Will ‘The Sims 4’ Tip Over EA’s Cash Cow Franchise?

Electronic Arts (EA 0.46%) recently revealed a demo for The Sims 4, the latest chapter of the 14-year-old life simulation franchise, at E3. The eagerly anticipated title will be released for Microsoft (MSFT 1.82%) Windows on Sept. 2.

The Sims 4. Source: EA.

EA's demo revealed a greater degree of customization for characters, deeper personality traits, and a wider variety of interactions between characters than its predecessors. But on the other hand, The Sims 4 didn't look all that different from The Sims 3, which was released in 2009. The Sims 3 wasn't even a big step up from The Sims 2, which arrived nearly a decade ago.

In fact, the biggest evolution of the franchise occurred between the original game and its 2004 sequel, which made the transition from an isometric view to full 3D.

Yet despite the arguably incremental improvements between its main installments, The Sims remains one of the most popular video game franchises in the world, with global sales totaling over 175 million. Let's take a closer look at why The Sims has remained so popular over the years, and if EA can keep itself from tipping over this cash cow.

How The Sims redefined PC gaming
Back in 2000, Valve's shooter Half-Life, Activision Blizzard's (ATVI) dungeon crawler Diablo II, and real-time strategy hit Starcraft defined PC gaming.

That's why The Sims was such a surprise hit when it arrived that year. It was an oddball life simulator, in which players customized avatars ("Sims") to live daily lives in fully customizable houses. Instead of killing things, players had to tend to their Sims' mundane needs, such as going to the bathroom, taking a shower, eating, and sleeping. Sims also needed to get jobs, exercise, and socialize to stay happy.

Unpredictable things could happen -- a Sim could abruptly die in a fire while cooking breakfast or be abducted by an alien while stargazing. It was an endless, kooky, virtual dollhouse game that played out differently every time.

The Sims (2000). Source: Maxis.

More importantly, it was a game that appealed to both genders. The Sims consistently ranks as one of the most popular games among women, who now account for nearly half of all gamers, according to the Entertainment Software Association.

The biz of The Sims
The business of The Sims consists of launching a base game followed by a parade of expansion and "stuff" packs. The base game gives gamers the foundation of the game -- the characters, the houses, the items, and the jobs. Expansion packs add new areas to visit, new characters, new jobs, and new abilities. "Stuff" packs add new in-game items for character and home customization.

As seen in the following chart, however, unlocking the "full" Sims experience of each title was actually a very costly affair:

Source: Sims.wikia.com.

For The Sims 3, expansion packs cost $20 to $30, and stuff packs cost around $20. Therefore, the grand total of the whole Sims 3 experience (excluding bundles) could easily top $500.

The Sims 3. Source: EA.

Recent surveys indicate that gamers expect between 12 to 16 new expansion packs for The Sims 4, and likely even more stuff packs -- which could make The Sims 4 one of the priciest single player games in history.

What's troubling about EA's strategy is that the it intentionally leaves content out of the base game to be added later. For example, The Sims 2 received a University expansion pack that allowed children to go to college. Instead of including that new feature in the base version of The Sims 3, EA released the feature again as an expansion pack. For The Sims 4, a handful of expansion packs have already been confirmed, once again including University.

It's the exact same story for other features like vacations, pets, and magic powers, which were all originally added as expansion packs for the first game.

In other words, EA sells a new base game as the foundation for its real money maker -- expansions and stuff packs -- for fans to rebuild their full Sims experience repeatedly for a hefty price.

How it could all go wrong
To address this negative perception, EA is rumored to be considering an annual subscription fee of $100 for access to all expansion packs.

But considering that the average Sims title lasts for four to five years between installments, it would be nearly identical to the $500 price tag for The Sims 3. In fact, EA would profit more from a $100 subscription, since only hardcore Sims fans purchased every single expansion pack in the past.

Although EA has not formally announced subscription plans yet, it would be terrible move to turn a single player game into a subscription-based one. Giving gamers the choice of either playing a base game online or paying a subscription fee to "enhance" the experience with downloadable content simply feels like a way to cripple the customer's ability to pick the packs that they like.

There's also evidence that the whopping cost of The Sims has caused the game to be pirated in record numbers. According to Torrentfreak, The Sims 2 was the second most pirated game of 2008. The Sims 3 is the sixth most pirated game of all time.

The Foolish takeaway
Will Wright, the legendary creator of The Sims, SimCity, and Spore, left EA in 2009. With The Sims, Wright left behind more than a blockbuster franchise for EA -- he carved out a new genre of "life simulators" that The Sims now comfortably monopolizes.

However, EA needs to find a way to make The Sims business model work beyond merely selling a new base game and piling on pricey expansions. It needs to convince gamers that The Sims 4 is really a major step up from The Sims 3 -- otherwise, the entire foundation will crumble and kill off its cash cow.