CEO on the crisis talks at EA's darkest hour, and how far the firm has come from failure
John Riccitiello has opened up on the pressures, pain, failure, embarrassments, loss and hope of his four years so far as Electronic Arts CEO.
The conspicuous publishing boss has hitherto only spoken of tough times at EA when addressing the firm’s nervy investors, but at a graduation speech last week at his old university, Riccitiello opened up. And he did so in a manner extraordinary for the boss of a company fighting for its life in an ultra-competitive industry.
“Let me make the point clear: The set-backs you will face in your business career will feel far more wrenching than you can imagine today,” he told a packed crowd of graduates at the Haas School of Business at Berkeley University.
“It’s how you deal with failures that are most likely to define your careers,” he said.
“There will be losses, there will be embarrassments, there will be pain, and there will be achingly long periods where people won’t believe in you.”
That summary was elaborated on with a detailed account of the toughest decisions he’s had to make for EA.
These decisions have been remarked on and analysed countless times over, but it was Riccitiello’s account of them that was startling.
‘WE WERE FAILING’
“Four years ago, I held a meeting and told [EA] employees we were in a do-or-die situation,” Riccitiello said.
“We were failing. We could invest and retool for radical change, or we could accept a shrinking share of a shrinking pie and eventually die.
“For the first time in the company’s history, we had to dramatically cut costs and personnel. This was a huge challenge to plan and execute, and frankly, a huge challenge to our company’s culture.
“Not that many years ago, in the late nineties and early 2000’s, EA was by far the most successful company in the games industry. We were particularly strong on the leading platform of the day, the PlayStation 2.
“By 2007 and 2008, the story was very different. From the transition between the previous generation of consoles and the current one, our product quality suffered, our development costs skyrocketed, and we had stopped growing.”
Despite the devastating slump in profits, Riccitiello was aware of yet another Herculean challenge on the horizon.
“The internet was about to do to the games industry what it was going to do to music, movies and newspapers,” he told the crowd.
“We were facing a world going through unbelievable change, with the rise if the smartphone, social networks, and more recently the iPad – each of which have turned out to be a platform where gaming is the number one application.
“In the churn of all this industry change, EA found itself on the wrong end of a technology transformation. Our profits were in rapid decline, before they went entirely negative,” he said.
TIME FOR CHANGE
“In order to succeed, we would have to fundamentally change how EA creates, publishes and monetises game content,” Riccitiello explained.
“We had to change Madden NFL from a product you buy at a game store to a place you visit on your mobile phone, your social network, and your trusty Xbox.
“We realised we had to dramatically increase our game quality in order to earn back the trust of our consumer. We needed to move EA from its core strength of games sold at retail, and move head-on into a world of connected devices, smartphones and social networks.”
If the plans on paper seemed inspiring, the damage done in implementing them were devastating.
EA has cut over 1,500 workers since Riccitiello took over. It has closed major studios and reported successive quarterly losses as the oceanliner-sized business tries to change path.
“We knew some employees would survive the change, but others wouldn’t. We knew it would be hard, but we had no idea how hard.
“We knew our enormous investments wouldn’t please investors, and that our return would be a long way off.
“The press and investors told us that our investment in digital was just not a good idea. It proved very hard to hear the negative drumbeat from the press and the public while at the same time tackling very hard challenges at work.”
Riccitiello turned to more personal accounts of his four years in charge of thousands of creative people.
“I lost a few friends in the process of change,” he said.
“Smart, creative people that just couldn’t stomach the transition. Some stopped believing. Some left to join companies they thought would provide a quicker profit and payout.”
Having pulled EA through the darkest nadir of its thirty-year business, Riccitiello says he can see the light at the end of the tunnel.
“If you want to succeed in any way that really matters, you have to fail,” he said.
“What matters isn’t failure itself, but what you do with that failure; how you pick yourself up and get back in the game.
“Like everyone else that’s had a long business career, I’ve had first-hand experience with failure, and have had the opportunity to learn and recover from it.
“I wish I could tell you it has all paid off, that we’ve been fully vindicated. Not yet. We’ve had a few wins but there’s much more to do.
“We’re proud our game quality is up, our costs are down, and our profits are up. The notion that we can build a games company beyond packaged goods is working, and we’re happy with Wall Street’s response.
“We didn’t quit. We stuck with it, and made lifelong friends. I believe we failed well,” he added.