xbox 360 and PlayStation 3. Godfather II Producer, Dave Woldman, explained the reasons behind cancelling the Wii version.
“We felt that in order to truly deliver on the vision of The Godfather II we really had to focus and take advantage of what the next gen hardware has to offer, including online connectivity. The next gen hardware is simply more robust and allows for a higher visual bar and immersive experience. A next gen hardware focus enables higher-resolution textures, longer draw distances, and better frame-rates. But we also harnessed the power of the Xbox 360 and Playstation 3 to make gameplay improvements as well. We were able to create an all new Artificial Intelligence system to make our characters act and react more intelligently.” said Woldman.
Sales for EA’s Wii games drastically declined, and EA was losing their patience with the Wii. All of a sudden, EA would find themselves in the same position as previous Nintendo platforms.
Bloomberg reported that EA’s John Ricitiello was displeased with the sales performance of Madden ’10 for the Wii, which had only sold 67,000 copies in August. In comparison, NPD reported that the Xbox 360 version sold over 928,000 in August. Even the PS2 version beat the Wii version by selling 160,000 copies. Madden 09′s Wii numbers weren’t much better than Madden ’10. Madden ’09 (Wii) only sold 116K copies.
Former CEO Riccitiello expressed his frustration at the lack of strong sales for EA’s Wii games.
“To be honest with you, I think the Wii platform has been a little weaker than we had certainly anticipated. And there is no lack of frustration to be doing that at precisely the time where we have the strongest third-party share. Frankly, I think they need more beats in the year than they get out of a first-party slate – to be able to have the Wii software platform perform as well as they would like. We are building the products that I think the most highly rated on the platform and at this point in time, generating the most revenue of any third-party platform.” said Riccitiello.
“I think Vita has a better chance [at success than 3DS] because it has a stronger title slate at launch.,” – EA Labels president Frank Gibeau
Riccitiello continued, “Nintendo needs to partner with third-parties at retail to help both achieve success on a format suffering slower sales than last year. I think driving revenues up on that platform from where we already are, which is up substantially from where we were a year ago, we are reaching out to Nintendo to find ways to partner to push third-party software harder. Wii is where we are missing it and so I really do think that the opportunity exists to find different ways to partner with first party in this case to sort of help establish in the minds of the consumer legitimacy of some of these other brands when they are going out multiplatform because very, very few multiplatform titles are succeeding on the Wii.”
Riccitiello pointed out that Wii’s install base was slightly misleading since a big portion of that install base was Japan, and many western franchises would not achieve the same success in Asia as in western markets.
“I would point out, by the way, the 50 million number of course includes Asia or Japan and I don’t think any of the Western companies are likely to participate much at all on the Wii platform in Japan, so the addressable market we see is just a little bit below 40 million but that is still an important opportunity.”
In 2010, the handheld wars were beginning to heat up, and Nintendo was preparing to reveal their Nintendo 3DS.
EA COO John Schappert says “The 3DS is just incredibly cool. The 3DS is magical. You put that in your hand, you look down, and all of a sudden it’s in 3D without glasses. That’s an amazing experience. I’m a huge fan,” he said. “I think that device is going to sell like hot cakes. I think it’s going to do incredibly well, and in typical Nintendo fashion they have re-energized the industry, yet again. I give them nothing but credit and we are excited to be supporting that platform with Madden, FIFA, and The Sims that we announced.”
Once the device finally released, launch sales for 3DS were underperforming, and EA became less optimistic about 3DS’s potential success.
EA Label’s president Frank Gibeau said Vita’s software line-up had a higher chance of success than what 3DS offered.
“I think Vita has a better chance because it has a stronger title slate at launch.” says EA Labels president Frank Gibeau. ”PSP’s had a great run in Europe as a device, it seems to have reached a much larger audience here than it did in North America. So I think they’ve got a good shot. We’re going to publish a few games on it and see how it develops.”
Comparison of Cellular with DS.
As third party Wii software sales declined, John Riccitiello sent a warning to Nintendo.
On March 2011, Riccitiello said, “When I look at a development dollar in terms of which teams do I invest in, and what platforms to go at, they [Nintendo] are not very competitive when you look at HD consoles, or free-to-play bets, or things like tablets and handsets”.
“It’s a frustration for all third-party publishers, when a platform holder does less to promote third-party content.” said Riccitiello. “[Nintendo has] never really been a heavy third-party supporting system. I think they’ve now got competition, in the form of gesture-based gaming from Sony and Microsoft. If they were to find ways to promote third-party content better, as opposed to first-party content, and would hit pricing, I think the platform would see new life.”
With PS Move and Kinect on the way, EA had their attention directed at those devices.
EA’s European senior VP Jens Uwe Intat seemed hopeful that Wii owners would eventually move on to HD consoles.
“We also always hoped those people would later buy a next gen gaming machine that does stuff the Wii doesn’t do as well as the others and we can certainly expect that the combination of reducing the entry barrier of the price and making the PS3 and 360 more accessible via Move or Kinect, we will certainly get people who now enjoy playing video games and want to play online or enjoy games in a much high resolution. We do expect quite a few people to do this.”
Frank Gibeau spoke on Nintendo’s successor to the Wii, saying that EA wants Nintendo to get serious in creating a third party development community where publishers can prosper.
“[Wii] is a tough market for a third party. When I look at a development dollar in terms of which teams do I invest in, and what platforms to go at, they’re not very competitive when you look at HD consoles, or free-to-play bets, or things like tablets and handsets. It’s something they need to think seriously about with their next gen – how serious is a third party development community for them on their next platform and their next bet?” said Gibeau.
“[Online is] something that we’re working very closely with Nintendo on…We have a series of people who are under very strict NDAs as you can imagine, operating with them, building that system out.” - EA Sports’ vice president Andrew Wilson
Afterwards, Gibeau sent a tough warning shot to Nintendo. He says publishers like EA can create quality games and be profitable on other platforms without Nintendo’s help, and it would be in Nintendo’s best interest to develop an ecosystem to help third parties if they want to continue getting support.
“They can get to a certain level of success with their own IPs and their own internal development, but if they don’t have that developer ecosystem where it’s frankly easy to make money on the platform, they’re going to see there are too many opportunities in the world right now to go build games on other platforms in a very successful high quality, highly profitable way. They [Nintendo] need to take note of that,” said Gibeau.
By June 2011, Nintendo would reveal their next gen console, the Wii U. EA’s CEO John-Riccitiello would be introduced by Satoru Iwata and Reggie Fils-Aime at the E3 2011 conference. Riccitiello would stress Electronic Arts’ support for the platform, and claimed that Nintendo and EA had entered into an “unprecedented partnership”.
Gamers would soon find out that Electronic Arts had EA Sports engineers helping to build Wii U’s online infrastructure.
EA Sports’ vice president Andrew Wilson spoke with Eurogamer:
“[Online is] something that we’re working very closely with Nintendo on… We are highlighting to them what we believe are the most important elements to that infrastructure to deliver a connected experience that we think is the future of gaming… They have demonstrated an openness and willingness to work with us and work with developers that I think will only land us in a positive place… We’re working through the development with them now… We have a series of people who are under very strict NDAs as you can imagine, operating with them, building that system out.”
A few months before, on April 2011, Satoru Iwata said, “Wii’s future could have been different if Nintendo had made better partnerships with outside companies in the field of network services at the early stages of the penetration of Wii.”
On November 2011, Rumors surfaced that EA was trying to convince Nintendo to use “Origin” for their service.
After E3 2012, the Wii U received a very mediocre response from the mainstream media.
EA’s Peter Moore commented on the Wii U’s lackluster E3 conference saying “you’re probably right that Wii U got a lackluster response.” Moore didn’t seem very impressed with the E3 conference either.
After Microsoft revealed SmartGlass, Riccitiello expressed his enthusiasm for the product, and claimed that Nintendo would be placed under pressure.
“It does definitely put positioning pressure on Nintendo because you don’t have to buy a new system. Most likely, you already have a smartphone and you already have a 360, so it does a really good job of positioning for the platform and we’re very excited about it.” said Riccitiello
Suddenly, it seemed like that “unprecedented partnership” between EA and Nintendo had evaporated.
In February 2013, John Riccitiello, CEO of EA, held a call with investors saying that “Gen 4″ is what EA was investing in, and Wii U wasn’t part of “Gen 4″.
“I wouldn’t say that we see a correlation between the results that Nintendo has shown with their console debut of the Wii U and what we see coming. We see a pretty sharp distinction, and unfortunately I’m unable to go any further than that. Ours is an industry where a lot of devices come in and represent themselves as the next generation, or the next generation after that. In many ways we would argue that the what we’re describing as “gen 4″ is yet to come. It’s that that we’re excited about, and that’s what we’re investing in. And frankly, we’ve been quite consistent with that for some time, while recognizing the frustration our inability to articulate precisely why causes for you.” says Riccitiello.
Kotaku’s Owen Good wrote an article noticing the lack of people playing Madden (Wii U) online on a Sunday. He questioned whether Wii U was much of a sports console.
Good writes, “Here was the picture on the Xbox 360 at midafternoon: 31,080 Madden players connected to the EA Sports servers; 2,978 were in a game. On the Wii U: 42 were online. One was in a game. It may be an off-peak time, and it may be a version releasing three months after the game’s main launch. The numbers still aren’t good. That’s forty-two people in North America playing Madden NFL 13 on a Sunday on the Wii U.”
EA announced Madden NFL 25 would launch for Xbox 360 and PlayStation 3, but for some odd reason, no Wii U version would be announced. Some gamers brought up the theory that EA would wait to announce the Wii U version once the PS4/Next Xbox versions were announced.
I glanced over North America’s top 20 eShop rankings for digital downloads for the Wii U. As of March 24th, 2013: Mass Effect 3, Fifa, and Madden were nowhere to be seen. The only EA game that ranked in the top 20 eShop games was Need for Speed at #11, which launched a week ago. Of course, these rankings can change weekly.
One after another, games were being announced without Wii U ports. EA announced that the next Tiger Woods would only come to 360/PS3, and would be skipping the Wii U this year. To add more insult to injury, Crytek stirred up the internet after revealing that Crytek 3 was running on Wii U but Electronic Arts killed the project.
“We did have Crysis 3 running on the Wii U. We were very close to launching it. But there was a lack of business support between Nintendo and EA on that. Since we as a company couldn’t launch on the Wii U ourselves — we don’t have a publishing license — Crysis 3 on Wii U had to die.” said Yerli.
Crytek’s comments provided further evidence that Nintendo and EA’s relationship was crumbling.
In a shocking announcement, John Riccitiello would step down from his position as EA’s CEO. It raises many questions about how this will impact Nintendo’s relationship with Electronic Arts in the long run. From my perspective, I see the relationship between EA and Nintendo getting worse with Riccitiello stepping down. EA has shown that they’re more interested in pursuing mobile and “Gen 4″ projects, and I’m positive it will lead to a decrease in the number of upcoming Wii U projects in development. In some ways, I would say Riccitiello was one of the few “allies” that Nintendo had at Electronic Arts, and I wouldn’t be surprised if their relationship got worse from now on.