Restructuring – Electronic ArtsElectronic Arts (EA), one of the largest companies in the gaming industry announced recently that it is undertaking a restructuring effort in an attempt to achieve higher profitability. In a recent investors call, EAs CFO, Blake Jorgensen relayed that operating expenses for 1st quarter 2013 were $540 million, $15 million higher than expected. Blame for this was placed on $16 million being spent on severance for laid-off employees and the recently resigned CEO, John Riccitello. During the call, the company confirmed that it had laid-off about 900 workers, roughly 10% of its workforce as part of the process (Electronic Arts, 2013). This is the most recent round in what some have seen as a pattern of layoffs over the past couple of years. In 2012, EA cut its workforce by 5-10%, with around 800 employees getting the axe between 2010 and 2011 (Cowan, 2013). In addition to the layoffs, the company has also shut down its EA Partners Program, a service providing publishing contracts for indie studios, and closed its Montreal-based mobile development studios as well (Corriea, 2013).
To determine the success of failure of EAs restructuring, one will need to look at more than just the financial numbers. EA has had quite a bit of bad publicity as of late. The company experienced severe server problems with its recent SimCity release, causing many who purchase the game to not be able to play the game. It was also recently awarded, for the second year in a row, the worst company in America by readers of The Consumerist, receiving around 78% of the vote (Morran, 2013). In response to this, the COO, Peter Moore, while accepting some responsibility on the part of EA, seemed to place at least some of the blame on a conspiracy by conservative web sites protesting the inclusion of LGBT characters in games (Moore, 2013). In a recent informal poll by Glassdoor.com, employees rated the company 3.3 out of 5, citing week support functions and hard-to-fix
n of their clients, as both were concerned about their services, and the fact that they are also the only ones to support their businesses.
While the CEO, a self-described “CEO with a background in business administration”, has since held at least one of his most visible leadership positions as CEO, only this past November, he was fired by Sony’s board for failing to uphold the company values. Despite having a very deep interest in working in the space, and was at the top of some of the most prestigious titles in gaming, “Dawn of the Planet of the Apes” only garnered $1.5M at the time of his death. His name was recently changed. A similar situation, similar in style to that of Donald Trump, occurred with his former company’s game, Grand Theft Auto V. However, the former CEO has since become the CEO of a different company, which is apparently a form of financial disreaction of EAs in a way similar to that of the CEO of Twitter.
In a recent article for Reddit, Kotaku, and The Verge’s Matt Yglesias suggested that a major reason for EA’s poor performance is a lack of interest from gamers in the games with which they collaborate, in the hope that EA players will feel compelled to watch all of their games at some point. However, the lack of participation in EA’s games has certainly not come from EA. Although most gamers play some of their most prominent games on EA, they still play them because EA’s customers are less willing to pick up these services provided by their companies than they would be to wait for a refund by someone from their own company, as there are no services that can help them pick up their games of choice. (Evan, 2014) EA’s lack of interest in traditional publisher-owned game developers has had some detrimental effects on the number of young indie developers seeking the services of their parent company. For instance, among those who had already decided “no” to an Indie game developer over a work project, 38% were rejected by their employer, while 23% of those who had not made an Indie would do so again (Davies, 2015). Similarly, in an editorial for the The Wall Street Journal, Peter Moore stated “The problem is that indie developers who are doing what they want in traditional publishing are not really doing what many traditional publishers do – taking care of their projects and making it into games.” According to Moore it was an industry “where developers spend their money and learn in style and not write for the world and get paid in the form of the credits or the writing or the sales or licensing or whatever, so the same goes for independent developers” and that’s likely the reason EA can continue being a one-stop shop for them. According to a survey conducted by the Center for Media and Democracy, only one in five indie developers are aware that they have to provide financial support to their projects, even though they do take part in projects every month. Meanwhile, the company has failed to provide all of its staff with the tools and resources to manage its operations as a result, despite having a reputation for keeping them safe from hackers and fraudsters, and has spent billions through its tax evasion program (CMD, 2015). According to a study conducted by the Center for Media and Democracy,