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Riccitiello's EA: Execution that fell short of the grand vision

Electronic Arts is headed into a post-John Riccitiello era--it's time to examine how the mighty publisher ended up where it is today. Editor-in-chief Kris Graft takes a closer look at EA's current reality.

Kris Graft, Contributor

March 19, 2013

7 Min Read

As Electronic Arts marches toward a post-John Riccitiello future, I've seen a lot of commentary on where the company may be headed, or the legacy he might leave behind. But let's think about how the company arrived where it is today. Riccitiello, a giant among game industry executives, has been the target of criticism from both investors and vocal video game fans pretty much from day one. But despite the criticism, he was always trying to lead the company in the direction the industry is inevitably headed: digital and online. The problem with Riccitiello's EA, however, has been that the execution never quite lived up to his grand online vision. And for all the effort and investment Riccitiello committed to staying ahead of the industry curve, the industry hasn't seemed to want to take EA with it. Here's a refresher on Riccitiello: He joined EA in 1997, serving as president and COO until he left in 2004. After that, he co-founded venture capital firm Elevation Partners alongside investors including Bono from the band U2. There, he was the mastermind behind a merger that created the largest independent game company in the world: BioWare Pandemic. He would eventually bring that entity with him to EA after he rejoined the company in 2007 as CEO.

A new world for an Old Republic

We can start right there. One of the main reasons -- or perhaps the main reason -- that EA negotiated the $860 million deal for BioWare Pandemic was for a Star Wars MMO that was in development at BioWare. In the mid-2000s, we were seeing subscription-based World of Warcraft as an unstoppable online juggernaut, and the very idea of a Star Wars MMO, developed by peerless BioWare, had more than a few people whispering "WoW-killer." The deal cost an enormous sum of money, but hey, BioWare and Star Wars. What could go wrong? On paper, at the time, this seemed sure-fire, and many onlookers agreed. To Riccitiello, known already for his vision of an online world of video games, it made perfect sense. All of a sudden, in October 2007, EA was poised to become a major player in the MMO market, and go toe-to-toe with Blizzard. We'd see that Blizzard was forging a relationship with Activision in a deal that would be announced just two months later. Notice the difference in strategies in this case: EA's plan to make a more meaningful entry into the MMO market was a big expensive acquisition of a Star Wars MMO that was under development by a premier developer. On paper, it seems like an eventual win. Activision's move into the space was through the formation of a holding company that would bring the world's biggest, most successful currently-operating MMO under its umbrella. In practice, it's already a win. We've seen what has happened to Star Wars: The Old Republic. By the time it released in 2011, the industry had changed so drastically that what seemed like a sure-fire win in the mid-2000s turned out to be the biggest game industry risk to date. The game was a day late and a dollar short, and as subscriptions dwindled, layoffs ensued, and the game went free-to-play. Again, Riccitiello typically seemed to have the foresight to know where the game industry was heading, but the actual execution seemed to fall short or come just a little bit late.

"Three years out"

In 2009, Facebook games were taking off (particularly FarmVille), so EA's $400 million acquisition of successful Pet Society developer Playfish, on paper, made total sense. But Playfish's The Sims Social -- another product that seemed like a sure thing at the time -- failed to gain the traction needed to knock Zynga off the top of the charts, two years after the FarmVille craze kicked off. Now, social games are in a state of upheaval, with EA losing ground not only to Zynga, but to companies with names like King and Wooga. In the summer of last year, Riccitiello praised Playfish for helping establish a digital culture and vision for the new EA, but said the company was "three years out" from realizing the full potential of the Playfish acquisition. 2015 may as well be an eternity from now. And now we're seeing browser-based social games turn increasingly to mobile. Once again, with mobile, EA is getting its sizable foot in the door through acquisitions. Chillingo, the original Angry Birds publisher, was reportedly purchased for under $20 million, and Real Racing developer Firement was acquired for an undisclosed sum. PopCap was the big buy in this area at $750 million in 2011, plus earn-outs that would bring the total price to $1.3 billion. A highly-respected company with great talent and properties, the PopCap deal -- again -- was expensive, but possibly worth it. But when PopCap said it was laying off workers last year, even that seemingly peerless deal was somewhat sullied. EA's mobile business does seem to be picking up traction, however, a fact that EA executives like to note when they announce layoffs and when they resign. Of course, there were other missteps, such as the ongoing SimCity fiasco (another online-centric problem), NBA Live's collapse, Medal of Honor's implosion, and a botched attempt at a Take-Two takeover. There were billions of dollars of spent on acquisitions, hundreds of millions spent on restructuring, missed financial targets and share prices that have slid over 60 percent (while Nasdaq went up). Now we find ourselves here.

Diving in headfirst

It's important to look again at what EA's competitors are doing right now. Riccitiello's EA jumped headfirst into MMOs, social and mobile, while EA's competitors have taken a much more measured, wait-and-see approach. Look at Activision and Ubisoft. While both are certainly committed to the digital future, compared to EA, they're treading carefully on emerging platforms. We didn't see enormous social, mobile or MMO acquisitions from these companies--rather measured, organic entry into those sectors. (Remember when Ubisoft was toying with a Tom Clancy MMORPG? Probably good for the company that that never came to fruition.) When everyone said retail was dying, Activision came out with Skylanders, a video game-toy crossover that was completely reliant on physical retail. Ubisoft continues to focus on the console and PC game crowds with top-tier franchises like Assassin's Creed and Far Cry. These companies are every bit as monolithic as EA, but they're playing to their internal strengths. I remember talking to former Activision CFO Thomas Tippl and (separately) Ubisoft CEO Yves Guillemot a few years ago, amid EA's increasingly aggressive moves into digital. The wait-and-see, organic growth approach was very much a conscious decision on both companies' parts. They'd rather watch Riccitiello and EA take the gamble. So with every acquisition into the online and mobile space, EA traded a few huge competitors like Activision and Ubisoft for a thousand smaller ones that are scrappy, agile and hungry for success. Next thing you know, you're a lumbering giant fighting a multi-front war that's really difficult to win.


Riccitiello was typically looking in the right direction, moving where the industry was headed. I disagree with the notion that EA was slow in identifying where the market was headed--if anything it tripped up while racing toward a vision, and fell short in the execution. This just might be one symptom of being a big publisher in today's dynamic industry -- this is what it looks like when such a large company convulses as it tries to react to disruption. The future of video games is, per usual, uncertain. Smartphones are varied and ubiquitous, PC is elbowing its way into the living room, social games are in upheaval, cloud computing is evolving, dev tools have democratized the craft and new consoles are hitting the market from three different hardware makers. Riccitiello insists that he leaves the company in great shape in the hands of Probst, but what a time to let go of the steering wheel.

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