Following
yesterday’s report that EA was laying off more Star Wars: The Old Republic personnel, their stock hit a year-long low of $11.28. It’s been a
sharp decline for EA over the past year, and though many gaming companies aren’t performing particularly well, EA is among the worst.
It’s so bad that CEO John Riccitiello had to come out and start
making excuses for their performance.
“After many years of stellar growth, we more recently got into a place where I think investors are having a hard time understanding where growth in the industry is coming from. We’re at a point where the new console generation is not yet been fully announced, so people don’t know what’s coming there.
“And they’re unclear about ongoing growth in the
Facebook platform for gaming and mobile. So we’re sort of in a transition period from an investor perspective.”
But is that really the reason? Investors just don’t understand gaming? That would seem to be ignoring the root causes of EA’s specific woes, and it’s worth discussing what’s been so terrible about the last year for them that can account for this steady decline.
1. The Old Republic is Likely a Bigger Disaster Than Anyone’s Saying
This was touched on briefly in the post yesterday about the SWTOR layoffs, but it’s perhaps a bit unclear as to how much EA had riding on The Old Republic. The game was meant to be the first serious threat to Activision/Blizzard’s World of Warcraft, yet failed to make much of an impact, and has been shedding users since launch.
Even if the game is halfway decent and has attracted a modest following of a million players or so (though it’s likely less than that now), that’s not enough to call it a success. Far from it, in fact. Though EA never officially released budgetary figures,
estimates are the game took between $200 and $300 million to develop, with marketing costs inflating that figure to possibly as much as $500M. Even if the numbers are off by half, it would be one of the most expensive games ever made.
Since release, there have been many layoffs associated with SWTOR, including the executive producer of the game as announced yesterday. SWTOR might end up going free-to-play like so many other of World of Warcraft’s competition, but that’s not the model that’s going to earn them their money back. They really needed the monthly fee model to work, and the fact that it hasn’t makes the game a failure, no matter how many players a free-to-play switch may bring back.
2. Battlefield is Not Call of Duty
Last fall, there was a much hyped battle for the ages. EA’s Battlefield 3 vs. Activision’s Modern Warfare 3. Call of Duty, according to many, had grown stale, and EA’s vehicle and teamwork centric Battlefield was the answer gamers wanted.
Battlefield 3 sold well. Very well. In fact, it was EA’s best launch of all time, as the title sold five million copies in its first week. It was a very respectable number, and coupled with critical acclaim, it seemed like a big win for EA.
But there’s nothing quite like a Call of Duty launch. Modern Warfare 3, like previous COD games before it, shattered not only every video game sales record ever, but every sales record across
any form of media. It sold 6.5M copies in a single
day and got to a billion dollars in sales faster than Avatar. To put EA’s juxtaposed Battlefield launch in perspective,
Michael Jordan might make $180K a day from endorsements, but despite how rich he may seem,
Bill Gates could buy and sell him like he was nothing.
Simply put, EA does not have the capacity to compete with Activision’s biggest franchise, and coupled with their inability to tango with World of Warcraft as well, these are two huge categories they’re consistently losing. And that has never been more obvious than it was last year as SWTOR and Battlefield were direct assaults aimed at Activision’s top two properties, and for all their millions in development and advertising, they barely made a dent.
Technically this is a Bioware problem, but a Bioware problem
is an EA problem. I don’t believe EA intervened to specifically make Mass Effect 3 worse the way some claim, but even if it was all on Bioware, it reflects back onto their brand.
There was controversy from the start as the game was announced to have Day One DLC that fans deemed rather essential to gameplay. It looked like a $10 tax to access content that should have come with the game in the first place, and it left a poor taste in fan’s mouths from the outset.
The ending debacle is where things really fell apart. The final moments of the game seemed rushed and unfinished, and left the overwhelming majority of fans disappointed with their story’s conclusion as it simply lacked any sort of resolution. It may have been a ploy to sell future DLC, but it also could have been a time crunch issue. ME3 had already been delayed, and perhaps there simply wasn’t time for a more fully fleshed-out ending. That would in fact make EA to blame.
Between these two issues, Bioware lost a lot of fans, and EA suffered the wrath of angry consumers who believed that they’ve corrupted their once beloved studio. Between ME3 and SWTOR, EA and Bioware’s relationship has been extremely rocky this year, and I’m not sure how long the two can hold together.
4. EA is Constantly Losing the PR War
Many companies are moving forward with practices that consumers deem bad for the gaming industry. Ubisoft has spearheaded always-on DRM. Activision continues to charge $15 for map packs that are rehashes of old content. Yet neither of them draw quite as much hate as EA, which was literally
voted the worst company in America this year, a mantle they laughed off rather than recognizing it as a serious issue.
There is simply a public perception that EA is not a likable brand. Yes, it happens with those other big companies as well, but it’s not nearly as virulent as when fans express their displeasure with EA. Their new “Origin” gaming platform as done nothing but aggravate players used to the more refined Steam, and chats with EA customer support have been so laughably unhelpful at times, screenshots of them
have gone viral.
Whether EA deserves all this hate or not is unclear. The fact is they make games people love, yet they’re perceived to be the great evil of the gaming industry based on how they treat their customers. Or at least how the customers feel they’ve been treated.
5. They May Be Jumping Into the Social Gaming Pool as the Water is Draining Out
This is my own private theory, but I believe there’s a social gaming bubble just waiting to burst. The evidence seems clear. Established titles like everything Zynga makes are bleeding millions of users at a time, and the app games market is now flooded with so many clones and rip-offs it’s hard to sift through the muck to find anything worthwhile. It would appear unsustainable.
But this year EA has bet big on social gaming. They acquired a few social games companies including PopCap, the guys behind Plants vs. Zombies and Bejeweled. In total, they’ve spent millions attempting to carve out a space for themselves in the social scene, but they may have gotten in after the market had peaked.
They have found success with The Sims Social, which has graced the top ten charts, shoving aside whatever Zynga “Ville” title has lost the most users that month. But they need more than one or two big hits to really compete. Zynga is itself in decline (another company with lackluster customer support), so that may be a boon to EA in the coming year, but if interest in social gaming itself wanes, they could be in trouble.
It simply hasn’t been EA’s year for a number of reasons (five, if you’ve been counting). To right the ship they need to put their focus back on their customers, the ones paying their bills, and worry less about DRM, DLC, ship dates or anything else that will make a few bucks at the expense of consumer good will.
