EA CEO John Riccitiello Resigns

By Dog of Thunder, 3 years ago
Yesterday, news broke that current CEO of EA, John Riccitiello, had resigned from his position atop the corporate ladder of one of the largest video game publishers in the world. The immediate reaction was for EA's stock to finally jump and ended trading at over $5 a share, despite notice from EA that the company was going to fall well under expectations for the current quarter. That right there should tell you all you need to know about Riccitiello's tenure as CEO. In case you want to know more though, feel free to read on, as Riccitiello had an interesting career with EA and has had a larger impact on the gaming landscape than you would think.

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John Riccitiello made a name for himself in the corporate world not with EA, but with Sara Lee, where he oversaw the bakery division which, if you have been to a supermarket in the United States, you would recognize as being a successful brand. In 1997, Riccitiello joined EA as COO (Chief Operating Officer) and helped oversee the company's explosive growth at the turn of the century on the backs of the Playstation 2 and Xbox. When the calendar turned to 2004, Riccitiello stepped down as COO, left EA and started an investment firm called Elevation Partners.

Does that name ring any bells in the back of your head? Well, Elevation Partners made waves in 2004 when they began investing massive amounts of money into Bioware and Pandemic. Estimates place the amount at near $300 million between the two companies. At the time, BioWare and Pandemic were independent studios and not part of EA, which is how we know them today. The two companies did not join EA until 2007, when Larry Probst, who had been CEO of EA since 1991, stepped down from his post and the board of directors recommended John Riccitiello as his replacement.

One of Riccitiello's first acts was to have EA buyout BioWare and Pandemic, the same companies his firm had invested roughly $300 million into, for the grand total of $900 million. Another of his early acts was to address the quality of EA games which, at the time, was poor. As part of his initiative to create bold, original and exciting IPs that gamers would want to play, EA produced Mirror's Edge and Dead Space. Riccitiello also saw the need to create a digital distribution service as he saw that the future was digital. This led to the Origin service, which remains EA's attempt at going head-to-head with Valve's Steam service. The other initiative EA began under the tenure of Riccitiello was "Project $10" (the plan to include an Online Pass in all EA produced titles), which has also been a financial success for the company, despite the outcries of hardcore gamers.

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While those are some of the successes of Riccitiello's tenure, with the exception of Origin (which is a "success" albeit not as big of a success as investors were expecting), his track record of going head-to-head against Activision is marked with a series of both critical and commercial beat-downs. EA's response to the juggernaut that is the Call of Duty franchise? Bring back Medal of Honor! Sadly, that plan did not work out well for EA. When the first game, Medal of Honor, turned out to be a success (though again, less of a success then the company was projecting), a sequel was fast-tracked and Medal of Honor: Warfighter, released in October of last year, was a financial disaster.

Despite the impact crater Medal of Honor: Warfighter left on EA's quarterly financials, it was small potatoes compared to the Hindenburg of MMOs. No, not SOE's Vanugard and not even EA's own failed MMO Warhammer: Age of Reckoning (for which this Newshound will never, ever forgive them!), no MMO can compare to the financial disaster that is Star Wars: The Old Republic. Developed by BioWare, The Old Republic was going to be the greatest Sci-Fi MMO of all time and feature both compelling multi-player and an extensive single-player campaign, all highlighted by over 300 hours worth of spoken dialogue.

The Old Republic sold very well during its first month at retail, but the sky high sales numbers did not turn into monthly subscribers. The "End Game" of The Old Republic was maligned by both players and critics. Soon, EA had to abandon the subscription model for the The Old Republic and made the whole game F2P (free-to-play). The implementation of the F2P model with The Old Republic further soured the game in the eyes of many fans, by locking them out of Spec Ops missions unless they signed up for a subscription.

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At this point, almost 10 months since The Old Republic launched, there is no chance for EA to recoup all of the money they spent developing the game. Between the failure of Medal of Honor: Warfighter and The Old Republic, EA was knocked out of the NASDAQ Top 100 this past December. Investors began calling for Riccitello's head on a spike, as clearly the plan of beating Activision-Blizzard at their own game was a failure of epic (some day people will write books about this) proportions. All of these missteps were before SimCity.

The final straw, the one that will forever blemish Riccitello's record at EA despite his string of early successes, will be SimCity, a game that launched in such a broken state that Amazon stopped selling it. While the game may have sold many, many copies, the broken servers that rendered it unplayable resulted in EA offering up a free game to anyone that bought the game from the day of launch until March 25th. When you sell a game for $60, but wind up shelling out a refund of a free game valued from $10 to $40, depending on which one the gamer chooses, that is not going to look good on the bottom line.

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That bottom line, despite the early critical success of Ricciello's tenure as EA CEO, is all that really matters to the shareholders. Never forget that the gaming industry is big business and if a company does not make money for their investors, something has to change. In the case of EA, now staring down the barrel of another poor financial quarter, change has come at the top of the company. The man Riccitello replaced, Larry Probst, will step in as a temporary CEO on April 2nd, the day that Riccitello will officially step down.

This is the end of an era for EA, but since they were voted "Worst Company in America" in 2012 and are losing money hand over fist, it is easy to argue that EA has nowhere to go but up. What does the future hold for EA now that a new console generation is upon us? With Riccitello shaping almost the entirety of EA's policy during the Xbox 360 generation, will we bear witness to a dramatically different EA in the years ahead?

No one knows, but to close this chapter of EA's history, below you will find the entire letter sent to EA investors announcing the change in leadership. As always, I prefer to close these articles by letting the subject speak for themselves, so read the letter before jumping to the comments.

REDWOOD CITY, Calif.--(BUSINESS WIRE)-- Electronic Arts Inc. (NASDAQ: EA) today announced that John Riccitiello will step down as Chief Executive Officer and as a member of the Board of Directors, effective March 30. The Board has appointed Larry Probst as Executive Chairman to ensure a smooth transition and to lead EA's executive team while the Board conducts a search for a permanent CEO. The Board will consider internal and external candidates with the assistance of a leading executive search firm.

Mr. Probst has played a leadership role at EA since 1991. In addition to serving as Chairman of the Board since 1994, he previously served as the Company's CEO from 1991 to 2007. As CEO, Probst successfully grew the Company's annual revenues from $175 million to approximately $3 billion, led EA into new platforms such as mobile, online and other emerging markets and expanded its international presence to more than 75 countries.

"We thank John for his contributions to EA since he was appointed CEO in 2007, especially the passion, dedication and energy he brought to the Company every single day," said Mr. Probst. "John has worked hard to lead the Company through challenging transitions in our industry, and was instrumental in driving our very significant growth in digital revenues. We appreciate John's leadership and the many important strategic initiatives he has driven for the Company. We have mutually agreed that this is the right time for a leadership transition."

On behalf of the Board, Lead Director Richard A. Simonson stated, "As we begin the CEO search, we are fortunate that Larry, who has a proven track record with our employees, partners and customers, has agreed to assume a day-to-day leadership role as Executive Chairman. He has 16 years of experience as CEO of EA and a deep understanding of the Company's strategy, management team, business potential and industry trends."

Mr. Riccitiello stated, "EA is an outstanding company with creative and talented employees, and it has been an honor to serve as the Company's CEO. I am proud of what we have accomplished together, and after six years I feel it is the right time for me pass the baton and let new leadership take the Company into its next phase of innovation and growth. I remain very optimistic about EA's future — there is a world class team driving the Company's transition to the next generation of game consoles."

Business Outlook

EA expects that its revenues and earnings per share for the current quarter will be at the low end of, or slightly below previously issued guidance provided in its press release dated January 30, 2013. Actual results may be materially different and can be affected by many factors, including the levels of usage of the Company's digital products, initial sales of new products that will be released before the end of the quarter and other factors detailed in the Company's annual and quarterly SEC filings.

EA will announce its fourth quarter and fiscal year 2013 results on May 7, 2013 and will host a conference call at 2:00 pm PT (5:00 pm ET) to discuss the results.

Forward-Looking Statements

Some statements set forth in this release, including the information relating to EA's fourth quarter fiscal year 2013 expectations under the heading "Business Outlook", contain forward-looking statements that are subject to change. Statements including words such as "anticipate", "believe", "estimate" or "expect" and statements in the future tense are forward-looking statements. These forward-looking statements are preliminary estimates and expectations based on current information and are subject to business and economic risks and uncertainties that could cause actual events or actual future results to differ materially from the expectations set forth in the forward-looking statements.

Some of the factors which could cause the Company's results to differ materially from its expectations include the following: sales of the Company's titles; the Company's ability to manage expenses; the competition in the interactive entertainment industry; the effectiveness of the Company's sales and marketing programs; timely development and release of Electronic Arts' products; the Company's ability to realize the anticipated benefits of acquisitions, including the PopCap acquisition; the consumer demand for, and the availability of an adequate supply of console hardware units; the Company's ability to predict consumer preferences among competing platforms; the Company's ability to service and support digital product offerings, including managing online security; general economic conditions; and other factors described in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2012.

Electronic Arts assumes no obligation and does not intend to update these forward-looking statements. In addition, the preliminary financial results set forth in this release are estimates based on information currently available to Electronic Arts.

While Electronic Arts believes these estimates are meaningful, they could differ from the actual amounts that Electronic Arts ultimately reports in its Annual Report on Form 10-K for the fiscal year ending March 31, 2013. Electronic Arts assumes no obligation and does not intend to update these estimates prior to reporting its actual financial results for the fiscal year.

About Electronic Arts

Electronic Arts (NASDAQ:EA) is a global leader in digital interactive entertainment. The Company's game franchises are offered as both packaged goods products and online services delivered through Internet-connected consoles, personal computers, mobile phones and tablets. EA has more than 250 million registered players and operates in 75 countries. Headquartered in Redwood City, California, EA is recognized for critically acclaimed, high-quality blockbuster franchises such as The Sims™, Madden NFL, FIFA Soccer, Need for Speed™, Battlefield™, and Mass Effect™. More information about EA is available at http://info.ea.com.

Source: Electronic Arts Inc.