EA chief stepping down amid struggles with digital strategy

Ea-logo-symbol-dragon-960x1080BIZMOLOGY — Electronic Arts CEO John Riccitiello announced yesterday that he will step down as an executive and board member of the video game company effective March 30. His resignation letter indicates he is falling on the sword for the company’s failure to meet the financial guidance it issued in January (although numbers are not yet available for the fiscal year ending March 30, the letter indicates EA will be at the low end or “slightly below” guidance). Riccitiello also says the company has not satisfactorily met the goals of the internal operating plan it established last year. Larry Probst, longtime chairman and former CEO of EA, has been named executive chairman and will lead the search for a new top executive.

Riccitiello has been at the helm of EA since 2007 (and with the company since 1997) and has helped guide its strategy as digital, mobile, and social usurps traditional physical products available on retailers’ shelves. But the transition has not always been smooth, and the company’s brand has been damaged in the past several years. In late 2011 it launched Star Wars: The Old Republic, a massively multiplayer online role-playing game (MMORPG) that has been estimated to be the most expensive video game ever developed. Although the game was well-received and had nearly 2 million subscribers after just six weeks on the market, players soon began dropping their subscriptions as updates weren’t as frequent as originally promised and gamers moved on to other titles. Within a year, the number of subscribers had dropped to less than a million and a free-to-play option was added to the game.

Then came the early 2012 release of Mass Effect 3, which again raised customer ire. Many players complained that on day-one DLC (downloadable content) should have actually been included in the original game and was simply left out (or actually pulled out, as some suggest) to make more money. About the same time, EA was voted the Worst Company in America (actually beating out Bank of America) by readers of consumer affairs blog The Consumerist, which is owned by Consumer Reports publisher Consumers Union of United States.

And just a few weeks ago, the company had one of its most disastrous launches with the newest version of its popular SimCity franchise. Although a single-player game, EA employed an always-online DRM (digital rights management) feature to limit the use of the digital content. In addition to bias against DRM and complaints that SimCity doesn’t need to be played online, the company’s servers weren’t prepared for the traffic, leaving some customers who bought the game unable to play. EA executives later admitted an offline version of SimCity could have been developed but didn’t fit the company’s “vision.” Finally, in mid-March it offered free games to apologize for the launch problems.

Although the company says these titles have still been successful, the negative publicity is undeniable. And depending on the Q4 and year-end numbers EA reports in the next month or so, we’ll see if the controversies are having an impact on the bottom line. Regardless, the company can’t afford to pull back from its digital strategy; it just needs to smooth the path a bit. Maybe new leadership will help.

Jason Cother

Jason Cother is a senior editor at Hoover's, having served in a variety of roles since he first joined the company in 1997. Jason’s hobbies include building upon his 30-year collection of TV Guides (yes, just like Frank Costanza) and matching wits, usually unsuccessfully, with his three pit bulls. Follow Jason on Twitter.

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