Last year, Electronic Arts (s ERTS) CEO John Riccitiello told The Wall Street Journal that his company was “boring people to death and making games that are harder and harder to play.” Prophetic words, though no one was listening at EA. In early December, EA said it was going to miss its revenue target of $5-5.3 billion for 2008.
And on Friday, it announced that it would cut 1,000 jobs or 10 percent of its workforce so it could save $120 million annually. They will only put efforts behind preexisting blockbusters or those in the making. Does this strategy shift really address the company’s bigger problems?Earlier this month, on Sarah Lacy’s TechTicker show, I pointed out that the company was “reliant on big, expensive Hollywood-style games, instead of more nimble social, mobile or Wii games.” The latest EA move to focus on a few hit games is nothing but recycling of the old strategy, especially at a time when the video games business is amidst a major transition.
In his piece, “Game Business and its Crisis of Attention,” Wagner James Au described some of the issues facing the video gaming industry as it grappled with the changing dynamics of interactive entertainment and rising competition for time spent on EA-styled big video games. If the recent sales of Wii are any indication, growth lies in simplicity. EA’s Riccitiello knows that. It’s just not clear if he can do doing anything about that in a company that seems to be a wee bit out of sync with the times.
Looks like the stock market is reflecting some of that skepticism: From 2004-2008, EA’s stock was one of the more stable scrips on Nasdaq, fluctuating between $45 and $65. This year it has dropped 70 percent, to about $17.39 a share.
15 thoughts on “To Fix Itself, Electronic Arts Needs More Than Just Job Cuts”
EA actually tried out some new series in 2008: Dead Space, Mirror’s Edge, Boom Blox, Spore, etc.
I guess people just want the latest regurgitation of Madden after all. 🙁
Their attempts in the mobile market including the ipod and the iphone have come up lame. I know they have smart people working there that can make great games on these platforms, but they just haven’t shown up.
“Looks like the stock market is reflecting some of that skepticism: From 2004 to 2008 – EA’s stock was one of the more stable scrips on NASDAQ, fluctuating between $45-and-$65 dollars. This year it has dropped 70 percent to about $17.39 a share..”
I’d say that’s a fairly irresponsible statement. If you take the stock fall of all the game companies and look at it, EA is averaging out to be somewhere in the middle of the losses over the last year. It’s the whole US economy falling, not investors shying away from EA in particular.
Disclaimer: I am an EA slave laborer.
if you look at EA stock from year-to-date perspective with complete disregard to the stability of the stock over past four years then you have a right to say it is an irresponsible statement. if not, then your allegation isn’t quite responsible either.
A lot of companies — EA included — are using the economy as an excuse for long term problems that plague. Them. Over past 6 quarters just check out the number of quarters EA has missed its revenue estimates.
The issue with Madden is it is a poorly produced (and rushed version). In addition, EA is living on their reputation and not improving their products (NHL 09 is the exception). They are fortunate the NFLPA liscense is their exclusive because 2K sports makes a better product for football and listens to their consumers.
EA did make an effort to diversify; out of the “Big Three” of third-party games publishers (EA, Activision Blizzard, Ubisoft), EA released more high-profile new IPs than any of them – and Activision Blizzard acquired other studios then cancelled new IP projects that weren’t franchisable this year. Activision bought Blizzard, which insures a revenue stream that rivals cocaine’s, but they’re also riding the fumes of its Guitar Hero franchise.
EA moved to release more casual versions of its sports franchises (All-Play, Skate It) and initiated Wii-specific new IP (Boom Blox, Playground, Active). All largely flopped, even critical favorites. Their Rock Band-as-DLC platform strategy outperformed Guitar Hero on per-copy downloads but was crushed in retail sales, as EA faceplanted on the Wii versions of both the first and second games in that franchise.
Meanwhile, games like Braid (two-person development team) and World of Goo (two-person development team) come out, sell thousands of copies in the low-cost, high-margin download space and make their creators lots of money, most of which goes to the developers and the digital distribution channels – owned by Microsoft and Nintendo, respectively.
The key isn’t necessarily to focus on the mobile market or the Wii market. It’s to focus on easily portable, well-designed, lightweight games that are low-priced and travel well. Games that are as easy to release for the 360 as the Wii as the DS as the PSP as the PC, and can be distributed through downloadable channels. Games like Puzzle Quest, Peggle, Lumines. Those are the games that sold best. The problem for EA (and Activision, and to a lesser extent Ubisoft) is that launching many small projects instead of a few large projects requires a large, expensive workforce – right at a time when they need to cut costs the most.
In other words, they followed the strategy you call for this year. Its early failures, compounded by the economy’s bottoming out and compared to Activision’s relative (but perhaps more unstable) success relying on its core franchises, killed shareholders’ desires to experiment and diversify.
EA should’ve done this when the Wii came out, and they’ve said as much. But the only strategy that’d work now is to build a time machine, go back to the Wii launch, and start focusing on the Wii.
Ask any gamer and he will tell you he’s sick of all the shovelware on the Wii and mobile phones.
the problem with EA isnt that their games are too big, but that they suck: they lack the quality of Valve, the wit of Rockstar and the innovation that smaller companies have.
All their games specially the maddem series, are boring and tired.
People always hate to talk about when they are laid off. But as it has become every day’s news headline since Yahoo started it with cutting 1500 of its task force last year, now a need of platform has been in demand where people can express their selves in words how they are feeling about their company, whey the got laid off was that justified or not.
And every thing they want to tell anonymously.And http://www.layoffgossip.com is providing you that platform.