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Electronic Arts' Radical Strategy for Long-Term Growth

Electronic Arts Inc. (EA) signage is displayed outside of the company's office in Vancouver, British Columbia, Canada.
Brent Lewin | Bloomberg | Getty Images
Electronic Arts Inc. (EA) signage is displayed outside of the company's office in Vancouver, British Columbia, Canada.

Electronic Arts, which reported slightly better-than-expected earnings Tuesday, is radically shifting its strategy for “Star Wars: The Old Republic” as a part of its big bet on free and digital gaming. The company announced it will now give it away for nothing.

“The idea of giving away play for free is the trend seeing that we’re in the market place,” Electronic Arts COO Peter Moore told CNBC Wednesday. “This premium trend — bringing more and more people in to play games, knocking down the barrier in price — is an important part of our growth strategy.”

The company is hoping this strategy will convert some of those players to a premium, subscription model, and/or get them to pay for up-grades with in-game currency. As one of Electronic Arts' biggest investments, “Star Wars: The Old Republic” continued to bleed subscribers, losing another 300,000 to end the quarter with fewer than one million, and leaving Wall Street disappointed.

“If we can get two to three million people playing the game, you then start to transition from getting your money upfront, if you will, by selling the game to an ARPU — average revenue per user model,” Moore said. “That is the long-term growth plan and we are very optimistic that will work.”

Electronic Arts didn’t launch a single packaged goods game in the most recent quarter— two thirds of the game company’s revenue was from digital offerings. The company reported slightly better than expected earnings — a loss of 41 cents per share — and announced a $500 million share repurchase.

But the real headline was the company’s ongoing investment in all sorts of digital games—mobile, social, online, and digital downloads and downloadable content.

However, Zynga’s disappointing results call into question the future of social gaming, raising major concerns about slowing growth. Moore noted that EA still sees social games as a growing profitable sector, even if growth is slowing. He also made a point of distinguishing EA’s strategy from Zynga’s.

“We are investing in brands in social and I think that’s the difference. … We are a lot more diversified and we have the portfolio brand that consumers recognize around the world,” he concluded.

-By CNBC's Julia Boorstin
@JBoorstin

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.