Overconfidence, or do the musings of EA's CEO have a point?
Love it or loathe it EA is still one of the largest gaming companies in North America. Yet despite holding franchises like Battlefield, Mass Effect, Dragon Age, Need for Speed, The Sims, and others, it's been one of the many businesses that have been seeing a decline in stock and are looking to be taking some losses as of late.
The interesting thing here is that John Riccitiello, the current CEO of the company, doesn't really see this as the case, as he expounded upon in a recent interview with CNBC. It's a fifteen minute long interview that unfortunately doesn't have a text copy anywhere, but I believe that it's worth listening to.
I'd already covered that EA seems to be quite eager to be one of the early adopters of an all digital media delivery method, and it seems that they will not be dissuaded from that in spite of some of the current downtrend. Riccitiello cites the investors own lack of knowledge regarding the kind of gaming that's currently going on; that being digital gaming, social gaming, and microtransactions. These are the factors that he believes have lead to the downtrend in the stocks and the sales numbers for games as of late.
Riccitiello would say that the numbers mean nothing, because they only track the initial sales of games, rather than tracking things like DLC, Microtransactions, subscription services and the like. The idea he puts forth is that EA and others are moving from a product based business to a service based business.
The major angle that Riccitiello is taking is that the budget needs to shift partially from making the games to finding the actual audience and then keeping them coming back. I can understand where that point of view is coming from, but I'm not sure that I completely agree with it.
I think that there is some inherent danger in this kind of gamble, one that sees a different, but not radically different. Companies like Zynga are losing money (not that you'll see me complaining about that) and while I'm hesitant to say that the kind of experience they offer has hit the wall in terms of sustainability and profitability, I think that it's not the golden profit train that it was once lauded as by some of the industry insiders.
I think that EA would do well to remember that one of the key parts to keeping an audience is also not pissing them off, something that EA hasn't been doing very well as of late. Certainly you can grow a userbase even with a remarkably simple game: things like Angry Birds prove that, but at the same time you can't pull crap like DRM and bait-and-switch microtransaction fonts and expect people to stick around.
Whether EA is actually moving in a better direction because of all of this really does remain to be seen. I suppose that I'll hardly be the only person watching, given that their success or failure will show other companies where to tread.