Why EA Will Stay On Riccitiello's Course
The shock is that EA's CEO lasted this long - but don't underestimate Riccitiello's successes
The word "shock" gets thrown around with fairly wild abandon by the media at large, with the games media being no exception, so it's no surprise that John Riccitiello's departure from EA earlier this week was quickly labelled a "shock" by plenty of commentators. For once, though, I don't disagree with this characterisation - there is indeed something shocking about Riccitiello's departure, but it's not what most pundits seem to think. It's not shocking that Riccitiello is going; it's shocking that he lasted this long.
"Controversy over aspects of game franchises like Mass Effect and Dead Space only highlight the fact that EA has created a significant number of well-loved games this generation"
John Riccitiello rejoined Electronic Arts in 2007, touting a turnaround plan for the giant but struggling publisher. He was going to change course, focusing the firm's resources on quality products and ensuring that it wasn't left behind by the rise of mobile, online and social gaming; internally, there were ambitions to overcome EA's deep-rooted structural problems, which often prevented teams from sharing technology and expertise effectively, denying the company the advantages its sheer scale should have afforded. In financial terms, this should all have afforded the firm better margins, a rising share of turnover from digital and other non-traditional revenue, and ultimately, rising income and profits.
All of these things were necessary, because EA's revenues had stagnated and its margins were in serious decline. Games were costing more to develop, but they weren't making any more money to cover those costs - a problem facing the entire industry, but one that was especially evident in EA's financials. Riccitiello's strategy for tackling the rot was touted, effectively, as a three year plan. EA was the games industry's publishing supertanker; it would be slow to turn around, but it could be accomplished in three years.
That was almost six years ago. The plan hasn't really changed - it's just taken a long time, and it's still not finished. By the time EA accomplishes what Riccitiello set out for it, seven or eight years will have passed - possibly more - and John Riccitiello, of course, will be gone. Even when his three-year plan was barely getting up to speed after three years (and I will always suspect that Riccitiello knew full well that it would take far more than three years to execute), the board and the markets still felt he was the right man to lead the company. Only six years down the line has patience run out and Riccitiello been forced to fall on his sword.
In some regards, the delay isn't really his fault. Remember that Riccitiello rejoined EA in 2007 - and the world's economies were hit by the worst financial crisis in almost a century in 2008. EA's share price graph falls off a cliff in 2008; it traded at between $45 and $55 in the years before then, and struggled to peak over $20 in every year since then. 2012 saw a big decline; 2013 so far was showing a recovery - but the company may never attain its pre-2008 levels again, which made restructuring very, very difficult, because a high share price was key to EA's power to acquire and retain companies, IP and talent.
"The Old Republic tanked. There are countless reasons for that but the buck stops with Riccitiello. This was his baby, and it was born ugly"
In other regards, though, Riccitiello's plan just didn't work out. His fate was probably sealed when Star Wars: The Old Republic failed commercially. This project was seen, perhaps unfairly, as the canary in the coalmine for Riccitiello's efforts. Its developer, Bioware, had been brought to EA by Riccitiello when he arrived as CEO. It was a digital product driven by subscription revenue, an expensively developed game designed as an exemplar of quality from a studio with a stunning back catalogue. It was the opening shot of two important battles at once - it would get Origin off the ground, putting EA head to head with Valve's Steam, and it would give EA skin in the MMO game, pitting it against Activision's World of Warcraft. In the world of simple narratives often preferred by investors, The Old Republic was the real-world test of Riccitiello's plan and EA's mettle.
The company failed the test; The Old Republic tanked. There are countless reasons for that, rooted in everything from design through to business model, but the buck stops with Riccitiello. This was his baby, and it was born ugly. That he carried on for a few quarters after TOR's failed launch, only resigning in the face of some (actually not so terrible) financial misses, is largely inconsequential - Riccitiello's P45 was stamped by The Old Republic.
It's important, though, to look past the headline and look at the sub-headings in Riccitiello's plan, because in some other regards, EA has made extraordinary strides in the past few years. The company is a major player in mobile and social games and has made serious inroads in tablet games. It has overhauled the FIFA franchise both in terms of quality, with the game widely beloved of football fans, and in terms of business model, with the Ultimate Team system introducing microtransactions in a way that's actually managed to please rather than horrify fans. Controversy over various aspects of game franchises like Mass Effect, Dragon Age and Dead Space only highlight the fact that EA has created a significant number of seriously well-loved franchises in this generation (although the ball was dropped on Dead Space at a corporate level; whichever management committee issued the instruction to warp the game into a shooter and yank it out of its much-lauded horror gaming origins would do well to keep their noses out of design decisions more complex than choosing curtains for their bedrooms in future).
"The ingrained culture of EA - bickering internal politics, jealously guarded fiefdoms and the whole lot - has improved but is by no means gone"
On these grounds, Peter Moore, hotly tipped in the press as the replacement for Riccitiello, is quite right to defend his erstwhile boss' honour online. This isn't mere misplaced loyalty - Riccitiello did come to EA while the company was in the wilderness, threatening to haemorrhage more and more money each quarter and utterly bemused by the rise of new business models and audiences, and while the company he's leaving isn't on the straight and narrow yet, at least it's got a road map and started to figure out the terrain. Remember, too, that for all the overblown rhetoric about EA being "at war" with gamers, this is a company that was roundly despised by gamers for most of the 1990s and early 2000s; perversely, it only arouses such renewed passion now because EA under Riccitiello went such a long way towards repairing its reputation.
Whoever replaces Riccitiello still faces a tough job. The ingrained culture of EA - bickering internal politics, jealously guarded fiefdoms and the whole lot - has improved but is by no means gone. The company still allows corporate interests to dictate to creative teams all too often, rather than fostering co-operative spirit between the two. Most of all, EA is possibly the worst company in the games industry at communication; its dealings with consumers and with media over the recent Sim City debacle, littered with legalese and robotic-sounding corporate jargon, are a jaw-dropping and deeply depressing example of an entertainment company that's forgotten how to speak with a human voice. One reason I'd like to see Moore as CEO is simply that he's one of the only public faces of EA in recent years who isn't a Stepford Wife, and that would go some way to pulling off the giant "Kick Me" sign that EA pastes on its own back every time a company spokesperson opens his or her mouth of late.
Be under no illusions, though - whoever replaces Riccitiello will continue Riccitiello's work. Smug expressions of triumph from soi-disant internet campaigners are misguided. Riccitiello isn't leaving because of microtransactions or social gaming; he's leaving because he couldn't get microtransactions, social gaming and all the rest of it up to speed fast enough (although there may be an element of disquiet at just how badly some parts of the market were being alienated by the way the strategy was being pursued, of course). His replacement will have to steer the ship through some rough seas - but the course he's setting is already plotted. Wherever EA goes now, it's Riccitiello's legacy it'll be pursuing.
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