Tobold's Blog
Tuesday, March 19, 2013
Revenge of the Jedi

The CEO of EA, John Riccitiello "stepped down" (company-speak for "got fired") this week. And pretty much every gamer with a grievance against EA pointed at his pet peeve with that company and declared that this was why the CEO had to go. Be it always-on DRM, SimCity server outages, excessive use of DLC and item shops, the ending of Mass Effect 3, or the whole Star Wars: The Old Republic, somebody cited it or all of them as reasons for John Riccitiello leaving.

In a way that is both true and not true. On the one side, CEOs don't leave because they made a decision some of their most vocal customers dislike, nor because a single new product among many didn't meet expectations. On the other side a long string of bad press sooner or later depresses earnings. And ultimately a CEO is judged on how profitable his company is. EA isn't doing so well, with the share price depressed since the financial crisis and the latest quarterly earnings down. That is what the CEO took responsibility for and stepped down.

What gamers dislike about EA is that it lost touch with traditional PC and console gaming. Or as John Riccitiello said in his farewell letter to EA employees: "You are number one in the fastest growing segment, mobile, with incredible games like The Simpsons: Tapped Out, Real Racing 3, Bejeweled, SCRABBLE and Plants v. Zombies.". Of the PC/console games he only mentions Battlefield and FIFA, while many of the other game brands have been run into the ground. Maybe being voted the worst company in America really doesn't matter, but what does matter to shareholders is that their CEO has a winning strategy. And ultimately EA's strategy was not a financial success. Mobile gaming might be "the future", but it doesn't look like a very profitable one for big companies. Not if small developers can make mobile games which are as good or better on those mobile platforms.

If any single game is the main culprit of the downfall, it must be Star Wars: The Old Republic. Not because it was the game with the biggest outcry from unsatisfied customers, far from that. But SWTOR was probably EA's most expensive failure. You need to sell a *lot* of cheap mobile games to make up for a flop like that. At some point a company is simply too big to rely on Bejeweled and Plants v. Zombies for their daily bread.

Yeah I've seen plenty of comments that he went because of Sim City.

Not so.

Sim City actually sold well. So right, it doesn't work and it doesn't live up to expectations. THAT is NOT the point. What matters is, share price didn't go up. It's just that ... share price did not go up. Whatever the causes (probably SWToR most as SC is too recent for this)

Riccitello's departure will grant him something like 10M dollars, am I right?

Not really a bad way to kick someone.
EA's biggest issue is corporate greed and listening to shareholders instead of the customers.

If they want to change direction, stop listening to the suits, start listening to your customers.
Well, the proof is in the pudding.

No matter how much the internet rages about it, microtransactions make more money. Release date review embargoes and preorder bonuses help sales. No matter how much ‘core gamers’ rage about it, mobile produces higher profits. The SWTOR F2P conversion is naked greed, treating free players as filthy freeloaders to be gouge and beaten into subscriptiony submission – it’s all stick, no carrot, but it’s profitable. The stick works. Single-player Fantasy/Sci-fi isn’t as profitable as iterations on the same annual sporting titles and multiplayer man-shooter. These are the hard truths they look at and how they have been gearing their business.

I, and people like me (traditional ‘core gamers’ who despise being nickled and dimed on already expensive titles), are not the target audience anymore because we aren’t as profitable. But they have to pretend that we are (to us, not to shareholders – which is tricky when we’re able to read what they tell shareholders) in order to make sure they get our money as well. But if it comes down to an ‘either/or’ situation, the core gamers will probably be the ones left out.

All the things we’ve called evil moneygrubbing? The things Riccitiello tried weren’t working well enough. Whoever replaces him as CEO will have a mandate to increase profits. They will be grubbing HARDER. And when it works – because they’re tapping a different market, not tapping the existing market better – they will continue. Others will see the success and mimic.

Dark days for gaming lie ahead. Or at least… for EA IPs. By boycotting, I’ll probably miss out on things I’d otherwise love to play. DA3, BF4, and ME4, but I doubt that’ll be any real loss. My pile of shame is ridiculous anyway. I can only hope that enough people will make the same conclusion on how to act, and that our numbers are significant enough that our actions will influence policy to something friendlier to us.

There's a very real, very sad (to me) possibility that the dollars from me and people like me won't be missed. I'll take it on the chin. There is more to life.
I am not sure that the failure means the strategy was bad; it could have been poorly executed - it is hard to imagine a strategy in which the recent SC launch was a good thing. Maybe they just started the migration to mobile too late. Or the migration to F2P. SWTOR seems to be doing much better these days; what if "all future EA games will have microtransactions" EA had insisted SWTOR launch F2P? Even Tera added 500k players in Europe after F2P.

EA is a public company. My guess is an investor would rather read about a large company talking about being positioned for the future in mobile than talking about focusing on a shrinking hardcore demographic. Whether mobile is The Next Big Thing, if that is the popular belief of the investors, then you at least want it well covered in your press releases.

Otellini was fired as Intel CEO for focusing too much on the desktop CPUs and losing the mobile wars. Certainly mobile has a much better story for emerging markets: flat/declining slightly PC sales versus a few hundred million new mobile devices in the next decade. It was the first time the PC industry experienced a year-on-year decline during the holiday season. Vs

In 2011 The company that did Angry Birds did 106 million in revenue with 67 mill pretax profit. Perhaps almost as much revenue and probably more profit than GW2? Apple recently paid out a 1000 million US$ in app store revenue in a month.

I think there is a bit of piling on with SWTOR. The EA quote was "The Old Republic is in EA's top 10 franchises in terms of profitability, "but it's not in our top five". "So it's a business contributor, while important, is not as important as Medal of Honor or Battlefield or FIFA or Madden or The Sims or SimCity, but it's more important than Tiger Woods PGA Golf." In spite of the reaction of the hardcore gamers, is it really credible that SWTOR had that much to do with it?

Being incompetent and hated by customers is a reason for being fired. Investing too much in the future, mobile, perhaps not as much.
Those who are chortling with glee about Ricitiello's demise forget that once again a game company who took a few risks and tried stuff that hasn't been done before has been punished while (Activision/Blizzard) keeps flogging the same few tired old franchises and is laughing all the way to the bank.

Don't be surprised when Ricitiello's replacement closes down all projects except for Madden 101 and Bejeweled 99 because they are the only titles that are sure to make money.

You can't blame shareholders for this. It is entirely our fault. We gamers vote with our wallets and we really do get the games we deserve.
"Riccitello's departure will grant him something like 10M dollars, am I right?"

If that's the case, then I too would like to fail like that (upwards)...
Actually he gets $1.7 million plus benefits. But for him that is "only" two years of salary.
Ctrl+Alt+Del has the real reason he left.

Recently all gone well.

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