A Different Track: Frank Gibeau Talks Strategy

As president of EA's Games Label, which oversees core games, Frank Gibeau is responsible for a wide swath of the company's output -- including internally-developed titles like the acclaimed Dead Space and the vaunted EA Partners division, which is responsible for publishing hits like Valve's Left 4 Dead.

It's been tough for EA in the past several months. As the company began to regain the respect of the industry, which was worn down from its licensed title-based reputation, the company was hit with major layoffs and disappointing sales of its creative new IP, such as  the artistically appealing Mirror's Edge.

Also aware that the company may also risk running its proven IP into the ground, the company has profoundly changed the way it develops its franchises -- like Need for Speed, which is seeing a change in development studios to an external partner for this year's edition.

These moves, and more, are part of a longer-term strategy and a meaningful turnaround for the company, which it believes will sustain it in the long term.

Here, in an interview conducted in Los Angeles at this month's E3 trade show, Gibeau discusses his view of the games label, its titles, studios, and prospects.

Obviously, there have been a lot of changes at EA over the past several months. How is the environment right now, post layoffs? Are things starting to get back to normal?

FG: Yeah, absolutely. I think people are focused on winning, on creating some great IP, making some hits happen. We're very focused on innovating on new areas like what we're doing with the iPhone and online.

Every company in the world pretty much went through a shakeout as the economic conditions unfolded. There were a lot of tough conversations and a lot of things that we wished we didn't have to do, but if you look at where we are right now, the folks that are on board at EA and are focused on the future are really fired up. We feel really good about our lineup at E3, what we've seen so far we've got for the next two years.

We also are really excited about that we're going to be able to maintain the focus on creating more IPs, going online, those are the things that people are focused on that drives a lot of positive job satisfaction. It's innovative, it's kind of bleeding edge. So, yeah, overall, I think we've come out of it stronger as a company, and we're very focused.

EA DICE's Mirror's Edge

I imagine that the mood, the overall tone of the company, was kind of depressed as it was going on.

FG: It was a tough Christmas, for sure, in Q3 and the early part of this calendar year. Like I said, nobody likes to do these things. It's not an enjoyable thing. And there was a point in time where people, like a lot of people out in the world, were concerned about, "Where's the business going, where's the industry going, what's happening with the economy?" That angst or worry was definitely manifesting itself in the culture.

But I think we're through that stage in the company's history. We're focused, and I feel like people coming out of that are now looking back. We're kind of back on product now, we're back on making hits happen, we're back on entertaining people.

And the baggage or the hangover from that is very short. It feels like it's kind of launched away, and people are back on track, me included. [laughs]

There is at least one analyst that basically was implying, not so subtlety, that EA is not really in the clear yet as far as layoffs are concerned. He mentioned a potential buyout -- somebody buying out EA because of the value right now.

FG: I didn't read his stuff. Typically, I don't read the analysts much. There's a couple that I think are really smart guys and really focused on stuff, so I very much take account of that, but I did not read this gentleman's report.

Look, it's outside my control whether anybody buys us or not, and the same thing goes for a lot of people inside the company, so nobody worries about it much.

What we're worried about is generating hit product that generate shareholder value, focusing on cost; we're focusing on creating quality hits, we're focusing on online. That's what's important to us and what's important to the folks inside the company.

Are there more layoffs? You know, I don't think so. I mean, I feel like we've been very focused and very aggressive in terms of how we cost-corrected our organizations. We're going to be looking for how to grow the business now, not responding to downturns in the economy and a cost base that was out of alignment with the market opportunities.

So, onto less depressing stuff...

FG: That's alright. [laughs]

You've been with the company since 1991, right?

FG: I joined right out of undergrad.

So, you have a unique perspective. Can you tell me how the corporate culture and the kind of company EA is has evolved all these years? Can you separate it into different eras?

FG: Wow. That would be like a book. I've seen it all, and, you know, I joined right after the company went public, and we were just starting on the Sega Genesis.

That stage of the company's history was very dynamic and interesting because there was a big debate inside the company about whether we go to video game platforms or not.

At that time, it was still kind of Amiga and PC and disk-based stuff, and there was a group inside the company -- Larry Probst was probably the main proponent -- who wanted us to get into the video game business, looking at what happened with Nintendo 8-bit.

So, at that time, it was really about changing the company's culture from where it was into something new, broader, bigger, and trying to scale the business. And at that time, you know, that particular part of the company won the argument, and we entered on the Sega Genesis. And that's when we first started to see the boom happen for our business.

Before that, we'd always been successful, and we had a very rock star image with all the "Can a computer make you cry?" in the early formative years of the business -- the album cover years. It was kind of very cool but very niche. It wasn't operating on a global basis, it wasn't operating on a scale.

When we decided to go on the Sega Genesis, that's when the company started to realize, "Wow, we could be as big as Disney." That's when we started to feel like our potential was much greater than the stage we occupied before.

You know, there's a series of video game stages, in terms of platforms, that we went through, on PS1 and PS2 where we continued to master and refine our skill in terms of being able to do multiplatform development, build franchises and IPs that could last over multiple versions, brought in a lot of new talent, a lot of new creators, built up the internal studios because before that it had all been external guys. That's when we really started to develop a studio culture. Lot of success, booming times.

And, you know, we entered the next generation of the Xbox 360, the PS3, and then the Wii, and that's been a more difficult platform transition for us than the prior three. A lot of it had to do with the fact that the Wii kind of came out of nowhere. You know, we weren't alone in the industry not really seeing that one coming.

No, you weren't. [laughs]

FG: You know, I really respect what we're doing now in terms of coming after it. But from a company culture standpoint, I think the consistent thread and why I stayed with the company is the passion for product is there. People love making games. They want to entertain people in interactive. We believe interactive is better than any other form of entertainment.

And that consistent thread has been there from the day I joined to the day I'm occupying the seat I'm in right now. The changes have happened mainly in business dynamics, how we've grown, how we've succeeded, and how we've failed, but that consistent thread has been important inside the culture.

I mean, there have been times when that culture has been hurt, where we got too successful and we got too focused on analyst reports and too focused on financial presentations and we forgot about product.

It was important to kind of relearn how important product is and bring us back and start doing best backing an IP. That's kind of the stage we went through, and now we're in where we've reinvested into creators inside of our...

Did that reignite with John Riccitiello coming in?

FG: Yeah, yeah. I think John came in and had a big focus on, "How do we go online?" and "How do we create IP that we own and that, frankly, our people make -- as opposed to stuff that we rent?" And so that rejuvenation really uncorked a lot of talent inside our organization.

You know, the Dead Space team created a very highly rated, critically acclaimed game last year that we're going to succeed and continue to grow as a franchise. That was the team that was working on the Bond games, you know. They were constrained by that license.

Kind of when we said, "Alright, we're moving off of that business. We're gonna give the license back. We don't want to be in this business anymore. You guys get to go create an IP. Let's see what you can do."

The quality just blew people away. I never thought that that team at Redwood Shores was that talented. One of the coolest things in our culture is that we were able to uncork that passion for product again by just turning teams loose. In some cases it worked, and in some cases, you know, we had some issues.

But starting new IPs is a risky business. Once you get a critical mass of IPs created, then you've got a business that can start to scale and build and invest in more. That was the problem we had.

We had very lean years there where we didn't have a lot of IP generation. We had a lot of rentals, and so we found ourselves in a glut where we had the sports business, we had the Sims business, and we didn't have a lot else. So, we had to rejuvenate and refocus...

Then 2008 came, along with lots of new IPs. Do you think that it was the right strategy to launch that many new IPs so quickly, or, as you look back on it, would you have spread them out?

FG: I'm not the kind of guy who ever looks back. I look back long enough to learn a few things and then apply them going forward. I think in the spirit of your question, I think we launched too many new IPs all at once in Q3.

I would have spread them out and found better windows for them. I would have had longer marketing for them. The marketing cycles were fairly short. We didn't have enough assets to really build the fanbase, build the community, and get that long lead demand built.

So I probably in hindsight would have picked a couple different windows for Dead Space and Mirror's Edge. It was kind of unknowable at the time, because a lot of IP gets created in those times. Big traffic, lots of volume.

We didn't anticipate a dramatic downturn in the economy at the same time. So, new IPs, we learned a lot about how to launch them and how to create them.

But to be honest with you, we didn't have a lot of sequel product laying around. So, it was a strategy that we had to embark on, which was to, you know, reload with intellectual properties.

If you look at Need for Speed as an example, a lot of the products that we hit last year were products that I inherited from prior teams because I'd been in the job nine months. Games typically take 24 months to build.

If you look at what we're doing now with Need for Speed, we're re-inventing it with Shift, Nitro, the multi-studio alternating year strategy that we embarked upon so that we could raise the quality of Need for Speed, get it back into the charts, get people fired up about the game.

It's a huge franchise, but it was sliding out on quality. We needed to shake it up and change it. I think the feedback we're getting back from E3 is positive on both of those games, so it's kind of doubling our efforts to do that.

EA/Slightly Mad Studios' Need for Speed: Shift

I read the E3 Show Daily; you were talking about the renewed focus on quality. How has the greenlighting process changed? Obviously, you make the standards higher. How do you weigh that with scheduling of the releases?

FG: Well, you know, the market conditions don't exist where you could profitably make 75-rated games anymore. You really need to be in the 80s and the 90s, at least in the category that we're in, which is the blockbuster category.

So, in terms of greenlighting, what we've done is we've put a lot more focus on team composition and the quality of talent inside of the team, really understanding -- who are the 45 to 50 people that occupy the core creative team, how good are they, how can we add to them, who are the stars, and how do we make them better?

That has always been the best indicator of how a game's going to finish, the quality of that creative core. How long have they been together? Have they been through a couple of versions?

In the greenlighting process, it used to be a much more financial exercise. Now, I spend as much time on team dynamics and composition and also the IP as I do on looking at net operating income based on the franchise.

And we're also trying to, much more aggressively, put in at least two to three months of polish time back into the schedule. So, the game is actually functionally complete, content complete, then we go in and put it through massive amounts of tests, massive amounts of re-playthroughs, so that we can really get those five, 10, 15 points of Metacritic that you get at the end of the project.

EA wasn't doing that how long ago? That's a new thing?

FG: You know, three or four years, products were coming in hot and hitting the market hot. Dead Space is one of those titles that has a lot of polish built into it, and a lot of the games we're doing right now like, you know, Mass Effect 2 and Dragon Age, and Need for Speed Shift, is two months polish time.

Last year's Need for Speed finished and went into test, and that was it. There was no time in the schedule because of the way that the studios have been set up. So we had to break the cycle and start to give some very careful consideration.

We have to have that polish time at the end of the project... We have to make sure that on the front-end, we have the right IP and the right team to build it, and give them that frame. That's basically the formula that we're driving.

You launched all those new IPs which you'll be able to build franchises from. I know you have Dante's Inferno coming out, Dragon Age. About how many new IPs can we expect per year?

FG: It's hard to forecast, but I think we're probably looking at two to three new IPs a year. We're looking at a three-year SKU plan right now. Between EAP and our internal studios, both of which are in our group, I can safely say it's at least two to three new IPs.

The degree in level of sequels is going to go up because now you're getting Mass Effect 2, now you're getting Army of Two: 40th Day, you're getting [Battlefield] Bad Company 2.

You know, if Dante's Inferno is successful. Dead Space, we're going to have a sequel to that game. So, there's going to be a larger percentage of sequels and blockbusters tied into that mixed, but two to three new IPs is what I feel good about.

With the Nintendo Wii, Nintendo's constantly saying third parties are successful. Yet, obviously, there are some titles that struggle even though they're good games, so I don't necessarily think it's a quality issue with core-focused games. What isn't clicking, do you think?

FG: I think part of the problem with some of the games is they've been approached as ports, and didn't really have the right design from the control route approach...

But that's changed quite a bit, though, at least with EA. And there are other companies.

FG: Well, there has been some M-rated high-quality games released recently on Wii that we've taken note of, and that's why I think Dead Space: Extraction is a gamble. It's a calculated risk. Can a high-quality experience like that that appeals to a more mature audience work on the Wii platform?

EA/Visceral Games' Dead Space: Extraction

We spent a lot of research, time, and understanding that the customer dynamics of who's actually playing on the Wii, do they own multiple platforms, are there really gamers on the Wii, or is it mainly families and youth? But we think we've found a market on the Wii that would be interested in the Dead Space: Extraction experiment. We're going to take a gamble and build that market.

You know, until you try, you don't really know if the hypothesis is correct or not. When you look at things like [EA Sports] Active, how the sports brand is doing, [or] Sims, in our lineup, we've got Spore, Need for Speed, Dead Space: Extraction, and the Beatles all shipping before Christmas, and they're all unique designs for the Wii.

They might have been in a universe or in an IP that's been someplace else, but we designed them very uniquely for the Wii. So, we actually think we can grow our share there.

And I think a lot of it had to do with, how do you speak to those customers and how do you identify them? The market is so gigantic now. It's the leading platform in terms of install base. There's fish there to fish for, but you have to communicate them differently than you do on the consoles, the PS3 and the 360.

I do think, though, that it is a difficult ecosystem when only Nintendo products can succeed. Eventually, those types of platforms lose legs, because you need innovation coming from publishers and developers outside of Nintendo to really keep them fresh. I mean, look at 360 as an example, they've really nailed it.

And I think Nintendo knows that, and that's why they've been very supportive with our company and others in trying to bring more titles. They've been very good with partnering with us, sharing information and giving us a view of the markets.

I think it would be great to answer your question in January after we've seen what happens this holiday with our sports brand, our Play label, and other stuff.

EA Partners, that's under the EA Games label, right? I think that's a really interesting little subset. What do you see as the future of that division? Is that going to expand even more? There's some really interesting stuff coming out of there.

FG: I'm very proud of what we've done with EA Partners. It was based on a very simple notion that we needed to be partner first. We needed to go out and find the best in the world in the third party development community and figure out what they needed and how to give them the largest audience possible globally through our company.

The early part of that process was going out and telling them that EA was not the Borg, and we weren't jerks [laughs], and that we actually would treat their titles equally well as an internal EA title.

And that took a lot of personal diplomacy and time and effort and frankly proving ourselves with a couple key partners early on so that we go that momentum.

EAP has not peaked at all. There are plenty of places to go. There's a lot of room in the marketplace for more of those titles. The third party development community is at an all time high in terms of generating marketshare within the top 20.

The number of games are doing well there -- the Epics, the Harmonixes, and everybody else -- they're generating massive amounts of market share. It's an all time high. The third party development community is going to end up stronger.

EA/MTV/Harmonix's The Beatles: Rock Band

It's a very tough business, but it's at scale. We think we have a winning formula in terms of getting partnered with them. I think our signings and the momentum we have in that unit is indicative of that. I think we have more opportunity to work with Asia, bringing product from Japan to U.S. through EAP.

I think we have more opportunity in building out online at EAP from online in a way, as well as continuing to sign the best and the brightest out there inside the third party community. Realtime Worlds' APB is great. There's a lot more partners out there that are looking for publishing.

We don't just do the publishing for the games; we also help from a development standpoint when they want it. It's a very opt-in situation. We sit down with the developer and say, "What do you need? What do you want?" If they need help with a PS3 issue or a 360 issue, we deploy actually EA engineers and help them with it. We helped companies build a Wii game. So, it's a full-service...

Yeah, it seems almost one-sided. They're getting EA's big distribution network, they're getting the help and development when they want it, but you guys don't own the IP, right? And the margins are lower.

FG: But the risk profile is different. You don't carry the team in between projects. So, when you look at a lower margin, of course, we're not taking the same risk. And so, when you look at that risk/reward calculation, it's actually very positive for EA.

At the same time, we have over the years acquired companies through that relationship. You get to know each other, there's a strategic fit, there's a cultural fit, like DICE, like Criterion. You know, the BioWare/Pandemic guys came in through EAP. We had EAP titles signed up with them.

So, you get to know each other, you try each other out, you feel good. If it feels like you want to join EA, and if EA wants you to join the company, then you have a good runway towards that.

Not all deals are going to be that way. There are a lot of fiercely independent developers out there. The good news is that if we prove ourselves on the first game, when the sequel rights come up, we can usually get them. And we're very open about that. It's ours to lose.

In fact, when we close a new partner, we typically ask them just to call the guys that we have. You know, call id, call Valve, call Epic, call Harmonix. See what they say about us. We're very open about that because we know we're kicking ass in this sector of the business. More often than not, it closes the sale.

So, I wouldn't characterize it as very one-sided to the development community. I think that's what working is: it's enlightened self-interest. You know, no company can have a monopoly on the best talent in the industry.

We're going to compete with these games if we didn't partner with them, so why not partner with them? Why not figure out how to build a relationship with them? Why not learn? Why not have them learn? It's good for the industry. It's good for us.

So, it's much more progressive than it was before, [or] the way other companies handle it, where it's internal titles rule, my way or the highway, very formulaic, how they approach it. We're very flexible. It's been one of the more exciting strategies that we've had, and it's working very, very well.