Mitch Lasky sold his mobile entertainment business, Jamdat Mobile, to Electronic Arts for $680 million in late 2005. He left the company a year later and became partner at Benchmark Capital. But he’s since become a bit of a thorn in EA’s side and criticized its strategy in a recent blog post.
On Monday, EA announced it would miss its December quarter targets for the second year in a row. It’s also in the midst of laying off 1,500 employees, and EA had a bleak outlook for the coming year as well. On his blog, Lasky castigated EA management, saying, “EA is in the wrong business, with the wrong cost structure and the wrong team, but somehow they seem to think that it is going to be a smooth, two-year transition from packaged goods to digital. Think again.”
Today, EA took a shot back at Lasky. Jeff Brown, head of corporate communications, said, “Mitch needs to try de-caf. It’s never easy being turned down for a job, but most people don’t spend three years obsessing about it. Since Mitch left EA, Apple invented the iPhone, Facebook evolved to include a gaming platform and EAMobile became the world leader.”
The clear message is that Lasky wanted the job that went to John Riccitiello, hired as chief executive of EA in 2007. Brown said that EA has a clear strategy focused on delivering top quality games, managing costs, and moving toward online game play and distribution on a variety of platforms.
Lasky pointed out that while Activision Blizzard scored big with Call of Duty: Modern Warfare 2, EA had no major hits in the December quarter. He said that while he was at EA, he advised then-CEO Larry Probst to cut expenses by $200 million a year and reduce headcount because of the big changes coming in the industry. Lasky felt spending on titles like Spore and The Godfather, both of which turned out to be disappointments, was ridiculous, and spending on mediocre titles like The Simpsons and Superman had hit “appalling heights.”
Lasky wanted EA to invest more heavily in digital distribution and games-as-a service, which is taking off now on platforms such as Facebook. He said that EA wasn’t bold enough to act on the knowledge that the core business was weakening and EA needed to shift to new platforms. Lasky says EA’s recurring sports revenue has weakened, its big budget hits such as The Sims have lost steam, and the only leg of its three-legged stool is digital investments such as Pogo.com, mobile gaming, and partner titles.
Sports has been hurt by rising costs. Lasky said that Riccitiello’s greatest failure is the lackluster performance of the EA Games division, which makes a mix of titles such as DeadSpace and Warhammer Online. This division made a lot of risky bets on original titles, and most of the bets were bad ones, Lasky said. EA bought BioWare/Pandemic from Elevation Partners, where Riccitiello used to work, but it just shut down Pandemic for non-performance.
“It’s a bankrupt strategy,” Lasky said.
Lasky believes that someone will buy EA now that its stock price has fallen once again below $4 billion, down $11 billion in the past couple of years. By comparison, EA’s big rival, Activision Blizzard, has fared much better thanks to its World of Warcraft online game revenues. Lasky mentions Disney as a buyer, as well as others such as China’s TenCent, which could swallow EA.
I’m sure we’ll get into these issues at our GamesBeat@GDC conference in San Francisco on March 10. One of the featured speakers is John Schappert, chief operating officer at EA.
GamesBeat 2014 — VentureBeat’s sixth annual event on disruption in the video game market — is coming up on Sept 15-16 in San Francisco. Purchase one of the first 50 tickets and save $400!