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Activision is doomed – why EA staffers joining casual games startups spells the end for Activision

By on September 8, 2009

No one leaves Activision to join a casual or web-gaming business, for the simple the reason that they just don’t get it. EA’s recent weakness is a strength, if only they can stop the brain drain.

The exodus of EA staff to casual gaming startups continues apace. Owen Mahoney, former head of corporate development at EA, is now CEO of casual games business Outspark.

The exodus of key staff from EA to casual games startups is substantial:

  • Owen Mahoney, ex corp-dev, now CEO of OutSpark
  • Louis Castle, the man behind Westwood Studios and Command and Conquer, now CEO of InstantAction, a site which focuses on high-quality web games
  • David Gardner, former head of EA Europe, now CEO of Atari
  • John Pleasants, former COO of EA, now CEO of Playdom, a leading publisher of MySpace games

Bad news for Electronic Arts, right?

It would be easy to argue that this was terrible news for EA, as many of its best and brightest leave for pastures new. After all, following the Blizzard merger, Activision became the biggest games company in the world, a crown that Bobby Kotick has been chasing for his entire career. Electronic Arts became #2 and all the smart people left, right?

No.

If that were the case, why are all the smart people not joining Activision, the new 800 lb gorilla?

EA innovates; Activision markets

Can I seriously argue that EA innovates? The ultimate franchise-milker? The games behemoth we love to hate?

Yes.

Electronic Arts, under John Riccitiello, has worked out that the world is changing. That the days when a games company can control physical distribution or where the console is inevitably the dominant platform, are coming to an end.

EA has been experimenting for years. With Pogo and with Majestic, with Battlefield Heroes and with FIFA Online. Not all of the experiments have worked, but EA has known that it needs to adapt. It has hired bright minds and technologists who worry about the future of games.

Activision has hired marketers. Its top tier of management come from FMCG backgrounds like Proctor and Gamble. They understand how to take a barely-differentiated product (like soap powder) and, using marketing spend and distribution muscle, create a world-leading business.

And to be fair to Activision, they’ve done a great job. They have billion dollar franchises in Guitar Hero, World of Warcraft and, probably, Call of Duty. They refuse to publish games like Ghostbusters that can’t become $100 million franchises.

In short, they can beat their competition into a cocked hat at selling boxed games in stores.

The right team, playing the wrong game

But the world is changing fast. Farmville has 33 million users after only two months of operation. All these startups headed by ex-EA staffers are eating into Activision’s market. Not in a way that causing consternation in Activision’s boardroom yet. But it will.

And then what: Activision’s top team will suddenly have to learn about the web. About free and freemium. About the irrelevance of brand marketing and the importance of metrics, A/B testing and conversion rates.

EA’s team are flexible. They’ve tried out new things. They believe in the new world and they’ve left EA to put their money and careers where their mouths are. They get it.

So EA has the better talent for the new world. Now all Riccitiello has to is to keep them.

 


Am I wrong? Am I missing Activision’s innovation or underplaying EA’s terminal decline? Let me know your thoughts.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com
  • Tiki

    Yeah, in many ways that's spot-on – I've got a huge amount of respect for what EA have done over the last few years.

    In many ways though, Activision aren't even the worst offender here; at least they've got some fairly forward thinking and talented people dabbling in web stuff at Blizzard (to my knowledge, the WoW Armory was fairly forward thinking for its time). It's the mid-size and smaller studios who aren't seeing the opportunities in free-to-play/social gaming – and who are in arguably the better position to try new things – that should be concerned.

    Yes Activision is going to start to see their profits eaten into by FarmVille et al, but they're in a financial position to muscle their way out of it and the boxed product isn't going anywhere for a while. The small guys who are suddenly going to see all of their contracts heading to Flash developers are going to suffer more.

  • Name

    Hmm. I think your analysis is right but your conclusion is wrong.

    Here's the thing: casual hardcore games like Farmville etc. aren't jeopardising the majority of games which Activision (and indeed EA) publish. They're completely different products.

    *However*.

    I think Activision are certainly missing out on the additional market/dollar opportunity in this space by not experimenting here (although they have partnered with Jolt to launch Legends of Zork).

    The next wave of gaming growth is certainly being fuelled by online and the browser-based stuff will be at the front of it. Activision isn't doomed, but unless it starts revving the M&A machine, it's probably going to miss the growth spurt that other companies like EA will be part of.

  • Tiki

    Yeah, in many ways that's spot-on – I've got a huge amount of respect for what EA have done over the last few years.

    In many ways though, Activision aren't even the worst offender here; at least they've got some fairly forward thinking and talented people dabbling in web stuff at Blizzard (to my knowledge, the WoW Armory was fairly forward thinking for its time). It's the mid-size and smaller studios who aren't seeing the opportunities in free-to-play/social gaming – and who are in arguably the better position to try new things – that should be concerned.

    Yes Activision is going to start to see their profits eaten into by FarmVille et al, but they're in a financial position to muscle their way out of it and the boxed product isn't going anywhere for a while. The small guys who are suddenly going to see all of their contracts heading to Flash developers are going to suffer more.

  • Name

    Hmm. I think your analysis is right but your conclusion is wrong.

    Here's the thing: casual hardcore games like Farmville etc. aren't jeopardising the majority of games which Activision (and indeed EA) publish. They're completely different products.

    *However*.

    I think Activision are certainly missing out on the additional market/dollar opportunity in this space by not experimenting here (although they have partnered with Jolt to launch Legends of Zork).

    The next wave of gaming growth is certainly being fuelled by online and the browser-based stuff will be at the front of it. Activision isn't doomed, but unless it starts revving the M&A machine, it's probably going to miss the growth spurt that other companies like EA will be part of.