'EA is in the wrong business,' ex-exec Lasky blogs

by Alexander Sliwinski on Jan 14th 2010 1:45PM

Former Electronic Arts executive Mitch Lasky, who is now a member of venture firm Benchmark Capital, is not holding back his thoughts on the current financial turbulence at EA. Once EA's executive VP of mobile and online, Lasky now writes on his personal blog, "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."

Strictly from a business perspective, Lasky lays out what he sees has gone wrong at EA, noting that in February of 2007 he made the argument to the former EA CEO that the company needed to cut $200 million annually by "reducing headcount and cutting back on ridiculous expenditures on risky titles" like Spore, Godfather and The Simpsons. He also advocated for "hyper-aggressive [research and development] investment and acquisitions in a transition to digital distribution and games-as-service." EA is starting to make such a transition, as seen in the publisher's strong iPhone and mobile sales, along with its dabbling in Facebook games. On the other hand, EA's MMO track record has been a legacy of failure that includes Earth & Beyond, The Sims Online and (sorry) Warhammer Online -- but perhaps Star Wars: The Old Republic will change that.

Given that EA's current value is so low (by billionaire's standards), Lasky finds it incredible that nobody has stepped in and scooped up the company for a bargain, noting that "Disney has been looking at them since I was at the house of the mouse back in the early 90's. And there are Chinese companies, like TenCent, that could easily swallow EA whole."

[Via Big Download]

Source

Tags: acquisition, business, disney, ea, electronic-arts, financial, mitch-lasky, stock

Reader Comments (65)

"reducing headcount and cutting back on ridiculous expenditures on risky titles" like Spore, Godfather and The Simpsons..."

Sounds like a smart man to me.

If you don't spend money on Will Wrights projects you would be the most retarded company ever. That man is gold.

Didn't Spore do well?

Also, Mega Man X ftw

Bullshit, Deadspace is a "risky title" and for the record, not only is it one of the best games I played last year, it's one of the best in it's genre. Sales weren't great for a title that's, in my opinion, surpassed most current iterations of Resident Evil yet this is a title that could get "the axe".

Cutting head count means laying people off and that sucks no matter WHAT the situation is. "Sounds like a smart man"... I wonder how you're going to feel when you realize the president of your company was just told the same thing.

Anyway, Will Wright is a pioneer but he shouldn't be working for EA. He's a fringe developer, like id Software or Lucas Arts. Some games are hit or miss but they usually try some crazy shit which makes them relevant (even if it's been years since then been relevant).

@Chilly P

1. FTW Indeed.

2. I don't know the exact numbers but I was working at Best Buy when that game came out and we had so many copies of that game left after it released, it wasn't even funny.

Shortly after that, Best Buy had to auction the overstock off on their employee auction site because so many stores had gross amounts of backstock from the game not selling.

@D dogg

It doesn't necessarily mean "laying people off".

EA is putting too many resources into games that no one gives a shit about.

And I'm not saying that EA shouldn't take more risk. Yes, Dead Space and Mirror's Edge were fantastic games. But people are tired of playing crappy Simpson's games and the only people who wanna play anything related to The Godfather are 15-18 year-olds who just discovered the movies.

And on a further note, who the hell is trashing Will Wright? Spore sold like 1 million copies in 2 weeks time. But I'm telling you, from my personal experience that they overshipped the crap out of that game.

Eh, I'm sure EA will be fine. I've heard Riccitello speak in a couple company meetings and I really think he knows what he's doing.

I think Spore did pretty well at retail. It sold 2 million copies it first 3 weeks at retail.

http://news.ea.com/portal/site/ea/index.jsp?ndmViewId=news_view&ndmConfigId=1012492&newsId=20081030006325&newsLang=en

Here's the answer to why nobody's buying EA games and half the reason Spore sucked:

http://en.wikipedia.org/wiki/EA_%28video_game_company%29#EULA_Agreements_and_DRM

It's not the entire reason for the low sales but it's part of it, even thought they've changed their stance. Spore was a horrible game and I don't think WIll Wright was the reason. My friend and I played it all the way through in 3 hours and then spent the next 2 hours scouring our computers to get rid of the DRM after we found out about it. Call us idiots for not knowing but it was a learning experience.

They used to do good NFS games...

If they would just make Hot Pursuit 3, all would be forgiven.

What's wrong with Shift?

Sorry, but no. EA is better than ever... the quality of their games this gen is a lot different from last gen...

Riccitiello is the best thing to happen to EA.

Sorry, but no. It doesn't even look like you read the article.

You just read the "EA is in the wrong business" title and assumed he was referring to the quality of viddy games they produce, instead of how the company is currently run (Which is what the blog post was about).

No where does Lasky insult quality titles from EA, other than pointing out some are commercial failures which no one can refute ("...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.")

EA is making some of its strongest titles in years, but no one is buying them. So from a business perspective one really can't say he's the "best thing" to happen to EA. They need to find a nice balance of between new IP (Dead Space, Mirror's Edge, etc), updating old IP (NFS, Burnout) and having a few more guaranteed cash cows to milk (Madden, Sims) to financially support everything.

[banned]

Mirrors Edge sold over 1.6 million copies, and established a franchise. Dead Space sold over 1.8 million copies, and established a franchise. Spore sold millions of copies (and was only hurt from the DRM, not the game).

God, I'd love to see what a 'success' is called these days.

The problem is those games took too long to sell. Yes, there is such a thing. The longer the game takes to sell, the higher the quantity sold needs to be to justify the investment. Raw profit is only one component of an investment decision, present values are important as well since EA needs to finance these projects. Money is not free. Loans require interest payments and shareholders require returns. Both debt and equity costs money.

1.8 million sales is bad because it took a year to get there. 1.8 million sales in a week then no sales after that is better than slow sales building up to 1.8 million units over a year. Taking a year to pull a profit means capital was tied up for a year longer than the game that sold 1.8 million in a month. This means that Mirror's Edge tied up valuable capital resources that could have otherwise been used on new game development for way too long.

EA wanting to switch to faster capital turnover products is not a bad thing, it's a hallmark of a competent management team.

Maybe for gamers, but financially Riccitiello has been nothing short of a disaster for EA. Their financial reports are always terrible. Revenues are up but profits are down.
It's only a matter of time before Riccitiello is given the boot and EA goes back to making 'less risky' titles.

The issue is that they need to be smarter about their riskier titles. Capcom made Lost Planet a hit by releasing it when nobody else was, *and* marketing the hell out of it. EA just went whole-hog into the clusterfuck of late 2008 with two unproven properties, and got burned.

I remember April 2009 was rather slow, and Mirror's Edge could probably have garnered much more recognition there (not sure about Dead Space, as that would have been soon after Resident Evil 5).

The company is being too aggressive with their new IPs.

When all you can see are dollars signs, how could you even run a successfull business? If the cookie monster hasn't seen a cookie for a week and was fix'en for a taste; how can he tell the good cookies from the bad? Fish don't have hands, but they can still swim...

"reducing headcount and cutting back on ridiculous expenditures on risky titles"
So basically make the same ho-hum titles over and over again.
If a risky title fails, when it should have been a great game, whose fault is it really?

i would love to see you run a board meeting.

Notes
11:30 AM: Meeting begins. Introduction regarding EA getting a piece of the pie.
11:32 AM: Sidebuster notes that EA can have its cake and eat it too.
11:38 AM: Slideshow presentation focusing on cow and milk metaphor.
11:42 AM: Guest lecture by Cookie Monster
11:50 AM: 3 separate parables involving fish are somehow tied into EA's new business strategy.
11:59 AM: This meeting is making me hungry. Fuck this, I'm going to lunch.

Being crazy and talking crazy pays off aparently.

Just a thought Alexander, but you might want to alter that sentence about SW:TOR.
I know what you are trying to say in it, but the structure of the sentence makes it sound like SW:TOR is already a failure.

Great, another guy who only sees dollar signs. I realize that businesses exist to make money and venture capitalists exist to make a profit on their investments, but to the exclusion of all else -- including innovation? Crass.

EA management has one job: drive shareholder value.
And considering the continued demand for gaming products that iterate rather than innovate (ie, Madden, Sims, etc), it seems there is a definite place in the market for... well, a rather "crass" approach to game production.

Perhaps they should have rethought their strategy of buying up every damn developer they could get their hands on. I remember Pandemic made good games before EA. Now look what happened to them.

that was before Riccitello. Now they do the EA Partners thing where they publish games for other companies like Valve and id.

Sounds like a bitter ex-employee.

If you have friends in the industry, I guarantee you many have stories to share of retarded management and awful business decisions. Just because of archaic thinking or just because someone had an moment of egotism.

Personally if they make a NFS: Most Wanted 2 half would be forgiven.

Notice how he points out the risky titles that failed. Not Dead Space, Mirrors Edge, and the like.

What EA needs to do is (and admittedly, it's difficult) try to thin out the bad titles a little more. Something like Godfather II should never have been released as is, especially since it pretty well killed a franchise for them. Don't be afraid to cancel games that don't show promise.

Less games like Facebreaker, more like Dead Space.

He did. In his blog post.

And while those titles didn't fail, I'm pretty sure EA was expecting bigger numbers than what they got.

[banned]

Reality to Bradwart, all new IPs are risky. He actually included those titles if you actually read his blog in full instead of jumping to premature conclusions.

An excerpt from Lasky's blog...

"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."

He's a smart executive, if he was the CEO of EA you'll just see rehashes of old IPs. Don't analyze article snippets in verbatim.

Both Dead Space and Mirrors Edge sold over a million copies. That's not a failure.

It is a failure to EA themselves because they were expecting both those IPs to be instant blockbusters and do blockbuster-like numbers immediately upon release.

Even Glen Schofield of EA pretty much said those games didn't meet their expectations. Of course, he didn't say they were outright failures (He is an exec after-all)

"Not meeting expectations" does not mean they failed, or that EA didn't make money off of them.

Really, the normal world definition of failure is different from an executive who's part of a billion-dollar corporation.

In the business world, not meeting an expectation is, in fact, a failure. EA's fault was setting their own expectations way too high for both games.

""Not meeting expectations" does not mean they failed, or that EA didn't make money off of them. "

Take it from a Wii fan... "not meeting expectations" = failure.

Also, they only broke a million if you combine PS3, 360 and PC sales.
...remember when we didn't used to do that?

Yeah, "expectations" is generally that mystic term for profitability, at least for new IPs. Expectations is why Suda51 can look at No More Heroes sales and jump for joy, but DICE can look at Mirror's Edge (significantly higher) sales, and blanch.

1 million is no longer the benchmark for great success, at least on the HD consoles. 1 million is now generally the benchmark for keeping your head above water.

yikes

What is with people not actually reading the article, or even the source? Is there some sort of race to get your opinion out the fastest?

Indeed. For all the whining about posters not commenting properly on stories, two of the people you'd expect to lead-by-example failed to do so (Fernando Rocker and Bradwart).

TenCent still has less net worth than TwoBit.

http://www.instantrimshot.com/

"transition to digital distribution and games-as-service"... Ew!

"And there are Chinese companies, like TenCent, that could easily swallow EA whole."

And that would be horrible. That said, how is TenCent even doing well?

Probably massive government subsidies.

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'EA is in the wrong business,' ex-exec Lasky blogs

Reader Comments (65)

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