EA Reorganizes Into Four Labels

Reuters is reporting that the mega-publisher EA will soon be reorganized into four separate labels underneath the company's umbrella. The four groups will be known as EA Games, EA Sports, EA Casual Entertainment, and a label simply called 'The Sims'. All four organizations will be supported by two additional EA groups, which will handle publishing and 'development services'. "The changes, based on the success of a pilot program that placed games based on "The Sims" franchise into their own unit, mean it will require fewer executives to sign off on new games or to approve launching an existing game on a different platform or in a different regions. "We ran an organizational experiment and it was pretty damn successful. The Sims grew aggressively," Frank Gibeau, head of the new EA Games unit said."

Re:Speedy?

[sglider]

You aren't kidding. What they don't realize is that what works for Madden and The Sims (releasing an expansion or 'booster' pack every 3 months) doesn't work for PC Multiplayer games like the Battlefield Series.

Battlefield 2 sold well, but they tried to capitalize on that by releasing BF2:Special Forces, and Armored Fury and Euro Forces in quick succession, and were rebuffed by the community.

They then didn't learn from their mistake by releasing Battlefield 2142 a scant year after BF2 came out, and it only surpassed BF2 in hours played the first week. Now, it barely registers on the top ten for Xfire [xfire.com], and doesn't hold a good spot on Gamespy's Server list [gamespy.com] either.

How is this new?

[Myria]

The changes, based on the success of a pilot program that placed games based on "The Sims" franchise into their own unit

Wasn't that "pilot program" called Maxis?

The Sims label

[Bongo Bill]

Would that just be, um, Maxis?

Easy.

[moosesocks]

Easy.

Spin your "studios" off, and back into independent units with a good degree of autonomy.

Maxis and Westwood were both fantastic on their own, and produced a whole bunch of innovative and fun games. Since being absorbed into the EA empire, they haven't produced a single new idea (not to mention that C&C Generals was outright offensive)

does this really change anything?

[joystickgenie]

Other then in internal upper management command chains does this really change anything? EA has pretty much already had these separations in place with few exceptions.

EA Games: EA Redwood Shores and EA LA
EA Sports: EA Canada, EA Tiburon, EA Chicago and EA UK
EA Casual Entertainment: Pogo and EA Mobil
The Sims: Maxis

Really what is the difference between what is going no now and what has been going on for years?

'The Sims' Division?

[wbren]

I'd hate to work for that division, unless EA promised to reallocate me within another division when The Sims loses popularity. Talk about putting all your eggs in one basket... People inevitably lose interest in a game over time (even World of Warcraft [gigaom.com] perhaps).

Bullshit management

[Bombula]

This kind of nonsense from corporations is very revealing. In massive conglomerates, one corporation (i.e.: PepsiCo) may own a subsidiary unit quite different from its original flagship enterprise (i.e.: Taco Bell vs Pepsi). In these situations of acquisition, the challenge is to line up the hierarchy of management with the hierarchy of ownership. It's a challenge, but effective organizations usually manage to get the entire show running as a single, albeit complex and multifaceted, business.

To take an existing company and split it up into smaller sections - whether spin-offs, labels, or whatever - is basically a bullshit move from the standpoint of management. If it's branding we're talking about, that's one thing. Differentiating among brands to target different markets is fine. But to actually split an organization up into separate operating units and decentralize their organizational structure is the new-age crap of the late 80s and 90s that ended up being a giant fart in the spacesuit of business.

Properly managed, a single organization can be of any size and any complexity. Good management will implement organizational decentralization as necessary, and as a corollary will also integrate management of operating units at appropriate decision-making levels to ensure optimum efficiency (management-speak would insert the bullshit word 'synergies' here).

Long story short, if EA was being managed properly in the first place, it wouldn't need to be split apart. The fact that its operating units can't be creative unless they pretend they're separate companies is a sign that the management has no idea what it's doing.

Re:Bullshit management

[servognome]

Properly managed, a single organization can be of any size and any complexity. Good management will implement organizational decentralization as necessary, and as a corollary will also integrate management of operating units at appropriate decision-making levels to ensure optimum efficiency (management-speak would insert the bullshit word 'synergies' here).

It could happen, but it is very difficult to manage. Sometimes 'synergy' turns out to really be a handicap for individual business units. It is difficult to justify to stockholders decisions by individual business units that directly work against other business units. For example, people are advocating Sony electronics and Sony music be split, since the electronics business unit is hurt by DRM and other restrictions to try and protect Sony music. They could pretend to be different companies, but if for some reason the music unit starts to slip (even if there are gains in electronics), shareholders will ask what the electronics unit is doing to help.

There are also regulatory, tax, and other reasons that it might be advantageous to split a company up.

Re:Bullshit management

[Bombula]

Your points are well made. Just some additions to them: the two points - stockholders losing sight of the big picture when evaluating individual business units, and tax and regulatory benefits of decentralization - are related via the accounting department through what's called 'transfer pricing'. Let me explain by way of example:

Would you buy multivitamins from China at $850 a pound, plastic buckets from the Czech Republic for $973 each, tissues from China at $1,874 a pound, a cotton dishtowel from Pakistan for $154, and tweezers from Japan at $4,896 each? Would you sell multivitamins to Finland at 61 cents a pound, bus and truck tires to Britain for $11.74 each, color video monitors to Pakistan for $21.90, missile and rocket launchers to Israel for $52.03 and prefabricated buildings to Trinidad for $1.20 a unit? If you are a large conglomerate with different operating units, the answer is yes.

The reason why is that by overpaying on imports from a subsidiary and underpaying on exports to them, a conglomerate can buy from and sell to itself in such a way that it shows losses in a US unit, which offsets taxes, but compensatory profit in a foreign unit based in a tax-haven country.

This gets to the core of both of your points because it shows why shareholders are foolish to look at individual operating units without looking at the context of the whole organization, when it's the bottom line that counts, and that it's foolish to operate units completely independently from one another. It also shows how taxes can be gamed no matter what the regulations may be (in 2001, for example, corporations reported $154 billion more profit to their shareholders in annual reports than they reported to the IRS in their SEC filings, leading to over $50 billion in lost tax revenue).

Lastly, bear in mind that while there are potential savings from decentralizing operations into separate units, there are also additional costs - like having to have a whole new admin department for each unit.