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Former Exec Says EA Is Following Misguided Strategy
If you've been keeping up with the news over the past couple months, you know that Electronic Arts has been eager to work its way into the digital space with CEO John Riccitiello saying that digital distribution will most likely dominate the industry this year. Even amid layoffs, EA acquired social networking developer Playfish for roughly $300 million to work with EA Interactive to further push in that direction. This week EA took a hit in stocks since the transition to the digital business is taking longer than planned. Investors aren't pleased. Still, Riccitiello told IndustryGamers that EA is making the right moves. Former EA executive and partner at investment firm Benchmark Capital Mitch Lasky disagrees.
"EA is in the wrong business, with the wrong cost structure and the wrong team, but somehow they seem to think that it is going to be a smooth, two-year transition from packaged goods to digital. Think again," he said.
Lasky finds the EA Games division to be the root of the problem.
"But by far the greatest failure of Riccitiello's strategy has been the EA Games division. JR bet his tenure on EA's ability to 'grow their way through the transition' to digital/online with hit packaged goods titles. They honestly believed that they had a decade to make this transition (I think it's more like 2-3 years)," Lasky commented. "Since the recurring-revenue sports titles were already 'booked' (i.e., fully accounted for in the Wall Street estimates) it fell to EA Games to make hits that could move the needle. It's been a very ugly scene, indeed. From Spore, to Dead Space, to Mirror's Edge, to Need for Speed: Undercover, it's been one expensive commercial disappointment for EA Games after another. Not to mention the shut-down of Pandemic, half of the justification for EA's $850MM acquisition of Bioware-Pandemic. And don't think that Dante's Inferno, or Knights of the Old Republic, is going to make it all better. It's a bankrupt strategy."
Lasky goes on to say that as a result of EA's business strategies, the company could be targeted to get acquired by another corporation, with Disney possibly being one of them.
"With EA's enterprise value down below $4 billion, it's remarkable that nobody has stepped in to put them out of their misery with an acquisition," he said. "Certainly, Disney has been looking at them since I was at the house of the mouse back in the early 90's. And there are Chinese companies, like TenCent, that could easily swallow EA whole."
Are these just the ramblings of a disgruntled ex-employee or does he have a point? Share your thoughts.
[Via IndustryGamers]
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