EA
#On the first piece, I think we will continue to see subscriptions grow, particularly with EA Access and the strength of that product, and obviously based on the strength of that, we rolled out Origin Access, which is our Origin-based PC-based gaming, with a similar structure as EA Access.
We'll continue to push that.
We think subscriptions are an important part of the future of this business, and you'll see that continue to grow.
In the past, remember we've had some accounting differences between products, where something that looks like DLC might have been booked as a subscription, because it was a series of DLCs over time, and that's what made the subscription number go up and down over time.
You'll continue to probably see some of that as we have different accounting methods, but I think the combination of extra content and subscriptions should continue to be a larger and larger portion of our business over time.
I think that's an important piece of the mix.
I think also, as you look at the business, you'll see greater mobile concentration of growth and the combination of mobile plus extra content subscriptions is now starting to create a very nice foundation for the business.
With that, plus full game downloads, we mentioned we're at $2.5 billion.
That's a wonderful foundation to make the revenue much smoother over time.
On the revenue growth, let me be clear.
It's not our aspiration to have single digit revenue growth.
It's our focus to try to maintain discipline on the operating model in the Company.
We don't want to over-invest, and not deliver the revenue.
That was the problem we had historically.
So we talk about single digit revenue growth, simply because that's how we think about our investment, but we're trying to drive higher revenue growth, if possible.
And we'll do that on a case by case basis, and decide if revenue ---+ if we can push the revenue harder or not.
And sometimes products get moved based on when those products are ready, or timing in the marketplace.
But our goal is to try to drive both revenue, top line growth, and drive earnings growth, and if we can get both of those in double digits, that would be fantastic.
We've been lucky enough to drive double-digit bottom line growth, and we'll continue to see that over the next few years, we believe.
It's probably in that zone, could be plus or minus $25 million or $30 million.
I remind people, there's a couple components of that.
One is our marketing and sales.
We've tried to target that number between 12% and 13% of revenue.
So obviously in a bigger revenue year like this year, we're going to spend more on marketing and sales to support things like Battlefield and Titanfall.
So that's going to see a flux up and down, based on the revenue component.
Our R&D expenses, we've tried to target around 21% to 22% of revenue, and we're tracking around that level now.
And we feel like there's a huge opportunity for us to continue to invest in new areas of the business, like the action genre, where we haven't completed historically.
It's a very ripe opportunity for us, and we've been able to bring great talent in to try to build out that part of the business.
Our new mobile areas, with new studios coming on, has also been important for us.
And we'll continue to invest there.
And then last but not least, continuing to build out the platform in which we operate all our games on and we're trying to leverage through that network will continue to be a key part of our investment.
You'll probably see that rough level, as a percentage of sales, be the focus going forward.
Which is a combination of the R&D level around 21% to 22%, marketing in the 12% to 13% and G&A in the 7% to 8% range.
Yes, it's again, a great question.
Advertising is certainly an important part of our business, both now and going forward.
We have been ---+ we have had ads in both our console games and our mobile games for some years, and that business has continued to grow.
We often walk the fine line between maintaining the integrity of the entertainment experience, with the provision of advertising inside those experiences.
Right now, we have ad technology that we are implementing in some of our key mobile titles that is very targeted in nature, and we believe is additive to the overall experience, in the long term, and players have been responding positively to that.
So there is some advertising in our FY17 number.
I would expect that as our network continues to grow beyond the hundreds of millions that we have today, that it will become a more meaningful part of our business in the future.
One thing to remember there, particularly for us, is that there's both the ability to sell advertising, but maybe equally or more important, is the ability to cross-promote to players, to keep them in your network.
And as we have a broader and broader portfolio of games, particularly in mobile, that cross-promotion advertising is very valuable to us.
Holding onto a player in your network is very powerful, and so you'll see take type of advertising, which may be less obvious to the average user than a traditional ad that you might see in a game.
Let me take the first one and then I'll have <UNK> talk a little about Battlefield.
It's a difficult prediction, right.
We know that PCs took about eight years to go from 0% to 75% in full game downloads.
There's a lot of differences between the PC business and the console business.
We do know that the consumer is very interested in convenience, and we want to have product wherever the consumer wants to shop, be it a retail store, or a console.
We obviously have great partners in retail, and we want to continue to have great partners over time, and so we'll support them with great in-store merchandise and training and support, and at the same time, try to help educate our console partners as well, on how to best market the products digitally.
Our best guess today is that growth continues at about the pace that it has over the last couple of years, since Gen 4 consoles were rolled out.
So could we see another 5% pop, meaning going from, say, the high 20s to the mid-30s, we do think that's possible.
I think the big issues remain bandwidth, they remain cashless transactions.
Many of our customers may not have a credit card, and they need a cashless transaction method to be able to pay digitally, as well as obviously the residual value that some game retailers provide.
All of those things are changing over time, and we see that will continue to help support the growth of full game downloads.
But we want to allow the consumer to decide.
We'll give them opportunities to buy certain things digitally, that they may not be able to buy physically, special digital-only offers.
But at the end of the day, we really want to make sure we're allowing the consumer to buy the product wherever the consumer wishes to do that, and we want to make sure we're there.
As relates to Battlefield 1 and extra monetization opportunity, taking a step back, any time we think about extra monetization inside an experience, we really think about it on two vectors: One, are we able to provide value to the gamer, in terms of extending and enhancing their experience.
And two, are we able to do that in a world where we give them choice.
We never want to be in a place where there's a belief that we are providing a pay to win mechanic inside of one of our games.
I think what you've seen from us over the last couple of years is our ability to balance this and deliver tremendous value through choice to our player, which is why our extra content line of business has continued to grow healthily.
As we look at FY17, we are forecasting, again, continued growth in that category.
Given that in Battlefield 1, you will see both macro monetization opportunities from us like maps and large scale content, as well as micro monetization opportunities, smaller increments of gameplay, and then over time, what you will see from us is elements of gameplay that allow gamers to engage and drive, and extend and enhance their experience, much the way people do with FIFA Ultimate Team or Madden Ultimate Team today.
We feel very confident in our ability to deliver that in a way that is deemed valuable by our player, and drives increased engagement over time with them.
I think, again, we have been undergoing a fairly fundamental transformation of our business over the last few years.
We feel like we're in a very, very strong place.
We feel like we have a strong and predictable revenue source, and that the Company's operating very well right now, and the management team are doing great things, in a world where our industry continues to grow.
And we want to take the opportunity to share our vision for the future, how we see the industry growing, where we think the vectors for growth exist inside that industry, and how we believe Electronic Arts is uniquely well-positioned to benefit from those vectors of growth in the years ahead.
I think part of that, the goal is to make sure we're giving both the sell-side and the buy-side exposure to the broader management team, and the chance to see the depth of what we've developed here, as we feel very confident of it, and we're excited to make sure we showcase that next week.
I can't tell you a lot about what Microsoft or Sony or other console makers' plans are.
I think we've all seen some of the discounting that's been going on in the industry, both through the holidays and post holidays.
And there's continued aggressive bundling across the industry, and I think all of that acts to continue to drive people into consoles.
I think the other thing that's important to remember is there are very few Gen 3 titles being still made.
Most of the new titles that we're talking about, as well as the industry's talking about are Gen 4 only, and that is ---+ will clearly start to push people to ultimately buy a new console, if they've resisted, because they've had a choice to play a game on either Gen 3 or Gen 4.
In terms of any mid-cycle upgrades, once again I can't predict, but what I can tell you is that what we've heard, I think, publicly from the console makers, is they're realizing that the compatibility issue across consoles is an important consumer issue.
As Microsoft has shown, they've tried to do with some backward compatibility on older titles and new titles.
I think that's going to be an important part of what a mid-cycle might look like, if there is one, which removes a lot of the risk associated with what we've seen historically with console cycles.
We don't spend a lot of time worrying about it because we feel like our ability to develop for whatever new technology comes, the risk of that's been minimized, because we've moved towards one single engine, Frostbite, and we're able to port that to whatever platform, or point that to whatever platform is evolving or is upgraded.
In addition, our business model is so much more diverse now than it has been historically, that the notion of a console cycle becomes somewhat irrelevant in our ability to generate strong earnings and cash flow.
So we'll all be interested to see where Microsoft and Sony come out, if they do something at E3, or sometime in the year to come.
But we're excited about the continued growth in the business and not afraid of a cycle change, if that was to occur.
As it relates to mobile, again, when you have the benefit of the depth and breadth of our portfolio of great brands and IP, in a world where discovery is becoming challenged, and the mobile market is increasingly fraught with competition, utilization of those brands is certainly a great strength for us.
And as you heard us in our prepared comments, we had the most installs of any publisher in calendar year 2015, and a lot of that is driven around the recognition of our brand and our IP, and the quality of experiences that come as part of those brands.
As we look forward, certainly you will see more great experience from us that are based around the depth and breadth of our IP portfolio.
But at the same time, like in our console business and our PC business, we also look at opportunities to develop new IP in this space.
And so you would expect from us in the future, a balanced approach to the marketplace.
But certainly, we're not turning our back on our existing portfolio.
In terms of M&A, I think over the last three years, we've gone through quite a transformation as a Company.
And three years ago, we could not have talked about M&A without having most of you throw something at us.
And we feel like we've now at least earned the right to talk about it.
The reality is, there's not a lot of things out there to buy.
This is an industry that's fairly consolidated already.
We look at everything that is ---+ that's being considered to be sold out there, or shopped.
Most of them, either we're not interested in, or are at a price that doesn't make sense to us, to create value for shareholders.
But we'll continue to do that, and we'll continue to look for ways to bring in new talent and new properties, over time, if those are an opportunity.
But we're certainly listening probably more than we did three years ago, and we're well aware of the opportunities out there, and we'll continue to look at them.
With that, I think we're wrapped up.
So I want to thank everyone and we'll see people here next week for analyst day and if not, we hope to see you at EA PLAY in <UNK>ne.
Thanks for your time.
Thank you.
