EA sport it's in the gambling game

#74 Angelinvesting.it - From idea to Series A - Weekly Newsletter

Dear reader,

Following is a brief history of the popular soccer video game FIFA by EA Sports. Over three decades, it has reinvented itself into a money-printing machine, a legalized casino for children aged 3 and up. It’s a crazy story that people don’t know... I hope it will make you think a bit. I can't get it out of my head.

From 1993 to 2000: Money, Money, Money

When EA Sports launched its first soccer game on December 15, 1993, it couldn't have imagined the success that game would have.

The founder, being a good American, had other passions, primarily American football. In fact, the first title launched by EA, also in 1993, was Madden NFL, named after the popular player John Madden, who helped in the creation of the video game.

However, FIFA was an overnight commercial success, with 400k copies sold in the first two weeks after its launch, and it was impossible not to give it priority.

Fast forward 30 years and 40 FIFA-branded games later, Electronic Arts Incorporated is a company with $7.4 billion in revenue, and soccer-related games still contribute the largest part of that revenue.

Sports games not only immediately attracted the interest of players around the world, but also proved to be golden geese. The beauty of games like FIFA is that real-world teams change their rosters from year to year. Gamers want to play with updated teams, so every year they are willing to shell out around $60 for the new game with updated players.

For EA, this means new revenue with very few extra costs, not having to reinvent the game from scratch each time. EA has expertly milked this cash cow.

The first decade of the 2000s - competition heats up

There was, however, a period of difficulty in this 30-year story. In the early 2000s, a new game entered the market called PES (Pro Evolution Soccer). The game by KONAMI was more fun to play, super innovative, and the public started to prefer it over FIFA.

It took 5 years, but EA Sports responded well, actually questioning itself and completely reinventing soccer simulation with FIFA 06. There was a lot of controversy, it seems FIFA blatantly stole code from PES, but even if it did, it got away with it.

The competition remained hot in the following years, but EA prevailed. PES made several wrong decisions. With FIFA 09, EA tilted the balance in its favor forever with a single decision—a decision worth billions: introducing FUT (FIFA Ultimate Team).

FIFA 09 When EA becomes a casino disguised as a soccer simulation and billions flow in!

FIFA Ultimate Team is a game mode that allows players to build and manage their own virtual team to compete in tournaments alone against the computer or online against other players.

As in reality, to increase your chances of success, you need to buy stronger players. These players are purchasable through virtual currency. You earn this currency by spending time - the more you play, the more missions you complete, the more virtual currency you get.

Since time is money, if you want a nice shortcut, you can spend real money on the digital equivalent of the sticker packs you used to buy at newsstands in the last century. If the player you want isn’t in that pack, you can always buy another pack.

Here comes the bombshell you didn’t see coming: of the $7.4 billion revenue made by EA in 2023, only 1/4 comes from game sales, and a whopping 3/4 comes from in-app purchases.

$5.4 billion is spent by players, largely minors, in a single year to buy pixels that cost EA little more than the air you breathe for free. It’s the microtransaction, in-app purchase economy, baby!

A few afterthoughts

I find what EA Sports is doing morally reprehensible. Unfortunately, the entire video game industry is made up of wolves in sheep’s clothing. There is a regulatory gap on these in-app purchases as big as a house.

The best way to think of these games is as real economies with many stakeholders at every level. FIFA Ultimate Team has become what it has become, driven by YouTubers and Twitch streamers who have made playing this game a profession. Some of them have made millions of dollars.

I played PES and FIFA in the past, and to be totally honest, I regret wasting so much of my youth on them. This story feels emotionally very close to me also because I have two young daughters, and I worry about their exposure to these games.

On YouTube, I’ve seen testimonies of families ruined by gaming. The line between gaming and gambling has never seemed so thin to me.

Have a great weekend,

Simone

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