Late last week, former senior EA executive Mitch Lasky, who sold his Jamdat Mobile service to the company in 2005 for $680 million called EA’s current business model “wrong”. Lasky thinks that the EA’s move away from boxed titles to monetization via virtual goods and currency isn’t the wisest move for the games giant.
On his blog, titled Bizpunk, Lasky writes, “EA is in the wrong business, with the wrong cost structure and the wrong team, but somehow they seem to think that it is going to be a smooth, two-year transition from packaged goods to digital. Think again.”
Lasky’s comments aren’t just coming out of thin air. His article is a response to EA’s CFO Eric Brown announcement that 2010 will see revenues and earnings down (again for EA) from previous years (and quarters). This news comes just on the heels of EA laying off 1500 employees, a move that company CEO John Riccitiello expects to save costs. Riccitiello also points to the layoff as a way for EA to, “cut cost in targeted areas and invest[ing] more in our biggest games and digitial businesses.”
It’s fair to say that any large corporation has it’s fans and detractors. Those that are not happy with the way things are being run have every right to express their opinion, but it’s not to often that a major corporation will address such complaints, at least not publically. It seems as though Mr. Lasky’s opinion is one that EA will publically address. Lasky published his article at 8:41 PM (presumably PST) on Monday, January 11th. It took EA three days to decide to address the issue or not, and on Friday, they made a public statement.
Before we get to this statement, it’s important to consider where things are coming from. While Lasky was at EA, he had a very valid shot at becoming the next CEO after then man-in-charge Larry Probst stepped down. Instead of Lasky, Riccitiello got the job.
EA’s response to Lasky: “Mitch needs to try de-caf. It’s never easy being turned down for a job, but most people don’t spend three years obsessing about it. Since Mitch left EA, Apple invested the iPhone, Facebook evolved to include a gaming platform and EAMobile became a world leader.” Lasky, incidentally, points out in his article that it’s exactly thee years to date since Riccitiello assumed the reigns at EA.
Lasky continues his titrate on EA by pointing out that over the course of Riccitiello’s three year reign, the company has lost over $11 billion in market value, and now has a valuation below $4 billion. He argues that this value, combined with a myriad of what he sees as internal problems at EA makes them a target for potential acquisition. Specifically Lasky sites Disney as a potential buyer, as well as Chinese online service Tencent having the ability to “swallow EA whole.”
Mitch Lasky is a partner at Benchmark Capital. Investors include online properties such as Friendster, Gaia Interactive, and Riot Games. If only by association, Lasky isn’t opposed to the model, just the way EA is going about it.