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Don Mattrick, the president of Microsoft’s game business, will leave the company and become the CEO of social gaming giant Zynga.
The news leaked earlier today in a report in AllThingsD, which cited multiple unnamed sources at the time. Zynga just confirmed the news, which is a major change in leadership at two of the game industry’s biggest players.
In a blog post, Zynga founder Mark Pincus said he will remain as chief product officer and chairman of the board.
“Over the last few months I’ve spent a lot of time thinking about all that we have achieved together as a company,” Pincus wrote. “We have pioneered social gaming and helped make Play a core part of millions of people’s lives. But Zynga has so much more potential ahead, the opportunity to be an Internet Treasure and deliver on our mission of connecting the world through games.
“As I reflect on the past six years, I realize that I’ve had the greatest impact working as an entrepreneur with product teams, developing games that could entertain and connect millions.”
Pincus lauded Mattrick’s experience of three decades in the game industry. Mattrick started Distinctive Software, his own game startup, at the age of 17. He sold the company to Electronic Arts and then spent a career climbing the ladder there, ending his EA tenure as head of worldwide game studios. He made the jump to Microsoft in 2007. There, he helped spearhead the launch of the Kinect motion-sensing system and helped turn around Microsoft’s business in gaming, making it consistently profitable. For the past couple of years, Microsoft has had the most momentum in the console game business, and it recently announced the details on the Xbox One, a next-generation game console that will launch in November.
Mattrick’s departure could set back Microsoft’s plans to launch its Xbox One game console and possibly frustrate Electronic Arts’ search for a new chief executive. After the news came out during mid-morning, Zynga’s stock price rose 10.4 percent to $3.07 a share, which was good for recent trading but was far below the $10 a share initial public offering price. Microsoft’s stock dipped slightly, down 0.2 percent. In after-hours trading, Zynga’s stock is up another 2.6 percent to $3.15 a share.
“Don is unique in the game business. He can execute in multiple domains – hardware, software and network, and he’s been the person responsible for game franchises like ‘Need for Speed,’ ‘FIFA’ and ‘The Sims.’ He’s one of the top executives in the overall entertainment business and he’s a great coach who has inspired people to do their best work and build strong, productive teams,” Pincus wrote.
Pincus said Mattrick starts next week and he will join a company-wide meeting Tuesday. In his own blog post, Mattrick wrote, “I’ve admired Zynga for years. You have redefined entertainment and brought gaming to the mainstream. Only Zynga combines engineering, industry-leading product management and analytics to deliver products that strike a chord with consumers and add real value in their lives. More than 1 billion people have installed a Zynga game across web and mobile and popular franchises like FarmVille and Words With Friends are a daily habit for millions of people.”
He addied, “It’s a staggering milestone that speaks to the mass market opportunity ahead of all of us. I joined Zynga because I believe that Mark’s pioneering vision and mission to connect the world through games is just getting started. As Mark was recruiting me to come here, I was impressed by his creativity, drive and the clarity in which he sees the future of games and entertainment as a core consumer experience. The news is a shocker considering that Microsoft’s multibillion-dollar game business is several times larger than Zynga’s $1 billion or so business. In that sense, the move is a step down for Mattrick. But the change speaks volumes about the nature of the challenge at Zynga and its opportunity for bigger growth.”
Before the confirmation, the skeptics were out in force. One joker on a thread said, “Man jumps off Hindenburg, lands on Titanic.”
“This is almost unexplainable,” said one industry source who declined to be named.
“Microsoft could mitigate potentially negative outlooks by positioning such leadership change at Xbox as part of the Xbox One policy turnaround,” said Billy Pidgeon, a game industry analyst. “Don Mattrick is very talented and could affect powerful changes at many game companies. Zynga would certainly benefit from such leadership. However, even major changes may prove insufficient to turn Zynga around at this point. Zynga has lost too much ground in the social and mobile sectors while smaller competitors have gained significantly.”
In his own statement, Microsoft chief executive Steve Ballmer wished Mattrick success on a “great opportunity” and said that Mattrick’s executives would report directly to him.
Mattrick is likely one of the only industry executives with enough credibility to convince Pincus to give up the CEO spot at Zynga, the social game company that he founded in 2007. Zynga saw a meteoric rise as gaming took off on Facebook, and it went public in 2011. But as the company grew to more than 3,000 people, it lost its mojo. Competition on Facebook rose, and Zynga failed to execute on the transition to mobile games, where other companies such as King and Supercell have the advantage. The stock has been under pressure for more than a year, particularly since John Schappert, the No. 2 executive at Zynga and a former Electronic Arts veteran, resigned from the company.
Mattrick had been considered a frontrunner to be the next CEO of EA, whose previous boss, John Riccitiello, resigned earlier this year. Both EA and Zynga are in need of a seasoned hand as game markets evolve and competitive landscape changes. Zynga recently shut down a bunch of games and laid off more than 500 employees. EA is trying to hold costs down even as it staffs up for next-generation games on the new consoles (though it’s laid people off recently as well).
Zynga’s board could hire Mattrick only with the consent of Pincus, who still controls more than half of the company’s voting stock. We had heard heard that Mattrick, a Canadian native, has a new home in the Bay Area and that he has long wanted to return to the region.
Mattrick’s most recent strategy, as revealed in the unveiling of the Xbox One, got mixed reviews. Gamers reacted negatively to policies relating to consumer rights. Specifically, they hated that Microsoft planned to curtail the sale and use of used games, didn’t have a clear position on privacy related to the new Kinect camera in the system, and would require an online check-in for the box every 24 hours. Sony also undercut Microsoft by pricing the rival PlayStation 4 (also coming this fall) at $399, while Microsoft pegged its initial price at $499.
The connections among the insiders at the companies involved run deep. Bing Gordon, former chief creative officer at EA, is a longtime friend of Mattrick’s. Gordon is also on the board of Zynga.
Microsoft had to backpedal on the consumer rights policies, but it hasn’t changed its price yet. While those foibles were widely criticized, it’s not likely that those matters alone would cause Mattrick to seek a new job, at least in my opinion.
In a statement, Zynga board member John Doerr, the general partner at Kleiner Perkins Caufield & Byers, said, “Mark took the lead in working with the entire board to recruit Don to Zynga. All of us at Zynga — and no one more than Mark — are thrilled Don is joining our mission to connect the world through games. This is a win for the people who play our games, the talented employees who make them and the investors who believe in our long-term value. This also is a win for Mark, who can devote his full attention to conceiving and building the best social games in the world.”
Gordon, who is also a partner at Kleiner, said in a statement, “Don is an incredibly talented leader who plays to win. He is someone who’s constantly attracting great talent and coaching teams towards success. I’ve long admired the rigor and passion he brings to an industry that he, frankly, helped create. Don loves games and gives developers the freedom they need to surprise and delight players; but he also knows better than anyone that an innovative games company is a demanding and complex enterprise. Few people are up to that; Don is.”