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Why Mattrick was right to join Zynga

What's in it for Mattrick, and what does it mean for Zynga?

Don Mattrick's jump from Xbox chief to Zynga CEO left many observers stunned this week. Why would he make this move? And what exactly does this mean for Zynga's future?

Let's try to look at the world from Don Mattrick's perspective. He's been a successful game company executive for decades, first with Electronic Arts where he was president of Worldwide Studios, driving such titles as Need for Speed, FIFA, and The Sims to success. Then he went to Microsoft, where he oversaw the growth of the Xbox from 10 million to 80 million sold. He's just a few months away from launching the next generation in consoles, the Xbox One. Why would he leave?

Rumors have been swirling for months that Microsoft CEO Steve Ballmer is planning a sweeping reorganization of Microsoft. Moreover, it's a reorganization that will significantly change the roles of top executives - and some of them wouldn't have a place in the new organization chart. Mattrick may well have decided (or was informed) that his place in the new structure wasn't what he wanted.

Even with a good role, there's not much upside for a talented executive at Microsoft. Ballmer doesn't look like he's leaving any time soon, so if your ambition is to be a CEO you might have a long wait. The compensation picture is also not great for an ambitious executive. Stock options are the usual way to provide the possibility of a tremendous payday, and that's what Microsoft used in its early decades to grab top talent. That hasn't worked for Microsoft for years - the stock has been steady for a long time and shows no sign of rising. Whether the new Xbox One sells well or not, it's not likely to move Microsoft's stock very much. A significant upside at Microsoft for Mattrick, either financial or professional, doesn't seem likely.

"Mattrick's departure from Microsoft has nothing to do with the recent policy changes regarding the Xbox One"

There's one aspect of this move that needs to be made clear: Mattrick's departure from Microsoft has nothing to do with the recent policy changes regarding the Xbox One. A CEO move for a company of this size takes months to arrange and negotiate; this has been in the works for quite some time. Even if a handshake was arrived at quickly, finalizing a contract on this level takes weeks. The timing of the two events is coincidence.

In any case, some time ago Zynga (perhaps in the form of board member Bing Gordon, who knows Mattrick well) approached Mattrick with an opportunity: become CEO and turn Zynga around. Zynga's stock clearly has plenty of upside potential; it was at less than $3 last week, but it was nudging $15 a little more than a year ago. The company has solid opportunities in front of it with mobile, real-money gaming, and advertising to its immense audience. Zynga's got lots of talented people, a solid technical infrastructure, a huge audience of monthly players, and some proven brands. The problem seems to be getting all of these pieces working smoothly and getting hit products out the door, which suggests a need for a manager with proven experience in doing just that with world-class game brands - a manager like Don Mattrick.

A new CEO who believes in his ability to turn things around at Zynga could make some serious bank from the options on millions of shares of stock. Sources at Zynga indicate that Mattrick's compensation largely consists of stock (either grants or options, or some of both); his potential upside could be in nine figures. It's a big challenge, a chance to make a significant difference to a huge audience, and if you succeed you are richly rewarded. Bingo! Mattrick becomes CEO at Zynga.

"Mattrick's arrival at Zynga has already had a positive impact on the stock, adding over $300 million in value since the announcement"

In fact, Mattrick's arrival at Zynga has already had a positive impact on the stock, adding over $300 million in value since the announcement. There's also an immediate positive impact on PR for the company, as the move is widely seen as a positive endorsement of Zynga's prospects. Employee morale is probably up right now along with the stock price. Over the next few months, Mattrick will have much to do in order to get Zynga on track. That may involve reorganization, or more layoffs, or other changes large and small.

Mattrick will have plenty to prove in his new role. His experience has been with ever larger projects, teams and budgets for PC and console games. Yet the biggest market opportunity for Zynga is in mobile games, where companies like Supercell and GungHo Entertainment are making hundreds of millions of dollars with teams in the dozens. Is it a better strategy to create fewer titles and expect them all to be hits? Or to produce multiple titles quickly and cheaply, with the idea that titles that succeed get extra effort (as King does with titles like Candy Crush Saga)? Will Mattrick change Zynga's overall strategy of emphasis on mobile games and real-money gaming? Will there be a greater or lesser emphasis on advertising, on distribution of other game publishers' titles, on social games, on Zynga.com?

The big question for investors and shareholders, no matter what strategic choices Mattrick makes, is: How soon do we see a steady increase in Zynga's share price, and how high is up? There's no doubt investors are hoping Mattrick feels the need for speed in making improvements.

Beyond the implications for Zynga are the effect this move will have on Microsoft, and what this means for the impending Xbox One launch. Read that analysis on the [a]list daily.

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Steve Peterson avatar

Steve Peterson

Contributor/[a]list daily senior editor

Steve Peterson has been in the game business for 30 years now as a designer (co-designer of the Champions RPG among others), a marketer (for various software companies) and a lecturer. Follow him on Twitter @20thLevel.

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