The last couple of years have been tumultuous for the video game industry. It was not that long ago that Facebook game maker Zynga suffered a nearly disastrous IPO (following a similar fizzle for the highly anticipated Facebook IPO). But it could be said that Zynga is something of a one-trick pony, even if it was at the forefront of online gaming linked to social media platforms with games like FarmVille and CityVille. Then there was the THQ fiasco in December, when the long-standing game maker announced it would file for Chapter 11. The publisher has since sold off the majority of its studios and licenses to pay debts. And now, the gaming community has drawn its collective breath yet again. John Riccitiello, the CEO of EA (Electronic Arts) has announced that he will resign his position effective March 30, leaving the gaming giant to scramble for a replacement.
EA probably isn’t as bad off as some of its competitors (ahem, THQ) thanks to a lineup of licensed franchises (Madden, FIFA, Sims, etc.), a strong slate of original IP (Need for Speed, Deadspace, Battlefield, and so on), and a wireless division that has enjoyed a recent surge of success thanks to a partnership with The Simpsons franchise (their iPad game ‘The Simpsons: Tapped Out’ is doing gangbusters with the freemium model), not to mention popular standbys like Tetris, Scrabble, and Monopoly. But that doesn’t mean the company hasn’t suffered during the recession.
In fact, it is the losses that have ostensibly led to Riccitiello’s decision to leave. In his announcement, the CEO stated that the choice was entirely based on accountability, and the timing has to do with what he describes as “the shortcomings in our financial results this year.” Not only has the company apparently come in at the low end of projected earnings for the fiscal year, but layoffs have been ongoing and stock prices remain low. When Riccitiello began working at EA in 2007, stocks were valued at a height of about $61 per share – they now sit at just under $20 and that’s certainly not as low as they’ve been in the last year.
Of course, it does seem a little unfair to blame the CEO, considering that the recession began just after he took the helm at EA. And yet, the buck stops with him. What he has managed to do during his tenure at the company is manage a transition that has hit many in the gaming industry hard. With new platforms springing up, mainly in the milieus of mobile and online gaming, the industry has had to make a shift away from the model of information-laden discs to one of online content that is pushed in packets. On the one hand, this could save money on materials and packaging, but on the other, it means that game makers can no longer count on earning $60 for every game sale. And piracy is also a concern. But EA’s mobile division seems to be ramping up nicely, with Simpsons taking the lead and proving that a company really can make millions with the mobile, freemium model.
Unfortunately, it doesn’t take an expert from Selby business advisors to predict that the loss of EA’s CEO could lead to further problems for the company in the coming year, the least of which is an immediate drop in stock prices. But it really depends on who takes over the company and the vision that person brings to the table. With Sony’s PlayStation 4 on the horizon and Microsoft expected to announce an updated console of their own, the future could be bright for any gaming companies left standing in the aftermath of the Great Recession. EA may just be one of the few, despite the untimely loss of John Riccitiello.