How introducing an electronic market helped make FIFA one of the most profitable video games franchises?

20

October

2017

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For those who don’t play a lot of video games, EA Sports’s FIFA is long-running football simulation video game franchise. It is developed and released annually by the video game company Electronic Arts (EA).  Each year it is amongst the top selling video games. In fact, last year’s edition (FIFA 17) of the game was ’the best-selling console title in the world in 2016’ according to EA themselves. Even if you think such a statement might be a bit of a grand standing on EA’s part since they don’t release official sales numbers (industry analysts put it around 11 million copies sold), no one can doubt the game’s popularity. What will most certainly surprise you is the fact that game sales is not FIFA’s most profitable revenue stream. In actuality, what EA makes the most profit on is one games playing modes – FIFA Ultimate Team (FUT).

FUT was first introduced in 2009 (FIFA 09) and it is fairly simple at it is basic concept. The users put together clubs with virtual trading cards of football players and attempt to maximize their team’s attributes by maintaining team chemistry based on the players’ nationality, formation and position. Afterwards, they play with the team they build online or versus the computer in various leagues and cups. However, what is most interesting the in-game electronic market that the developers implemented to facilitate card trading.

It works in the following way. Every user can place the virtual cards he wants to sell on the market (via a timed auction) by setting an initial minimal bidding price and “Buy Now” price which can be paid at any time and the user who pays it gets the card. If nobody triggers the “Buy Now” the user with the highest bid will get the card at the end of the auction. Moreover, the only other way to acquire a player card is to draw it from a “randomized” card pack, which will cost you a certain amount of the in-game curency FIFA coins. As you probably have already guessed the chances of getting enough valuable cards to make back your investment or make a profit is pretty low. You probably have also guessed that you can buy card packs with real-life money. One card pack costs around 1,50 euros.

But what is the most important part of FUT’s electronic market is that you cannot buy individual player card from the market place with real money, you can only use FIFA coins. Therefore, the only quick way to build your dream team is to spend a ton of money by buying hundreds of packs in the hopes that you draw enough valuable cards that you can trade in the marketplace for the cards you really want. Of course, you can always play games to earn FIFA coins, but you will probably need to win hundreds of games to afford one Messi.  You can spend hundreds of hours trading by identifying inefficiencies the market and slowly accumulating the amount needed for one Ronaldo. EA will certainly not help you in this quest as it will charge 5% brokerage tax for every transaction.

At this point you might say that this electronic market is totally fixed and biased, and question how many are going to be dumb enough to participate in it. The answer is millions (myself included) as FUT is the most popular game mode in FIFA. Of course, you don’t have to spend any real money to enjoy the mode. In fact, most people (luckily, myself included) have never spend a euro on buying packs and are happy to play with “cheaper players”, but those people who are willing to spend money more than make up for it. FIFA’s Ultimate Team is now estimated to contributes $800 million in net revenue annually, up more than 20% year-on-year. It is such a jougernaut that the Ultimate Team concept has been replicated in EA’s other sports franchises (Madden, NBA, NHL) and the company is looking for ways to incorporate in its other big franchises Battlefield and Star Wars Battlefront according to their CFO.

What do you think about introducing such types of electronic markets in video games? Is the future of video games and would you be interested in playing such a game mode?

References:

https://www.polygon.com/2014/3/19/5525710/fifa-ultimate-team-fifth-anniversary-ea-sports-interview

http://www.gamesindustry.biz/articles/2017-03-01-eas-ultimate-team-now-worth-USD800-million-annually

http://www.vgchartz.com/game/117272/fifa-17/Global/

https://venturebeat.com/2017/01/31/ea-fifa-17-was-the-best-selling-console-title-in-the-world-in-2016/

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Technology of the Week – Electronic Market & Travel Industry

6

October

2016

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Link video group 78: https://www.youtube.com/watch?v=tXX7Ly2r0NY

 

Thomas Cook was was a baptist preacher who lived in the 19th century. In 1841 he made a deal with the Midland Railway to organize a trip for his society. After that, Thomas cook organized a lot of other transportation trips. He became the first recorded travel agent. Without making use of any technology, Thomas Cook organized travels for 165,000 people a year.

Nowadays, we can’t imagine the travel industry without technology. Firms just like Booking and TripAdvisor are online travel agents. Because of these firms, people don’t have to go to a physical store anymore.

TripAdvisor.com

TripAdvisor was founded in 2000. It started as a portal for professional reviews and by now it’s the biggest travel website. They search the cheapest trip for you. You can also write about your experience about a hotel, flight, restaurant, etc. and view comments from others. In this way you will be sure about your choice.

Besides their website, TripAdvisor also have different applications. They have TripAdvisor for both mobile and tablet and three application where you can see different  information about flights, weather and restaurants.

 The biggest strength of TripAdvisor is that they has a strong international presence with 300 million (unique) monthly visitors. Point that are less good are the controversies regarding the validity of the reviews and the chance of theft of email addresses.

Booking.com

Booking is an online accommodation booking website started as a small start-up in 1996 at Amsterdam. Now it has become the world’s number one online booking website. Booking has a similar but different value proposition to TripAdvisor: Booking is mainly focused on the hotels.

In contrast to TripAdvisor, Booking have their own online booking system, where people can directly pay on booking.com. As the biggest online booking website, they’re also able to connect the hotels around the world which is supported by rich resources and information.

Prediction

Because people prefer the cheapest price, the biggest success factor in the future is to build consumer habits and expectations that they will find the cheapest hotels at the right price when using the review sites.

Using the hype cycle, we believe companies like TripAdvisor and Booking.com are ‘at the peak’ and that the services are at the end of ‘at the peak’. The service will reach the stages where negative press begins. Media hype is currently building and with the brand expansion, supplier proliferation is increasing.

The review sites aim to handle users regardless whether they visit through its apps, or desktop. According to TripAdvisor’s CEO Steve Kaufer, people prefer Apps. The future for the online travel review industry is one with a greater emphasis on the helpful button as well as the ability to achieve higher overall expertise levels.

The future of creating an online community should encourage the forum posts, destination experts, seeing where your friends have been, giving the chance to directly ask other users about their reviews, and more overall social interaction.

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Technology of the Week – Electronic Markets: Forex & Bitcoin

6

October

2016

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Video link: https://www.youtube.com/watch?v=WuxBKOROjKU&feature=youtu.be

 

Looking into history, the very first sight of electronic markets appeared in 1970 with the creation of the single-source electronic sales channels; linked customers to the products of the single vendor owning the market channel. Since then, the electronic have changed dramatically thanks to new technologies but their primary function as remained the one of traditional markets, namely matching buyers and sellers, enforcing contracts and providing a price mechanism. The advances in IT have greatly reduce both the time and the cost of these exchanges between both sides of the market. Named electronic communication effect, it affected almost all businesses in a profound and lasting manner.

 

In our ‘Technology of the Week’ video, we decided to focus on a special category of electronic markets with very defining characteristics: currency exchange markets. We looked into the most common and used one, Forex, as well as a relatively new but promising one, the crypto-currency exchange, focusing on bitcoins.

 

Forex, or the Foreign Exchange Market deals with currencies of other countries. All trading takes place on the over-the-counter market, a non-transparent and decentralized market open all day long on weekdays.  

 

Cryptocurrencies arose in 2009, as a reaction to the 2008 financial crisis. They are a generic name that covers all types of currencies that are not operated by a central bank. Encryption techniques are used to regulate the generation of units of these currencies and verify the transfer of funds using them. Satoshi Nakamoto invented the bitcoin, the most popular cryptocurrency at the moment, with the idea of cutting the middleman from the process while still offering a secure and effortless currency. A digital wallet is needed to store bitcoins while transactions are verified by digital signature and blockchain. The blockchain technology is basically an online ledger that records all transactions and is open to everyone. It is worth mentioning that despite all benefits offered by greater privacy, bitcoins have helped criminals and terrorists transact online.

 

The PEST analysis shows that the environments in which both markets operate are subjected to different influences. At the political level, the main difference is the regulation. Forex is governmentally regulated which provides a safety net to traders while Bitcoin markets are much less protected. The economic landscape has a direct influence on Forex, while bitcoins are much more volatile and rely on speculation theories. Regarding social factors, the anonymity of bitcoin traders is differentiating this market greatly from Forex, where all traders are personally identified. On the technological side, the technologies behind both markets are rather similar, the only difference being in the density of players and integration of back-and front-end.

 

Summarizing the findings, Forex has the benefits of being regulated, and hence safer, having a relatively low volatility while still allowing informed traders to make profits. When it comes to the bitcoin market, privacy, low costs, and high availability are its great advantages.

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