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Mitch Lasky points to consoles as biggest risk for EA

Mitch Lasky points to consoles as biggest risk for EA

Wed 27 Mar 2013 8:36am GMT / 4:36am EDT / 1:36am PDT
MobileOnlinePublishing

Veteran exec calls out EA Games for undisciplined product selection, cost control and marketing spend

Former Disney, Activision and EA exec Mitch Lasky has pointed to EA's console-focused Games label as the company's single biggest problem for future growth.

In a post on his personal blog, Lasky called consoles, "the wild card for the future of EA, the platform with the most risk." He praised the company's growing digital business - particularly innovative ideas like FIFA Ultimate Team - but he warned that, while big publishers believe that new console hardware will reinvigorate the market, any resurgence will be fleeting - "a dead cat bounce."

"I think you could easily take the position that there will never be a return to the installed base level that Sony, Nintendo and Microsoft saw with their c. 2005 consoles. They've essentially lost the living room," he said, referring to the preference for mobile and tablet games among children, including his own.

"EA's current strategic situation suggests that the search for a new CEO could be very, very difficult"

"To use the old parlance of by-gone console industry analysis, there is likely to be a massive fall off in peak-to-peak margins."

After helping to establish Disney Interactive Studios and serving as VP of Activision's worldwide studios, Lasky was one of the prime movers in mobile gaming: he joined JAMDAT as CEO in 2000, and presided over its $680 million acquisition by EA in 2006.

Lasky was VP of mobile and online games at EA for around a year after the acquisition, and he believes that mobile the requirements of mobile and business models like free-to-play are simply too distinct to successfully balance with a focus on consoles.

"EA has a dilemma. By yoking their business to the new consoles, they hamstring the company with bloated teams, high production costs, and packaged goods marketing and merchandising that is not, in my opinion, additive to their other business opportunities. Console investment doesn't position EA well for the future.

"There are few economies of scale on the audience aggregation side... The only way EA benefits is if console players come online and authenticate with EA rather than Sony, Microsoft, or Nintendo. Otherwise, EA can't really do anything to leverage them cross-game or cross-platform. And the console manufacturers are not likely to be easily dis-intermediated."

Ultimately, EA's biggest challenge is to get past the archaic mindset of its senior management, who still regard consoles as "their wheelhouse" and would be unwilling to launch major new IP on mobile or online free-to-play. The new consoles will draw the attention of management, the time of its most talented developers, huge spending on advertising, marketing and retail merchandising, and the necessity of sharing an audience with companies like Microsoft and Sony - companies, "who have their own online ambitions."

"[Going all-in on console] is fraught with peril and execution risk, and demands a nuanced long-term strategy. For me, EA Games needs the biggest re-think - that division has been pretty undisciplined about product selection, cost control and marketing spend in the past, and represents the biggest downside risk on the new platforms.

"In the end, I think there is a lot to work with, but a lot of hard, cost-cutting work to be done to get EA back to greatness. They don't have the management team to execute against all of these opportunities simultaneously, and recent management losses haven't helped, leaving the old guard with greater power and stripping the company of some much-needed new thinking.

"EA is a very conservative company at its core, and will struggle to change in the dramatic way that the new market opportunity requires. EA's current strategic situation suggests that the search for a new CEO could be very, very difficult."

3 Comments

Totally agree. The current console model is deadly in the long term. Mobile and micro-consoles are well-positioned to take their market in the next 18 months. So that leaves publishers & developers that support traditional consoles exposed as they have to concentrate so much talent on a doomed business model. Better to cut it off now and refocus on a digital business model where you are not paying out platform royalties and retail margins, price protection etc. The agency model that Apple operates creates value for the consumers and allows access to millions of people.

Posted:A year ago

#1

Charles Overbeck Software & Firmware Engineer, Apple Inc

1 1 1.0
Why don't they reduce their insane TV & general marketing spend? I mean it certainly isn't the cost of development that is the issue with Marketing often being 3-5X the cost of development on these major titles.

Of course the digital titles have very small marketing spend so "surprise" when the succeed they can make money. If the digital titles were marketed with the same crazy multiples of development costs then even more of them wouldn't make money.

Posted:A year ago

#2

James Benn Studying Computer Science, University of Portsmouth

12 15 1.3
@Charles: Catch 22 - triple A publishers invest so much money into the development of a game they can't afford for it to hit retail in conditions of 'total obscurity'. I use the term loosely as they must have stats for what their marketing dollars buy them.

Edited 1 times. Last edit by James Benn on 28th March 2013 1:30am

Posted:A year ago

#3

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