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Puzzled: EA's recent strategy on Zynga, Playfish, EALA, Pogo, Jamdat

I am searching for logic behind EA's recent business decisions in these changing times.

Intro

First of all, I have to thank Dan Lee Rogers' blog I read this morning to rip the scabs off some long lasting industry market confusion.

Background

I am genuinely interested in getting some perspective on EA's choices towards embracing the new social/online markets. I myself worked at EA from 2002-2006 in the RTS group, right when EA acquired Westwood and before moving everyone into the new EALA super-studio. I was on the very team that spawned the industry changing  EA-spouse lawsuit, and witnessed Neil Young's resultant studio cleanup. Those years were the best years of my career in all the studios I've been, so overall I am very fond of my experiences at EA. But it looks like things have really gone south over the past few years.

The Problem

Okay, how to put this all together? My thoughts are stemming from the migration from premium retail packaged video games to online social microtransaction models and the steps EA has taken. Taking a sweeping generalization approach, here is how I've seen things go down:

  1. EA buys Playfish for $300 million. A studio started by 4 guys that made Facebook games 2.5 years prior to purchase.
  2. EA talks about how they are moving quickly into the social space.
  3. EA lays off the majority of the EALA RTS group to better align their goals.
  4. Zynga sets up a new studio next door and hires up the majority of the RTS group.
  5. Pogo & Jamdat continue to stagnate when they both had the infrastructure necessary to best tackle these new markets years ago. They may not necessarily be stagnating, but that is just my outside perception. For example, Pogo could have been Zynga and completely dominating Facebook today.

So you can see where this is going, right? To me, the way things went down seem really wrong. And this isn't just hindsight, I've been boggled every step of the way.

My Scattered Analysis

Here's some more insight from my insider perspective. EALA's RTS group was a very good team, very skilled, very knowledgeable of games, and had a rare spirit where people on the team worked well together. Sure times may have changed since I left in 2006. Since then, I've occasionally visited the studio and watched the group spirit decay. For me, the problem was that of repetition.

Churning out annual RTS games became really easy and really boring. We never had enough time to actually spend 2-3 years making a 95+ metacritic game. Instead it was 80ish metacritic every year. One year the game has tanks, next year it's orcs, then sci-fi tanks. It became content swapping...

So on the business side of the fence, the mysterious people behind the curtain decided that annualizing RTS games was the best strategy to the dismay of the developers. And sure enough, the RTS genre eventually stagnated and sales started to really slip. So what do they do, they buy Playfish and eject the RTS group.

But wait.. get this: They were making C&C4 and were experimenting with an online microtransaction model. But decided to switch it back to retail and give everyone 3 months notice prior to launch that they would lose their jobs. Result: 64 metacritic premium retail project, a wasted opportunity, and feeding Zynga a really talented group.

If it were me, I would have saved the money and converted the RTS group into a social microtransaction team. Instead, Zynga jumps on it and forms a studio next door, hiring them up, and now guess what. Half of the ex-EALA are now EA's competitors in the precise industry they need to get into.

And I touched on this before, EA has Pogo and Jamdat -- huge businesses. Pogo was perfectly positioned to dominate the Facebook scene, but where are they? What are they doing? After looking at their website, it looks seriously dated and obsolete and like like not much has changed since inception. So I was curious, how does their traffic compare to the similar and much better Kongregate site?

Well surprisingly Pogo is quite big, kicking at around 12 million uniques to Kongregates 1 million. I just checked out Facebook and looks like they are in beta on Facebook with almost 1 million monthlies. That's a really sad number compared to the 50-60 million playing individual games like Farmville which is just a single game. Why didn't EA get involved years ago? Big mistake!

And according to the blog I linked up top, Jamdat was acquired at $682 million in 2006, and in 2009, EA charged a $316 million "goodwill impairment writeoff" on the acquired value of JamDat. I'm sure those EA iPhone games they are producing isn't quite the cash cow they were hoping for.

Still if they really had foresight, they could have been in a much better position today. I hope this doesn't come across too negative, but wow, really? This just seems elementary to me.

 

About Kris Morness

Kris has 14 years of game industry experience and is currently working on his first startup. A game called Harvest Circuit which is a browser based 3D game utilizing the microtransactions business model and a full MMO to boot. He believes in a big future in this area. We're planning our first release launch in Jan 2011.


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