5 reasons Electronic Arts is in big trouble (which is bad news for Canada)

EA has pointlessly chased trend after trend.


With the Mass Effect trilogy over, is there anything to look forward to from EA?

So John Riccitiello is stepping down as CEO of Electronic Arts, the biggest game publisher in the world. That shouldn’t come as a surprise to anyone.

Riccitiello on Monday took responsibility for the company’s poor financial performance—its shares have fallen to nearly a third of their value since he took the reins in 2007, with the past year looking particularly brutal. “It currently looks like we will come in at the low end of, or slightly below, the financial guidance we issued to the Street, and we have fallen short of the internal operating plan we set one year ago,” he wrote in a letter to employees. “For that, I am 100% accountable.”

Indeed, Riccitiello’s tenure is perhaps a textbook case of how not to run a company in what is an innovation-driven sector. Rather than create new experiences, EA has pointlessly chased trend after trend, with little to show for it. It’s no wonder the company has been suffering death by a thousand cuts.

Exhibit 1: It turns out Activision had a big hit in Call of Duty, so what did EA do? It tried to copy it—not just once, but twice. With its rival pumping out annual iterations of the mega-franchise, EA figured it could do the same by rotating Medal of Honor and Battlefield. While all three franchises have their merits, Riccitiello evidently never stopped to wonder whether gamers might eventually develop military-themed first-person shooter fatigue. And as a big fan of the genre, let me just say that, oh yeah, the fatigue is in.

Exhibit 2: Activision also has a big hit in World of Warcraft, a massive online role-playing game. EA can’t have that, so it spends big bucks developing Star Wars: The Old Republic. In fact, analysts predict it’s the most expensive game ever made. The Old Republic launches with a monthly subscription fee and starts strong, but nosedives after only a few months. Scrambling to make up lost ground, EA decides to make it free, with in-game purchases now the revenue model. But that move is marred by server problems, which brings us to…

Exhibit 3: The SimCity debacle is only the latest example of EA proving completely inept in running online games. From Battlefield 3 to The Simpsons Tapped Out to The Old Republic, the company just can’t seem to cope with demand for its games. Moreover, by forcing draconian DRM locks on these games, requiring an Internet connection to play them, a move aimed at fighting piracy, EA has earned the righteous enmity of its customers. This isn’t the right kind of innovation.

Exhibit 4: When Nintendo launched the Wii U last fall, where was EA? Or more acutely, where was EA last month when Sony announced its PlayStation 4? Those of us at the launch were pretty weary by the end, after a seemingly endless cavalcade of developers talking up the upcoming new console. But the biggest games maker on the planet was nowhere to be found. EA certainly doesn’t seem to be supporting innovative, new hardware because that would require, you know, thinking in innovative and new ways.

Exhibit 5: As a gamer, I can’t think of a single EA franchise I’m excited about. Mass Effect is played out and Dead Space is out of fresh ideas. Its FPS games are tired and starting to look dated. Looking at rivals, that’s not the case: Ubisoft has the newly rejuvenated Far Cry and Rayman series, plus the upcoming Watch Dogs and Splinter Cell reboot. Activision, meanwhile, is making hay with Skylanders and has the promising Destiny (from Halo developer Bungie) coming up. EA? Nada.

The company’s financial health has significant repercussions for Canada, where it has more than 2,000 employees. Its biggest studio, in Burnaby, is responsible for several of its biggest sports franchises, including FIFA and NHL. While those cash cows are probably relatively safe, EA’s other Canadian studios, including BioWare in Edmonton and its Montreal operation, aren’t looking quite so solid.

Whoever the new CEO ends up being, he or she needs to put the focus squarely back on in-house innovation. Video games are a market dependent on it.