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Former Exec Says Electronic Arts "Is In the Wrong Business" 180

Posted by Soulskill
from the inspiring-internet-outrage-is-a-bad-business-model dept.
Mitch Lasky was the executive vice president of Mobile and Online at Electronic Arts until leaving the publisher to work at an investment firm. He now has some harsh things to say about how EA has been run over the past several years, in particular criticizing the decisions of CEO John Riccitiello. Quoting: "EA is in the wrong business, with the wrong cost structure and the wrong team, but somehow they seem to think that it is going to be a smooth, two-year transition from packaged goods to digital. Think again. ... by far the greatest failure of Riccitiello's strategy has been the EA Games division. JR bet his tenure on EA's ability to 'grow their way through the transition' to digital/online with hit packaged goods titles. They honestly believed that they had a decade to make this transition (I think it's more like 2-3 years). Since the recurring-revenue sports titles were already 'booked' (i.e., fully accounted for in the Wall Street estimates) it fell to EA Games to make hits that could move the needle. It's been a very ugly scene, indeed. From Spore, to Dead Space, to Mirror's Edge, to Need for Speed: Undercover, it's been one expensive commercial disappointment for EA Games after another. Not to mention the shut-down of Pandemic, half of the justification for EA's $850MM acquisition of Bioware-Pandemic. And don't think that Dante's Inferno, or Knights of the Old Republic, is going to make it all better. It's a bankrupt strategy."
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Former Exec Says Electronic Arts "Is In the Wrong Business"

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  • by Anonymous Coward on Friday January 15, 2010 @07:44AM (#30777310)

    Of course he's talking about business! It's no use churning out original titles which cost 10s of millions to make and don't recoup their costs. You don't get more "art" in the market, in the long run, because the company making it will go bust.

    There is no dichotomy of companies which are trying to make money vs companies which are trying to do something new. All the games companies are trying to make money. The rest is just PR & marketing.

  • by NickFortune (613926) on Friday January 15, 2010 @07:45AM (#30777312) Homepage Journal

    This is a business person commenting harshly mostly about how EA is financially ran, and that they haven't been able to grow as fast as Activision Blizzard (which was a one giant merker - like Microsoft and Google getting together). His bashing about the games isn't about gameplay, their originality, or how fun they are for players - it's just seems to be about business

    You say that like it's a bad thing. His point is that EA's business strategy is unsustainable, and I think he's got a point.

    I actually like the way EA has been taking. They're doing a lot more original, new IP and games than some years ago - last year notably Dead Space, Mirror's Edge, Dragon Age Origins.

    When you say "way they've been taking", I assume you mean that in the sense of "direction they've chose to head in". As opposed to the way they've been taking money. Personally, I'm not entirely convinced. DA: Origins could have used another six months playtesting on the AI IMHO, and Dead Space sucked like a black hole. Spore was fun however, and I'll concede that I'm not generally representative of the larger gaming community.

    The point is, as you rightly point out, he's not criticising the games - he's criticising the business strategy behind them. If Spore, Mirror's Edge, Dead Space and Need for Speed: Undercover were indeed loss makers for EA, then it doesn't matter how good the games were. If they can't make them turn a profit, they soon won't be making any more.

    It seems he was more happy when EA was the company that didn't create much of new IP or games, but just milked the old ones every year with new versions

    I didn't get that, at all. As I read it, he just thinks the revenue from their established franchises isn't going to be enough to tide them through the changeover to digital distribution. And he thinks that EA are throwing too much money at trying to manufacture blockbusters, and I think he's probably right.

    The trouble is that for quite a while now, the big games companies have been throwing money at games trying to raise the barrier to entry. They want to be like Hollywood studios where you have a big investment for big returns. So we things like big name voice actors throughout. Or fully orchestral scores for a game. Hollywood gets away with this by sinking a lot of cash into publicity so they can "buy the gross" - cover the bulk of production costs in the first week. That doesn't appear to be working for EA, assuming bizpunk is right about those games being expensive loss makers.

    He's not making any judgements about the games themselves, except that they don't seem to be making enough money to recoup their development costs. Which, if true, would be a problem regardless of the game content.

  • by dltaylor (7510) on Friday January 15, 2010 @07:50AM (#30777344)

    If you're in business to make money, open a brokerage, casino, or bank.

    Otherwise, while you would like to make enough profit to keep the doors open, you're in the business of producing a product. Make a good (-enough) one keep satisfy the customers and get some repeat business.

    In case no one's figured it out by now, Wall Street doesn't know their ass from a hole in the ground about the latter, and will happily destroy the entire US economy (except them, of course) to do the former.

  • by Anonymous Coward on Friday January 15, 2010 @07:54AM (#30777362)

    You can say anything you like but you should be able to back up your allegations with some kind of fact or you risk sounding a lot like a 12 year old who did not get what they want. The real reporter here would be forced to ask the "EA Executive" what exactly should EA be in the business of then? The problem with the statement above is that as Sopssa pointed out, "It seems he was more happy when EA was the company that didn't create much of new IP or games, but just milked the old ones every year with new versions." Gamers get bored... Gamers are getting tired of since you know... it has been around for nearly 20 years now for example. Sports games are always going to make some money because people love being able to play their favorite teams and whip the hell outa their least favorite teams.

    MMO's are going to be hard to break into because Blizzard took an award winning and fun game (Warcraft) and turned it into an online experience with WoW. SWG at one time was the leading MMO out there until Smedley took over the creative side and tried to make it a financial thing instead of an innovative and fun game by copying the best of every MMO he could find. However The Old Republic will do well in the market for multiple reasons such as Bioware's known ability to write extremely good plots in their games added to an already good name in the Old Republic series of games (KOTOR is still on the best sellers list ten years after its release).

    Whom ever this EA Exec is needs to look at something along the lines of... uhm... Quake is a good one. It was by far the number one FPS game for a long time. And after Quake III its kind of died out because people are bored with it. ID still does well for themselves doing other great games dont get me wrong, but they are not the power house of FPS's that they used to be. Repackaging the same old game with updated graphics and new maps is what will get you a status quo. EA is trying to come up with something new. Its better than some other gaming companies out there.

    Off subject (kind of), Dragon Age sold a ton more than expected, has released three Downloadable Content items for minimal cost (around $5 each), is working on the fourth DLC (should be out sometime in the next week or so) and has announced an Expansion. Not bad for a game thats less than 6 months old. Great job Bioware/EA. And the game rawks.

  • by Alarash (746254) on Friday January 15, 2010 @07:59AM (#30777388)
    I'm completely with you. Unfortunately video games are not about fun and, well, video games any more. They are about making money, and most of the time that means low innovation/risk taking. Which is sad, because video games should not be about pleasing shareholders, but pleasing gamers. If you please the gamers, you will mechanically make money. But probably not in the 5 to 15% year-to-year growth that investors are asking in our capitalist world.
  • MOD PARENT UP (Score:5, Insightful)

    by aussersterne (212916) on Friday January 15, 2010 @08:08AM (#30777434) Homepage

    One particularly unhelpful wrinkle of the U.S. version of capitalism + culture has been investors' singular motivation to hit it big and rake in the bucks and a general social unwillingness (management, the population, investors, regulators) to believe there is any social good in any business that does not generate massive returns and growth on a quarter after quarter basis.

    There are simply many things that we need the economy to do that are not going to generate double-digit returns and result in world domination by a single sexy corporation. Plumbing, for example. Or reference publishing. Or wood milling. Instead of taking sustaining business + paying employees or small but steady growth as good enough within the context of also employing people and providing a necessary social good, we're happy to say "This hospital isn't giving us 20% year-over-year; it's only giving me 1%! I can get that from a damned CD! Fuhggedaboudid." And nobody bats an eyelid, everyone takes for granted that a hospital is only valuable if it's nice and profitable, otherwise it "couldn't compete" and "should" close in a free market economy.

  • by Stan Vassilev (939229) on Friday January 15, 2010 @08:12AM (#30777454)

    It's been a very ugly scene, indeed. From Spore, to Dead Space, to Mirror's Edge, to Need for Speed: Undercover, it's been one expensive commercial disappointment for EA Games after another.

    Most startups fail, but this doesn't mean we don't need startups.

    An advice I read somewhere said to treat every project in your company like a mini-startup. Of course, many of those projects won't become an instant cash-cow. the secret is in being flexible, quickly recognizing failure, minimizing damage and adapting.

    But if the company stops trying to innovate and create fresh products, then all you're left with slow death by milking the existing franchises. And of course, man of the best franchises started small as yet-another-risky-project for the company.

  • by dickbot (1116661) on Friday January 15, 2010 @08:18AM (#30777506)

    - work for EA for a while, at least until I can find a real job : CHECK

    - leave the company with a nice bundle of cash and the appearance of now having insider knowledge : CHECK

    - take various SHORT positions on EA stocks with the leverage of my new firm : CHECK

    - write a nasty paper about how bad EA is ran, and have it published on /. : CHECK

    - take even SHORTER positions on EA stock : CHECK

    - wait for stocks to drop, take LONG positions and retire to the caiman islands.

  • by Grimbleton (1034446) on Friday January 15, 2010 @08:40AM (#30777626)

    You shut your lying whore mouth.

  • by LKM (227954) on Friday January 15, 2010 @08:46AM (#30777660) Homepage

    I actually like the way EA has been taking. They're doing a lot more original, new IP and games than some years ago - last year notably Dead Space, Mirror's Edge, Dragon Age Origins.

    This is correct. What Mitch Lasky does not seem to understand is that these new IPs don't have to be immediate monetary successes. They are investments in the future. To understand how that works, one only needs to look at EAs past. They got into the current situation by not starting enough new franchises. Eventually, yearly updates to established franchises were not enough for EA to sustain their business. Hence, EA is failing because they did not invest in new IPs in the past, not because they invest in them now.

    Activision is now going down that same path. They made a ton of money with risky, interesting new IPs such as Tony Hawk's and Guitar Hero. Now that they are on top, they're milking these franchises for all they're worth, but not investing in new, interesting franchises they can milk in the future - they're doing exactly what EA has been doing five years ago, and they will end up in the position EA is right now.

    People like Mitch Lasky got EA into the position they're now. These people are the cause of EA's problem, not its solution. They need to shut their pie holes.

  • by LKM (227954) on Friday January 15, 2010 @08:49AM (#30777672) Homepage

    He's not making any judgements about the games themselves, except that they don't seem to be making enough money to recoup their development costs. Which, if true, would be a problem regardless of the game content.

    Without taking a risk on new franchises, you won't have established franchises you can milk in the future. Which is exactly how EA got into its current hole. They're doing the right thing now, even if it's not producing immediate profits for them.

  • Re:MOD PARENT UP (Score:5, Insightful)

    by YourExperiment (1081089) on Friday January 15, 2010 @08:52AM (#30777698)

    One particularly unhelpful wrinkle of the U.S. version of capitalism + culture has been investors' singular motivation to hit it big and rake in the bucks and a general social unwillingness (management, the population, investors, regulators) to believe there is any social good in any business that does not generate massive returns and growth on a quarter after quarter basis.

    Whilst I totally agree with you on principle, I would take issue with one point. It's not that no-one believes there is any social good in these businesses, it's that no-one cares.

  • Missed his point (Score:3, Insightful)

    by Anonymous Coward on Friday January 15, 2010 @09:06AM (#30777766)

    I think we've missed his point. EA continues to make very expensive "disc based" titles when things are going to "download only", thus cheaper (take a look at iPhone 1.99 games... Good luck selling a $9.99 app). The article said that EA thinks they have 10 years he thinks 2-3 years. Whether he's right or not, who knows. If he is correct then EA can't keep spending $50mil per title. People pay $60 per game because they can trade them in for $40. What happens when "download only" does not allow tradeins? The price of games will need to drop. (eg. Music Cds used to cost $20 now I find most for $10.). All $ Canadian.

  • by NickFortune (613926) on Friday January 15, 2010 @09:46AM (#30778138) Homepage Journal

    Without taking a risk on new franchises, you won't have established franchises you can milk in the future. Which is exactly how EA got into its current hole. They're doing the right thing now, even if it's not producing immediate profits for them.

    Sure, in a stable market. And to be fair, I didn't read TFA as saying "EA should not be taking a risk on new franchises". He's just raising concerns about the budget size vs. the payoff.

    I think you have to remember that his comments are all made in the context of a move to digital distribution, which he feels is going to happen a lot faster than EA are allowing for. Reading between the lines a little, I think he'd like to see more, lower budget games aimed at a cheaper price point. That doesn't make sense if your retail is through shops because shelf space is expensive, and with a limited number of titles that you can offer, you need to spend money trying to force a blockbuster. But for digital distribution, you can spread your risk a bit more, develop a range of titles and see what catches the public imagination.

  • by Ltap (1572175) on Friday January 15, 2010 @11:54AM (#30779548) Homepage
    Actually, it would be an interesting project to graph sales and ratings for long-running, many-installment franchises (*looks at sports/racing games*) to see how things have fluctuated - some of them are old enough to have gone through multiple generations of gamers. It's an old wrestling strategy that you can redo a gimmick after 7 years, because the people who were around then won't be around now, and the ones that are around now won't remember anyway.

    For instance, the first Call of Duty and Call of Duty 5: World at War. WaW has some references and nods (it also rips off Modern Warfare's narrative structure, but that's beside the point), but this was fine until the final scene: Russian soldiers in Berlin capturing the Reichstag and ending the bulk of the war. This scene was copied almost directly from CoD1. So even in narrative-based FPSs, you're starting to see repetition within a franchise after a few years. I think you'll find that the majority of people who have played CoD5 have never played the original Call of Duty and wouldn't know about this.

    This is also one of Disney's strategies - they re-release their "classics" just short of every decade, which is enough to account for a new generation of children and the format changes that would require re-buying.
  • by Gilmoure (18428) on Friday January 15, 2010 @12:22PM (#30779862) Journal

    I don't know if you grew up with cars from the 60's and 70's but things have changed for the better. Back then, even Datsuns, Hondas and Toyotas, needed a lot more maintenance and more frequent maintenance than modern cars and they also didn't last as long. To get 100,000 miles out of an engine without a ring or valve job (actually taking engine apart and partially rebuilding it) was almost unheard of. Same thing with transmissions; seems you were always getting bands adjusted and such.

    Now days, my '96 Jeep Grand Cherokee is about to pass 330,000 miles, only having oil/fluids changed and belts and spark plugs. My '02 Tracker has just passed 125,000 miles, again with just fluid and plug changes. And both of these machines are required to pass emissions checks, which my older cars ('72 Honda and '70 Impala) don't. And with the older cars, there's still timing and carb adjustments that have to be made about every other month or so.

    The other cool thing about modern cars; they've all been hot rodded. My '07 Chevy Trailblazer, just a basic truck with basemodel engine, has a 250 cubic inch straight 6 engine, the same size engine as my '68 Nova had. Only this engine is now aluminum block, fuel injected, has headers and free flowing exhaust, dual cam and puts out almost 100 HP more than my old straight 6. And gets better gas milage and pollutes less. And this is all standard now. Cool!

    So yeah, modern cars are definitely lasting longer and are built better.

  • by Anonymous Coward on Friday January 15, 2010 @05:12PM (#30783996)

    sively covered in hot grits, which will no doubt result in mas...

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