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EA studio founders may be "victims of cost cutting"

EA studio founders may be "victims of cost cutting"

Tue 07 Jan 2014 4:08pm GMT / 11:08am EST / 8:08am PST
BusinessPublishing

Analysts weigh in on the recent departures of studio founders at PopCap, Criterion and Chillingo

Within the last week at Electronic Arts, we've seen departures at Criterion, PopCap and - just yesterday - Chillingo. These weren't any employees, but actual founders at the respective studios. Sure, it could be coincidental timing at the start of a new year, but it feels like something else is afoot. Some of the analysts that GamesIndustry International spoke with suggested that these recent departures could be related to cost cutting measures in the wake of John Riccitiello leaving and Andrew Wilson taking the helm.

"I think the 'problem' is that since JR left EA, there is a serious focus on cutting costs, which means streamlining organizations and cutting budgets. Some of this is not coincidental at all, and some of the people departing are either victims of cost cutting or are not as enamored of working for a company that is paying attention to costs," Wedbush analyst Michael Pachter told us.

Asif Khan, CEO at Panoptic Management Consultants, agrees. The founders in particular may want to have more creative freedom, and a cost cutting mode at the publisher doesn't fit well with their vision.

"Chillingo was an opportunity generator for EA... EA could use more studios with independent spirit like Chillingo"

Billy Pidgeon

"The turnover at EA seems to be attributable to one of two factors. Whenever there is a change in leadership of a company (especially the CEO), there is usually a flood of employees who leave shortly thereafter. The other factor is that these employees are all founders/entrepreneurs and they may feel that there is more upside to taking their money and starting another new venture than staying at stodgy old EA," Khan explained.

"With Andrew Wilson at the helm, it is possible that some of the folks at the mobile and social divisions of EA are feeling left out of the big picture strategy," Khan added. "These founders of Chillingo, Popcap, and Criterion probably want more control over their projects and starting their own ventures would create more freedom to take the creative, innovative risks that got them acquired by EA in the first place... these entrepreneurs [may] have ideas that they either feel they couldn't properly execute at EA or their strategy would be more profitable in a separate venture. These are proven entrepreneurs and I am sure we will understand their departures from EA as time passes."

RW Baird's Colin Sebastian doesn't think the departures are a big deal. He called them "maybe a yellow flag, probably some end of the year shuffling - not completely surprising for an acquisitive company."

That said, independent analyst Billy Pidgeon did comment that losing the Chillingo founders could have the most negative impact. EA could benefit from more studios like Chillingo, he said.

"Of the three recent studio executive departures at EA, Chris Byatte and Joe Wee leaving Chillingo is the most surprising and could have the most significant negative impact," Pidgeon noted. "Dave Roberts did a great job of leading PopCap as an independent company, but John Vechey was a founder and is more directly involved in PopCap's game creation. PopCap should be able to continue to develop high quality games. There isn't much left of Criterion for Ward and Sperry to work with at EA as most of Criterion's staff has been assigned to Ghost Games to work on Need for Speed.

"Byatte and Wee were running Chillingo much as an independent studio within EA, working with small developers around the world to create unusual mobile games that have been broadening EA's mobile catalog in several markets. Chillingo was an opportunity generator for EA, with the ability and autonomy to fund and direct multiple low cost projects with high potential to break out as new franchises. EA could use more studios with independent spirit like Chillingo. It's a great approach for large publishers to enable creative development for high growth categories like mobile and downloadable games."

We'll be keeping a close eye on EA in the weeks ahead to see what other changes may take place at the publisher. The company will release its third quarter results on January 28.

7 Comments

Graham Simpson
Tea boy

220 7 0.0
Speaking as a former shareholder the $1bn acquisition of Pop Cap was a shocking example of shareholder value destruction. John Riccitiello was blinded by social gaming and ignored the price. He did the same with Playfish. Once bitten twice shy. Apparently console gaming was dying....

Posted:3 months ago

#1
""Of the three recent studio executive departures at EA, Chris Byatte and Joe Wee leaving Chillingo is the most surprising and could have the most significant negative impact," Pidgeon noted."

Really? Seems to me that either these analysts do not know what they are talking about or they are just after getting their voice heard and their company name shown in the media. It is quite a common procedure that when company is sold, part of the contract is that the founders / management stay with the company for a year, two years or something like that. And often these persons decide to seek new things after this period and it is known by everyone involved since day one. My guess is that this period ended for Wee and Byatte at the end of 2013 and that them leaving has been known by EA top brass for a long time. So not really news, if not for these analysts themselves :-)

Edited 1 times. Last edit by Kim Soares on 7th January 2014 8:03pm

Posted:3 months ago

#2

David Amor
CEO

24 20 0.8
Agree with Kim. Seems more likely that Chris and Joe had a three year earn out. Chilingo was bought in October 2010.

Posted:3 months ago

#3
Since we're chucking around totally unfounded speculation. I think they were victims of alien abduction. It's a conspiracy I tells ya!

Posted:3 months ago

#4

David Serrano
Freelancer

281 248 0.9
I was reading about income inequality yesterday and stumbled onto a couple of quotes that EA board members should contractually be required to use as screen-savers.

John Young, former Chief Executive of Hewlett-Packard:
Maximizing shareholder wealth has always been way down the list. Yes, profit is a cornerstone of what we do—it is a measure of our contribution and a means of self-financed growth—but it has never been the point in and of itself. The point, in fact, is to win, and winning is judged in the eyes of the customer and by doing something you can be proud of…. If we provide real satisfaction to real customers—we will be profitable.
Jack Welch, former CEO of GE:
On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy…your main constituencies are your employees, your customers and your products.
Robert W. Johnson, Jr, former Chairman of Johnson & Johnson:
Our fifth and last responsibility is to our stockholders. Business must make a sound profit. Reserves must be created, research must be carried on, adventurous programs developed, and mistakes paid for. Adverse times must be provided for, adequate taxes paid, new machines purchased, new plants built, new products launched, and new sales plan developed. We must experiment with new ideas. When these things have been done the stockholders should receive a fair return.

Edited 3 times. Last edit by David Serrano on 9th January 2014 10:20pm

Posted:3 months ago

#5

Gareth Williams
Senior Embedded QA

1 1 1.0
Not trying to spoil anything, but I heard this this may be the set up to an elaborate April Fools'.

Posted:3 months ago

#6

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