“Before it was a battle for a few operating margin points here and there… but when you look at the Asian companies like Shanda… you (are) talking about a 40 percent operating margin business, which is just in a different league from the U.S. companies.” – Mr. Schachter

Ok – so who’s this Mr. Schachter, what the heck is a Shanda, and how do I too get a 40% operating margin business you ask? Well, Mr. Schachter is an Internet and Game company analyst. Shanda is a game company. And you too can learn how to get a 40% operating margin business if you send me $29.99 for my new pamphlet called “how I built a 40% operating margin business selling $29.99 pamphlets.” Alternatively, you can think about a few of the lessons embedded in this excellent NY Times article about the evolution of Electronic Arts.

It’s a pretty simple story with words like “wikinomics” and “the long tail” written all over it. The business of EA has almost always been dependent on hard-core gamers willing to pony up $60-a-pop for the latest games – they sold a single product where demand has become famously hard to predict. The approach they’re layering on top of this is freely available games, generating revenue through in-game advertising and micro transactions (i.e. buying stuff for your character and whatever else they dream up).

The “Western” debut for this offering is the next round of the Battlefield Heroes series, building on an experiment that began in South Korea a couple of years ago – an experiment that’s now got 5-million users and $1 million in monthly in-game sales, plus unknown marketing revenue. Not a bad start…

Now such stories might seem old-hat to many wikinomics readers, who might see (say) Second Life as soooooo 2004. But the reality is they’re not old-hat yet… they’re still, um, new shoe, it least in terms of real application. It seems to me that we’re at a bit of a turning point where video game makers, musicians, and others who one might have expected to alter and expand their business models years ago are starting to do so en masse. In turn, the question is how many other companies, in how many other industries, might be able to add the functional equivilant of “$10 pink shoes for my Battlefield Heroes” to their established business models?