Electronic Arts: Making Up for Missteps

You take Superman. We're talking about an open-world game with 3-D flying. I mean, no one's done that. No one expects us to be that ambitious with a movie title, but it's really important for the technology and game engines that we're building for the next-generation machines. Medal Of Honor, where you can jump out of a plane and land anywhere [to] start your game, again, no one's tried that.

It's incredibly important for us to make the right investments and get the technology and the game-play right for the growth in this coming generation of consoles.

Open-world gaming seems to be one of the buzz phrases of this E3. Sure, Grand Theft Auto has been successful with its open-world framework, and, theoretically, offering gamers more choice in how they play games is a good idea. But is there any sense that gamers really want that?

Paul Lee

It doesn't have to be a fully open-world game like Grand Theft Auto, but I think open-world elements of a game, where you're not moving and reloading, going from platform to platform, I think that is really compelling.

And I think consumers are going to expect and demand that in this generation of machines, more so than they did in the past generation.

EA seems to be placing more and more emphasis on developing its own content, as opposed to licensing it from other content owners. Do you have any targets on what percentage of your business you want owned IP [intellectual property] to be?

Our goal is to get over 50%.

In terms of developing new IP, you signed the deal with Steven Spielberg. How soon before we see some of the fruits of that?

I don't think we're prepared to announce that yet.

Are we years out? Are we months out?

It won't be months. It will either be in our fiscal '08 or '09 is my guess. You know, either late of one or early of the other.

The investment community seems to love owned IP because they think it offers higher profit margins. But THQ CEO Brian Farrell said to me that the margins on owned-IP games end up being about the same as those of licensed games, because the licensing costs come out about the same as the marketing costs for new IP. What's your take on that?

Again, this is one of those things where you can be right on both sides. On the one hand, you save margins [with owned IP], because you're probably saving 10 to 20 percentage points. On the other hand, if you do your own IP, there's not that built-in awareness of a particular property. You have to spend a bit more on marketing. But the third part of it is -- that doesn't get talked about a lot -- your ability to create games.