Bonus Round – Why Riccitiello Had To Go.

Let’s look at the evidence.

 

So, gamers around the world are coming down from last nights unhinged high. The Wicked Witch of  the EAst is dead. John Riccitiello will soon be out of EA forever.

However, I find it perplexing that Peter Moore and many industry analysts have said that Mr. Riccitiello did a good job, and grew the company. Because for me, never have I seen a company more poorly managed and run than EA have been over the past few years. I understand that it might be polite to give him a fond farewell even if you think he was an absolute twat of the highest order, but there’s polite and then there is deluded. And I think unfortunately we’ve already crossed into the territory of the fabricated.

For example; EA’s share price. When Mr. Riccitiello came to the CEO position, EA had come in from the cold and was resting comfortably on $68 a share. That was in 2007. In 2013, the EA share price now stands at £18. That’s a near-75% drop. You can argue this doesn’t mean much to us as customers; but to the shareholders, to the investors, this matters greatly. Sure it’s a great entry point for a new investor but those with long-standing shares in the company – staff who rely on it for their company pensions, for example – it’s seen their future nest-egg and/or investments crippled beyond measure. It’s amazing that it was tolerated for as long as it was, because there is certainly something perplexing about this.

Then you come to EA’s own investments. Over the years, EA have acquired many studios – BioWare, Maxis, Visceral and others. So let’s perhaps begin with the ones that did the most harm – PopCap and Playfish. Both were strong contenders in the “Social Gaming” market, one which has been on shaky ground for a while. To acquire them, EA paid an eye-watering $400 million for Playfish and $600 million for PopCap. That’s a billion dollars, right there. I said on my older PlayHard blog that this made no sense; not least because at their own at the time profitable rates, it would take ten to twenty years to pay their way. A long-term investment focused on short-term gains, perhaps, but I’ve barely seen much from either. They’ve done precious little in the short-term, and without a plan, the long-term is questionable as well. That’s a lot of money wilfully thrown into an arena that it sees no sensible reason to push. Whilst EA’s “App Gaming” scene is interesting, with Real Racing 3 gaining some attention for good and bad reasons, it’s got to make up for this huge investment. And that just seems to be an impossible ask.

As for other studios and games, it’s a mixed bag. EA have had to concede in recent months that Star Wars: The Old Republic is, effectively, a bit of a commercial bust for them. It has helped to taint the reputation of one of the industries most beloved developers; BioWare. Much like the start of Riccitiello’s rule, BioWare came in with two relatively new IPs at the time – Dragon Age, and Mass Effect. Both series have been put through the wringer since. When Riccitiello began, Dead Space was an exciting new IP. Dead Space 3 has seen lower-than-expected sales.

It isn’t just sales however; Public Relations began so well with the defence and annihilation of Dr. Tim Langdell, and Mr. Riccitiello seemed quite nice and humble. However, over the years he has publically made numerous faux-pas in public, quotes that will haunt EA and the industry for the rest of time as the worst excesses to have been put upon it. When Riccitiello came to his position, the industry bogeyman was a Mr. Robert Kotick, CEO of Activision-Blizzard. Mr. Riccitiello trounced Mr. Kotick in the race for the most hated pariah of the gaming world, and kept on digging that hole feverishly when he had long-since usurped the throne. He never stopped, and most of us all but forgot about the once-vilified Mr. Kotick because he had been beaten. His methods are still not much better than EA, but Activision must surely have sighed with relief when the focus was snatched away from Bobby Kotick, and put instead on John Riccitiello.

More than that, EA have had plenty of other more technical disasters. The recent SimCity debacle is one such issue, but it’s the tip of a very deep iceberg; from switching off servers to games where people have had to pay for multiplayer access, to micro-transactions being pushed into commercial games, to day-one DLC issues and cut content, from Online Passes and trying to crush the second-hand sales market, and that is before we come to the commercial and technical headache that is the Origin service – something which the market didn’t ask for, want and EA have been unable to move forward with because they’re stuck trying to get as much money from it as possible without trying to see if alternatives allow it to make more money. Under his watch, EA have become synonymous with the very worst business practices of the industry. Sure, EA may not have come up with the ideas, but where others saw sense and rescinded, EA grasped hold of the ideas with both hands and wrung then dry.

You may think this doesn’t matter – except it does. Making money (which EA haven’t been doing for a while, with a total net loss in his rule of $5.2 billion) is more than about the bottom line. For example, image is everything. Customers who are wary of a company aren’t likely to spend money on it – and if they have to, they will spend considerably less than if they viewed the company favourably. Last year, The Consumerist handed the 2012 award for the Worst Company in America to EA. People voted for it in spades; not because it was the most unethical, or the most destructive overall. But primarily for its nasty public persona, it’s disregard for consumers and it’s drive to take money for less, and less, and less. This has coincided with the reality that many of EA’s sales predictions were wildly optimistic; for example, it’s comment that Dead Space 3 needed to sell five million units to survive. When the previous games didn’t do that, you don’t throw more money at it hoping it will grow. You keep things as they are. You keep it going. EA’s drive to grow the market, grow game audiences, has seen those same audiences turn their backs, leaving them needing more sales than ever before. EA refusing to give people refunds over the SimCity issue another example of a company desperate to cling to our money; and when one of the games being offered as compensation on its hated Origin service is the prequel of SimCity 4, then as some have said on Twitter, you get the feeling the company is rather taking the piss.

With dwindling sales figures, losses, a plummeting share price and the scorn of both the press and the consumer on all sides of the fence, it was inevitable that John Riccitiello was going to be asked to leave this year. Wall Street 24/7 was completely on-point with that prediction; there is only so much that a CEO can preside over. Any one of these issues would have seen off a CEO, but for them to all align so perfectly in the last few weeks effectively doomed his position. He took over EA when it had new ideas, new concepts and – surprisingly – was in good spirits and financial health, as well has having scrubbed off its image as an evil nasty corporation. Under his rule, the wellspring of hope was corrupted, tainted and bled dry. He may have had good intentions. But absolute power corrupts, absolutely, and he has more than earned his place in the gaming world as a villainous Sith-like character. With the consumers revolting, the press mocking it, predictions about its demise and future rising and that little lie a couple weeks ago, one that seemed more believable than the truth at EA (a lie that exposed a shocking lack of communication and common sense within EA as it stands now), investors and shareholders, as well as the board, couldn’t tolerate his reign any longer. He may not have been involved in every decision; however, that he put his face to every bad decision made the task so much easier.

In many ways, Riccitiello became the perfect fall-guy. He was so willing and so keen to be seen and heard for whatever reasoning that most of the company hate was directed his way. He became the foci, the lynch-pin on which it all hinged. He has drawn criticism from all sides, all walks of life, all sides of the market and the business world. That said, knowing that his severance package included two years worth of salary also suggests that as a CEO, he perhaps wasn’t yet willing to let go. It sounds underneath like he needed some persuading. But the time has come. For EA to move on, it needs a new image. And when you’ve become a magnet for hate, ridicule and criticism to the level that John Riccitiello has, it’s very hard to move on without being constantly reminded of the past. EA will be reminded constantly, of course, but a new face will at least give the appearance of new growth.

If anything, I am surprised it took so long. Many of these problems have been creeping up slowly and they were not little problems either. They were obvious, ominous, large and looming. Perhaps that is ultimately why Riccitiello had no choice but to resign. A lot of what has been going wrong was entirely preventable; and he ignored it, either carelessly or wilfully. There was no longer any choice, any room to dodge the blows. Much of what has happened – is happening – could have been prevented. Should have been prevented. A little communication here, a little humility there and a little more listening to customers as well, for ultimately they are the ones who give you their money for a product.

However, for EA to move on, there is one last fly in the ointment; any new CEO would have to be new. It is unlikely that anyone taken in under Riccitiello’s guidance will be eligible, not because they will copy his ethos but because of that lingering trace. It’s perhaps telling that in Riccitiello’s absence, the stewardship of EA will be put into the hands of Larry Probst – the man who, in his own governing of EA, grew it from a $175 million company to $3 billion whilst also fixing its image and reputation along the way. It’s handing the baton back to someone who perhaps he knows had done a better job than he ever could. However, a CEO beyond the taint of John Riccitiello will mean that current favourites like the vocal Peter Moore will find themselves passed over for the position.

And yes, I’m sure Mr. Riccitiello isn’t the satanic anti-Christ that everyone says he is. I’m sure he was happy in his job, I’m sure he might have thought he had a chance to fix things. But realistically, no-one – not the consumer, the business world, the investor or the press – is likely to miss him. He just became too much of a liability. He served as the lightning rod for all the hate that EA ever had over the last few years; and now the hate is penetrating into the company, so it’s time to change the lightning rod!

His departure isn’t a surprise. Again, my only surprise is that it’s taken so long to come to pass. But recent weeks have certainly pushed the hands behind the scenes into action.

Change happens. One branch pruned… and a fresh branch needs to be grafted in. But it will take time before it takes hold. The big question is – can any new CEO survive when old ideas hit the fan with force?

I don’t envy the next CEO. It will be one of the most thankless tasks in the market…

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