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

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."

Comments

Times have changed

[sopssa]

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. "Hit" would be a game that makes lots of money, not how good it is.

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.

The thing is that Activision Blizzard has grown in to a huge competitor with their World of Warcraft franchise, Modern Warfare 2, and Guitar Hero series. All of them, btw, series that have 6+ released games. Every year a new one. And the cash cow that World of Warcraft is.

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. Now EA has changed it's route a bit and releasing such new kind of games than Mirror's Edge, and such legends than Bioware's roleplaying games. They don't probably hold such a mass appeal, but they're great games and something new.

So is Activision Blizzard now the ones that are mostly after money, and EA trying to do something new?

Re:Times have changed

[A beautiful mind]

Mass Effect um, probably holds mass appeal. With the masses. It's going to be massive! And the sex scenes, oh my, some nerds are going to go to mas...

Re:Times have changed

[Anonymous Coward]

This is actually close to the problem EA currently has, when people like him were in control of it all they did was dish out the same game every year with name changes on the models and perhaps a new colour scheme. This was a great way to keep a steady income but has 0 room to expand and increase profits and a good chance of starting to lose them as you get outbid for the contracts by upstart companies that can take risks.

Now the new team have spotted this and have started to branch out but its having to fight the old EA to get it done the games he mentions as disasters really weren't, and pandemic was never really a reason to buy pandemic-bioware seriously it was maybe 200mill of that price which they recouped almost instantly.

The Old Republic (note the lack of the word KNIGHTS) already has enough interest to be classed as a major hit for EA seriously its a SW MMO aslong as they avoid the problems people had with galaxies its gonna be a cash cow with extra cash on the side!

Activision-Blizzard has a problem lack of new properties and Blizzards own self confesed inability to come up with new game ideas and universes (seriously they became famous for games that were quick renames of Games Workshop games with game play ideas stolen from dune 2!)

If players ever start to leave WoW for other games in increasing numbers i can see their income dropping like a rock

Re:Times have changed

[NickFortune]

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.

Re:Times have changed

[dltaylor]

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.

Re:Times have changed

[L4t3r4lu5]

... ter social interactions by utilising in game script choices, with the outcome predicted to be a reduction in mas...

Re:Times have changed

[Alarash]

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.

Re:Times have changed

[vivian]

...sive waist sizes usually associated with them, as gamers will start actually getting out there and experiencing the joys of the real world.
Of course there will always be a need for mas...

Re:Times have changed

[Denihil]

terbatation. After all, gamers gotta get off, and someones gotta do it. Definitely not my mas...

Re:Times have changed

[LKM]

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:Times have changed

[bobdotorg]

...ters thesis topic. That has to do with the sexual habits of mas...

Re:Times have changed

[ZarathustraDK]

terbatation. After all, gamers gotta get off, and someones gotta do it. Definitely not my mas...

C-C-C-C-Combo-breaker!

Re:Times have changed

[Jellybob]

terdons, which actually have a long, and exciting courtship ritual, involving lots of mas...

Re:Times have changed

[PizzaAnalogyGuy]

..terpiece pizzas, because even if these gamers get more social, not all of their old habits are going to disappear. They will still need their crusty big pizzas with pepperoni, italian sausage, green peppers, red onions and mushroom toppings taken down with a big glass of coca-cola while raiding in WoW. Only that way they can ever find mas...

Re:Times have changed

[Anonymous Coward]

...tication which is necessary for proper digestion of their food and better overcoming the diabetes from those years of sitting on their posteriors. But that does not really answer the questions about their mas...

Re:Times have changed

[mike2R]

...sively distended stomachs; pizza alone cannot account for that, it must be due to mas...

Re:Times have changed

[cgenman]

Also, once you've milked a single franchise for too long, you can no longer get guaranteed profits from it. Player interest starts to die out, and you start getting smaller and smaller returns from each iteration.

EA's current administration recognized that problem. NFS's underperformance isn't a reflection of a failure of planning, but rather that the series has been milked to death for far too long. The sales curve for NFS had plummeted already, and was arguably long past the possibility of a yearly iteration remaining relevant or salable at previous levels. in 2006, they had pushed so few new IP's that when Medal of Honor started to fade they really had little to bring up in its place.

Of course, with any new series or universe in the gaming world generally speaking the second iteration sells better than the first. You really do build up a lot of awareness and interest on the first go. Mass Effect 2 (one of the new post 2006 worlds they specifically created) looks posed to be one of next year's biggest games. Army of Two 2 is looking to make up ground. Skate has basically stolen "Best Skater Game" from the now officially flopped over Tony Hawk. Even Dante's Inferno has a surprising amount of player awareness at this point. That's a lot of profit potential that they wouldn't have just grinding out Need for Speed sequels twice a year.

Re:Times have changed

[rcastro0]

...sage to the trunks: long vigorous, strokes, growing up in a crescendo. Golly! It was as enjoyable to them as mas...

Re:Times have changed

[NickFortune]

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.

Re:Times have changed

[selven]

...ks.

On a completely unrelated note, Natalie Portman is mas...

Re:Times have changed

[FreonTrip]

...sive disappointment with the world as it is. Rather than work to fix issues with personal appearance and the world at large, a lifetime of video games and distraction - particularly in the world's richest country, where the entertainment industry represents 4% of GDP - have encouraged them to avoid that which makes them uncomfortable, or to gloss over it before heading back to endless diversion.

Sorry, guys, they can't all be funny.

MOD PARENT UP

[aussersterne]

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.

Re:MOD PARENT UP

[YourExperiment]

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.

How you grow a business

[Stan Vassilev]

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.

It's life Jim, but not as we know it.

[GuyFawkes]

The only thing that I can remember about EA games is the logo and the girl whispering "EA Games", I can't remember what games had that "loading screen", actually the other thing I can remember about EA Games is most gamers seem to hate them.

While the marketing / advertising / PR types will probably point at my memory of the corporate logo and say "See, branding works!" the fact is that it doesn't, because the memory that I have is not a positive one.

I remember 3dRealms for Duke, I remember Raven for SoF, I remember Cavedog for TA, and those are all positive memories associated with good games.

I can't think of a single game that EA released, I can probably sit here and recite 50+ game titles, many of which may have been released by EA, but that's not the point.

Frankly the ex-exec is as out of touch as the CEO, if you are going to measure anything by my experience, but of course they don't do that do they, they measure stuff by the closed feedback loops of market researchers, also employed by EA, drinking their own kool aid.

The problem with EA is that unlike 3dRealms, Raven, Cavedog et al, they tried to make the "house" bigger than the "game", and I suspect that if you dig down to the level of the actual game workers, you will find that same corporate branding ethos at work, sure, you're all working on "Aliens vs Mario 7", but you're all working for EA first and foremost, you're all able to be switched around within EA, to "Mario vs Jar Jar Binks 3" at the whim of a manager.

Re:It's life Jim, but not as we know it.

[f0rk]

The problem with EA (for the studios) is that EA screams louder.

What is the first thing you see in a EA game ? That damn EA logo, then for a slip second, you see some random no name company (the studio).

The game publishing industry is trying to mimic the movie publishing industry by doing the classic " presents... a movie"-introduction.

By sad part is. The avarage gamer is a lot less intrested in who made the game, then the avarage movie enthusiast. So they only notice the EA logo and get reminded to turn off all brain activity for 5sec because, well, every one hates waiting for the game to start.

The movie industry can do this because its more or less part of the build up, and for the enthusiast, its just another reminder that this movie is made by the awesome studio, .

Back in the old days. A game would open with the studio logo, and if the publisher is lucky enought, they get there very own screen to present there name, else they would just have to do with a "published by" in the end credits.

transparent strategy

[dickbot]

- 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.

Re:They said DA:O would be the new BG

[Grimbleton]

You shut your lying whore mouth.

Recommended businesses for EA:

[Hurricane78]

Things that, from what I know about the typical EA manager character, should fit them:
- Weapon dealer / Warlord: Fueling wars by selling weapons to both sides, just to make money.
- Pharma industry: Getting school children on hard drugs sold as medicine, just to make money.
- Competition for Monsanto: genetically engineer slowly killing plants and make the whole world plant and eat them, just to make money.
- Music industry: Artist extortion and media reproduction, just to make money... ...Oh, wait!

I agree, Lasky is the cause of EA's current issues

[LKM]

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.

Missed his point

[Anonymous Coward]

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.