Electronic Arts’ chief financial officer, Blake Jorgensen, told the audience at the recent Goldman Sachs Technology and Internet Conference in San Francisco that his company is not expecting Microsoft and Sony’s next generation consoles to be backwards compatible with Xbox 360 and PS3 software. If that turns out to be the case, Jorgensen noted that the result will likely be a slow adoption of the unannounced hardware.
“An important thing to remember is that next-gen consoles will most likely not be backwards compatible, and if you [play] multiplayer on a game, you’ll most likely not be able to play with someone on a different generation. And so if you’re a FIFA player and, and the soccer season’s starting in August, and all your friends are playing FIFA, you’re going to want to be on the same box that they’re on.”
“So if they all go out and buy a gen-four box if it comes out at Christmas, then you’ll most likely do it. If they all hold on and continue to play on third-generation, you’ll probably not see that box purchase until after the soccer season’s over.”
Considering Microsoft’s half-hearted attempt at backwards compatibility with the Xbox 360 and Sony’s decision to completely drop the feature in early revisions to the PS3 hardware, it would be rather surprising to see either company go the Nintendo Wii U route as it relates to last-gen software.
It also makes sense from a business perspective, because if the next generation Xbox and PlayStation are backward compatible it would be extremely difficult for their respective marketing teams to sell us Super HD Collections of all the current HD games that we own.
Jorgensen also took some time to comment on EA’s position towards the used game market, and recent rumors claiming the next Xbox would block users ability to play used games by requiring an always-on Internet connection and activation codes.
“It’s one of these classic double-edged swords. In one way the used game business has been critical for the health of the retail channel, and having a healthy retail channel is an important thing for us. The business will probably never be 100 percent digital. Bandwidths are a constraint, and will continue to be a constraint for many years to come, which hold back the ability to do full digital downloads of some games.”
“…Would we like to sell everything at full price and not have a used game market? Sure. But I think the used game market’s a little like any other kind of market where it creates liquidity. The fact is, that liquidity benefits us in some fashion. So if someone goes in and trades in a game, there’s a good chance they’re going to buy another one of our games. And so if there’s a liquid market, I think that that’s not a bad thing at all.”
“I can’t really comment on where the next generation boxes are going to be relative to used games. I will say that the trend in the business is to have that always-on connectivity and connect with a customer, and to the extent that the software identifies a certain customer is going to create some issues going down the road in the used game market. But I do believe that the consumer likes it, and it’s been good for the retail channel.”
While Jorgensen remained silent on the topic of used game support and the next generation consoles from Microsoft and Sony, he left little doubt that the systems would require always-on Internet connections. Regardless of how either company plans to use those always-on connections, they will create major problems with a significant number of their prospective customers who either don’t have access to a high speed Internet connection or don’t want to hook their video game systems up to it.
It will be interesting to see exactly what Microsoft and Sony have planned for their next generation consoles. If they turn out to be anything like what we have been hearing, I’m guessing that we are in for a rather long transition period.