EA/Playfish, and Greg Costikyan’s analysis
Posted at 23:32 on 10th November 2009 - permalink

Yesterday EA and Playfish (makers of popular Facebook timesinks such as Restaurant City) put an end to weeks of rumour and gossip and formally announced they were “combining forces”, with EA paying $300m for the fast-growing social games company. Shortly after, EA announced plans to axe 1,500 staff and cancel twelve games in production. Nine hundred development jobs are expected to go in the next two years, with Black Box (NFS, Skate), Redwood Shores (Dead Space, Godfather), Tiburon (sports games, patches for sports games) and Mythic (Warhammer Online) rumoured to be among the studios hardest hit.

The timing of these announcements has widely been interpreted as EA hoping to show that they’re moving their focus away from cranking out lots of boxed product for consoles and chasing growth in other areas.

Lots of journalists, analysts and armchair pundits have weighed in to give their opinion on the wisdom of EA’s apparent strategic direction. One that caught my attention was on the blog of Greg Costikyan (formerly of Manifesto Games, and author of the ‘Scratchware Manifesto’). ‘Costik’ is known for his very hardline views on whether creativity can exist in a corporate environment (views which seem to me to be shown up as absurd hyperbolic ravings every time a great game comes out of one of the major publishers who he characterises as irredeemably stagnant).

Here’s what Costikyan had to say about EA/Playfish.

I don’t profess to know the full financial details of all of the deals that Costikyan cites, but I can’t help but think that his conclusions are not entirely soberly objective.

For one thing, I don’t think that EA overpaid for Playfish. Zynga and Playdom may be bigger and able to herd millions more players through their doors, but you have to consider how they’ve done this. Playfish have only recently (two years since their inception) started to seriously push virtual goods, while their competitors have exploited them hyper-aggressively from day one. They don’t spend tens of millions of dollars on advertising their games on Facebook. And yet in the face of an onslaught of advertising from their competitors (for products which in some cases are direct imitations of their own games), they’ve managed to retain millions of players.

Playfish have also been very careful to cultivate their brand image, taking cues from Nintendo, EA and Disney. The recent storm of bad press about “offers” systems (a type of advertising that trades sign-ups for products and customer research surveys for virtual currency, intended to allow players without credit cards to buy into virtual goods) has settled more on Playfish’s competitors.

I think there is also lots of evidence that virtual goods are not a flash in the pan (even if the market doesn’t continue to grow at its current rate forever) and Playfish’s user-interaction-centric approach has already shown that it can make serious money.

Costikyan’s theorising about EA’s major acquisitions tending to be disappointments is also based on very shaky reasoning. His recounting of EA’s headline-grabbing $680m purchase of Jamdat fails to make any mention of the rights this has given them to exploit Tetris well into the next decade, for example.

What little I know of Pogo.com (basically “it’s been going for many years” and “it has millions and millions of users” – although crucially not whether it’s made any money) doesn’t suggest it was a complete flop. I suppose if the purchase of Mythic was intended to produced a “WoW beater”, then that could be deemed a failure, but it’s hard to see how EA could have justified not trying to contest the MMO market, or to identify another company that they could have acquired that would have had a better chance than Mythic.

In any case, there doesn’t seem to be a lot in common between Jamdat, Pogo, Mythic and Playfish to allow meaningful comparisons to be drawn. I don’t rule out the possibility that EA just won’t be able to get their head around Playfish’s market and they’ll end up suffering the same fate as Origin and Westwood Studios back in the 1990s, but I don’t think it’s inevitable either. Small, exciting online games start-ups have been diasporing from EA over the last couple of years – perhaps Playfish will give EA a chance to keep some of their staff who are frustrated with console development within the empire (assuming they haven’t all left already).

Costikyan’s belief that it’s impossible to identify products and studios that are likely to be ‘dead wood’ over the next few years also comes across as a trifle naive. A studio that has been built to specialise in a market that is now shrinking (or dominated by one or two incumbent games – e.g. Forza and GT in racing, or CoD in FPS) might be expensive if not impossible to repurpose. A big ‘factory’ studio that churns out licensed games to fill a quota (like Tiburon, Visceral, or on the Activision side of the fence, Raven or Vicarious Visions) is going to shrink if their parent decides to release fewer titles per year.

The reason EA started chasing new IP (and continues to do so – there’s been no indication thus far to what extent the cull is going to affect new franchises like Dead Space and Mirror’s Edge) was to get away from having to rely on (and share profits with) extra-industry IP. The reason (or one of) that they’re buying Playfish is to weaken their bonds with the console manufacturers – the same reason Bobby Kotick has been musing about stand-alone Guitar Hero machines. Another reason of course would be to move into an area where Activision (whose management originate from marketing, rather than product development) wouldn’t be able to follow easily. Letting Activision, Ubisoft et al fight among themselves for increasingly lean table scraps from Nintendo, Sony and Microsoft might still give EA the last laugh.



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