The slowdown in video game sales has hit EA particularly hard. After laying off 1500 employees in November, the company slashed its 2010 financial forecast last week.
Mitch Lasky, a former EA exec, responded to the news by saying, “EA is in the wrong business, with the wrong cost structure and the wrong team.”
Lasky sold his mobile entertainment business to EA in 2005 for $680 million, and ran EA’s mobile division (EAMobile). Lasky backs up his argument with cost structures and financial figures. Some market analysts agree: “Investors feel betrayed,” said analyst Michael Pacter of Wedbush Morgan.
EA’s response to Lasky’s statement has a bit of history. In 2007, EA appointed John Riccitiello as the company’s CEO; shortly after, Lasky left the company. “The clear message is that Lasky wanted the job,” writes Dean Takahashi on venturebeat.com. Jeff Brown, EA’s head of corporate communications, said, “It’s never easy being turned down for a job, but most people don’t spend three years obsessing about it.”
To be sure, the mobile gaming arena has gone through significant evolutions in the past three years. It’s debatable if the industry should even be called “mobile” — know anyone who uses a “mobile phone” anymore?
And while Lasky’s statement does sound like a childish complaint from a jilted employee, he does get at some larger issues. One is the industry’s reliance on blockbuster games — multimillion dollar titles with huge overheads. One bad blockbuster can destroy a company’s financials, while a good one makes the industry focus on making more blockbusters. Smaller, innovative titles get shelved (see also: movies and television).
A second issue Lasky touches on is the distinction between investors and gamers. Investors are interested in the bottom line. Show them the money (and a good plan to make more) and they’re soothed. From an investor perspective, EA hasn’t been a good buy. Even with the downturn in sales, competitors like Activision and Take-Two both posted double-digit gains in stock price in 2009, while EA’s price limped up just 2.7 percent.
The funny thing is, Lasky doesn’t care about the games, only the money that they make. Gamers, obviously, are all about the product. Some say that CEO Riccitiello has brought a renewed focus on producing quality titles, instead of a single focus on sales.
Mass Effect 2, Sims 3, Dante’s Inferno — how do these fare? Do you think EA should be focusing on making better games? Which ones are winners?