The Rise of EA ... And Where It Went Wrong

The whole point of video games is that they are fun.
So how did Electronic Arts grow to become one of the biggest players in the gaming world
and yet was voted the “Worst Company in America”?
Why did ‘Challenge Everything’ become ‘Milk Everyone Dry’ and has it made any
difference to their bottom line?
Today we’re going to look at the innovative origins, bold decisions and later missteps
of Electronic Arts.
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The founder of EA, Trip Hawkins, already sounds like a video game character, so it’s no
surprise that he ended up playing a huge part in the development of the industry.
As a teenager, Hawkins loved board games and even designed one of his own, called Accu-Stat
Pro Football, based around his love of American football.
But whereas a regular kid might just cut up some cardboard and invite a few friends over,
17-year-old Hawkins convinced his father to give him a small loan of $5,000 and actually
tried to put the game into production.
He ended up making about a hundred copies, but the game was a commercial flop.
Nevertheless, it was an invaluable business lesson that would eventually serve him well.
Later on he studied at Harvard, where he majored in strategy and applied game theory.
In 1971, he got to see a prototype computer at a friends house, and that convinced him
that computers were the way of the future.
This led him to pursue a job at Apple, back when it had just 50 employees.
There he learnt everything he could, inspired by Steve Jobs’s drive and ambition, but
always with the knowledge that he was going to start his own business eventually.
So, four years later, when Apple went public, he cashed in his shares and set about creating
Electronic Arts, which he founded in 1982.
He started with 11 employees and $5 million in start-up capital, including money from
, the godfather of Silicon Valley who also invested in Apple, Atari, Google and Youtube
long before they were household names.
Hawkins played around with a couple of different names for the company, but the one he eventually
picked is telling of his philosophy: to him software developers were artists, not
just coding monkeys.
In fact, he even spent his time between leaving Apple and creating EA to look at the music
business and to study the types of contracts they had for their recording artists.
You can see this reflected in EA’s early releases like Pinball Construction Set and
Hard Hat Mack.
Their big, colorful covers featured the name of the game designers, or electronic artists,
written prominently on the front.
From the very beginning EA’s model was different from that of other game studios at the time.
Instead of putting actual effort into coming up with good ideas, they let freelancers submit
game concepts and then EA would pick the ones they wanted to work on, just like a Hollywood
movie studio selecting scripts.
EA managed the development of each game as if it were a movie rather than a traditional
piece of software, by focussing on the entertainment and the audience.
They ran multiple projects at the same time so that if a game or two sucked, all EA needed
was a good one to cover them up.
For the most part, and this is still true today, an independent developer or development
team would create the game and then EA would publish it.
Hawkins really believed in games as a source of entertainment.
He wanted society to break out of brain-dead television and to embrace the interactivity
of games by connecting with others.
Although, don’t ask your average Call of Duty player how that worked out.
In 1983, EA stumbled upon a formula that would later allow them to totally dominate the world
of sports video games.
Doctor J and Larry Bird Go One on One was a basketball game, but by tying it to real-life
players Julius Erving and Larry Bird, and getting them to help with the development
and marketing, EA drew on a powerful idea: that everyone aspired to be like their idols.
If you were shooting hoops in the playground, you didn’t want to be yourself, you wanted
to be like Michael Jordan or Shaq.
Or if you played Dungeons and Dragons: you weren’t imagining yourself out there battling
evil, no, in there you could be like Robin Hood or Gandalf.
So, when you picked up a game with one of your real-life heroes on the cover, well,
that was a chance to bring your dreams to life on the screen.
If you go to a game store now, you can see how successful this idea was, with the faces
of famous sports stars peering out at you from the shelves, from Tom Brady on the Madden
18 cover to German soccer player Marco Reus on Fifa 17.
The Madden series was first released in 1988, after a long development.
In order to get the legendary coach John Madden on board, EA agreed to make the game as realistic
as possible in accordance with his immense knowledge of American football.
So far the series has about 30 versions, and a new one comes out every year with an updated
roster, and slightly better graphics.
This method of producing games with no real changes whatsoever has inexplicably brought
in $5 billion.
Of course, EA have covered a whole range of other sports too, from hockey and tennis to
golf and many others.
All these titles were put into their own division in 1991, with the creation of EA Sports, which
quickly bought up the official licenses to many leagues and tournaments so that only
its games could have the official players.
Aside from celebrity endorsements, another key to the success of EA was their persistence
in cutting out the middlemen.
Rather than handing their games over to distributors, EA went directly to the retailers in order
to keep a bigger percentage of the sales.
They made great deals with Walmart, Target and Toys’r’Us, which gave them noticeably
higher margins than their competitors.
When the market for games consoles began to grow, publishers had to take on the cost of
making expensive game cartridges.
This made it harder to release a game on multiple platforms since you weren’t just dealing
with the compatibility of the software, you needed completely different manufacturing
as well.
Thanks to their good deals, EA could afford this more expensive production, and releasing
on multiple platforms has now become a key strategy for them.
That’s one of the reasons why EA would not work with Nintendo back then, because they
wanted games exclusively for the Nintendo Entertainment System.
Instead, EA took a gamble on the new, not-yet-released Sega system called Genesis, which was twice
as powerful as most other machines, particularly the NES.
The gamble paid off and by 1991, the Sega Genesis was a shining success, largely because
of the popularity of the growing number of EA sports games.
Hawkins eventually resigned from the board in 1994, to pursue other projects.
The company, of course, grew without him, thanks to its sports titles and a number of
movie tie-ins, such as Lord of the Rings, Harry Potter and James Bond.
But along the way, as EA grew ever larger, they embraced a strategy that is one of the
main reasons they are now infamous within the gaming community.
Rather than simply publishing the games that developers made, EA started buying all of
the developers themselves.
They acquired Maxis in 1997, taking control of the SimCity series and eventually running
it into the ground.
In 2007, they bought BioWare and their hugely popular Mass Effect series, and then they
ran that into the ground as well.
At least they haven’t wrecked Star Wars: Battlefront yet.
EA’s list of acquisitions goes on and on, however, and what they often did after buying
a studio was to shut it down.
Pandemic, for example, was closed just a two years after purchase, with EA retaining the
intellectual property, of course.
A lot of EA’s releases now are simply rehashes of all these titles that they have acquired.
Fans feel like there’s no real development happening, merely a few updates and name changes
so they can market the same product all over again.
I mean, just look at the never-ending list of Madden and FIFA titles.
In the past a lot of innovations came from the smaller studios, but now that’s far
less likely to happen after so many have been assimilated.
EA have also had to adapt to the influence of the Internet: now, for example, they aggressively
push multiplayer modes in all of their games.
The trouble with online multiplayer is that you need to host it, which is pretty expensive.
Players have bought a game on the promise of online multiplayer, and then after a couple
of years, EA shuts down the servers and they basically can’t play the game anymore.
Even for the big games, where hosting is supposedly going to last indefinitely, players often
need to buy online passes, which greatly add to the cost of the game.
Another notorious EA strategy has been to release tons of downloadable content, or DLCs,
at a pretty significant price.
Mass Effect 3, for example, was released at $60, but alongside its launch was a crucial
DLC that cost another $20.
You didn’t have to buy it, but if fans had followed the series this far, they definitely
wouldn’t want to miss out.
To be clear, this is certainly not a problem that is unique to EA, but industry leaders
should always be held to a higher standard.
The CEO for most of this negative period was John Riccitiello and he was eventually removed
in 2013, perhaps to keep the fans happy, but probably for another reason.
Even though EA was pulling in billion in revenue, Riccitiello lost money for four years in a
row.
The CEO change really worked: EA went from an $8 million profit in 2014, to $875 million
the next year.
Their success hasn’t quenched their thirst for money, however, and when you look at some
of their latest releases and the unstoppable flood of DLCs, it’s hard to argue that EA
is in it for the art and not just the money.
Of course, the sheer scale of most of their games will likely keep the fans coming for
a long time; the hype around Battlefront 2 being just the latest example.
But if EA really want to improve as a company, they’re gonna have to stop squeezing their
customers out of every last penny.
Right now EA release half a game at full price, and then charge the same or more when they
release the rest of the game as downloadable content.
That might boost profits on the short-term, but it’s absolutely not the way to build
any sort of loyalty with the players and if EA don’t improve their behavior, their reputation
will eventually catch up to them.
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The Rise of EA ... And Where It Went Wrong

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