EA has become the most hated gaming company in America. What events led up to this infamous status?
For years gaming publisher Electronic Arts (EA) has garnered an infamous reputation, often labeled as the most hated company in America. A chain of events have rendered the pioneer in digital entertainment to become one of the most hated gaming companies in the world. What events caused EA’s PR downfall?
In April 2013, a survey conducted by Consumerist, a now defunct spin-off website of ConsumerReports, unveiled EA to be America’s worst company, for the second year in a row. Customers were dissatisfied with the gaming company for delivering incomplete, broken games riddled with micro transactions. The award preceded a chain of unfortunate, may it be calculated or poorly executed, releases that tarnished the company’s reputation.
EA’s next chapter
In February 2007, Larry Probst was replaced by John Riccitiello, assigned to lead the largest video game publisher in the world. Probst, a long time executive at the company, had garnered much criticism over the years for his lackluster performance, with Wall Street criticizing him for becoming overly reliant on sequels and big hits, jeopardizing the company’s value in the entertainment space. Investors have long enjoyed outstanding performance, seeing the stock price increase by 70 percent since 2002, NBC News noted. However, the tides had started to turn. Electronic Arts started to heavily rely on its sports properties, which were delivering guaranteed returns.
A fresh paint was enough to get fans to buy the publisher’s games by the millions. However, this put EA in a precarious position. If one of these properties failed, there was little left to maintain stable earnings. This led investors to believe the company was overvalued. NBC noted that investors were anxious about start-ups with bootstrapped operations to deliver hits thanks to the massive reach of the internet, jeopardizing the revenue model of giants such as EA who lacked the agility and seemingly necessary creativity to keep customers onboard. Games analyst for research firm IDC, Billy Pidgeon, told NBC that companies like EA had become overly reliant on successful franchises, making it risk averse.
Strategic vision
EA may have become complacent over time under Probst’s supervision, he was an essential figure in the growth of the then fledgling gaming company. In February 2007, website Game Developer spoke with founder of EA founder, Trip Hawkins and its current EVP Frank Gibeau, reliving its 20 year history. Probst joined the company in 1984 as vice president of sales. At the time EA was experimenting with digital entertainment. Their games were catching on, with the publisher’s games attracting countless new players. Seeing this success, Hawkins started to become more aggressive in its negotiations, increasing its profits. Despite its new found vigor, the company was still missing the vision that would secure its long term vision.
This transition to full-fledged corporate gaming giant, was marked by Probst’s arrival. He introduced the company to new ways of conducting business, giving the company more power over the distribution channels. EA would bypass distributors and sell directly to retails, exponentially growing its market presence. As EA was now the primary gateway to consumers, they could establish deals with lucrative franchises, working together with media behemoths such as Lucasfilm Games, Interplay and SSI. These brand affiliations would become the bread and butter for Electronic Arts.
Introducing microtransactions
A key turning point in EA’s strategy was the introduction of microtransactions in FIFA 09, through FIFA Ultimate Team, better known as FUT. FUT introduced a trade-card gaming element to the massively popular FIFA sports games. In March 2006, Eurogamer spoke with Ultimate Team producer, Matt Prior and Football Academy lead designer, Chris Coates about the newly added feature. The interview is a carefully orchestrated PR-pitch by EA, but gives us a glimpse into the opening hours of this highly lucrative endeavor.
Prior pointed out that the trading-card game would bring an extra, entertaining new element to the FIFA franchise. Instead of opting to add a new competition or cup tournament, the team was looking for new ways to engage players with the game. Developers had already added the Champions League, with the team having to find novel ways to connect with players. Furthermore, the trading-card game would serve as an enhancement to the existing game, coming in the form of a downloadable add-on. Prior argued that additional content would keep the game fresh and reinvigorate an eagerness to play more.
At the time of the time of the interview the prices for FUT were still unknown. However, FUT could not be played without the base game, Prior confirmed. EA prided itself by stating that the trading card add-on was a full game by itself. Hence delivering double the value to players. Already we could see the early signs of EA exploring new avenues to maximize revenue potential for its games and testing how well it would be able to monetize games beyond physical sales.
In these early stages, publishers such as EA were reluctant to push a narrative that micro payments were required to play the game. Prior noted that the card-packs only served as a shortcut and didn’t prevent players from enjoying the game. While the card-packs are purchased with real-world cash, Prior emphasized they don’t deliver an advantage over not participating in the card game. EA had made a good bet by introducing microtransactions into its games, as it would deliver billions in revenue.
Ultimate Team alone would generate $1.18 billion in net revenue in 2018 and increase to $1.62 billion by 2021. Additionally, for all the reluctance experienced by gamers themselves, the majority of players believed microtransactions could be beneficial to the games they played. In October 2016, a survey conducted by NPD, cited by Game Developer, among 8,893 Americans aged between 13 and 54 explored their purchasing habits in relation to the DLC and microtransactions.
Surprisingly, 23 percent of respondents indicated to prefer microtransactions, compared to 16 percent favoring DLC. The price could prove vital however to the success of the content, as the pricing kept gamers away from purchasing when too deemed high. 28 percent of respondents said they spent money on DLC and microtransactions 3 months prior to the survey. An amazing 77 percent of respondents said that microtransactions could extend a games’ enjoyment as long as it wasn’t designed as a pay to win mechanic.
Riccitiello leaves EA
In March 2013, the month where CEO of EA John Riccitiello announced his resignation, analyst Doug Creutz, reflected on the tumultuous tenure of Riccitiello at the gaming company. Creutz opened by saying that while EA was left with a tainted reputation, it was in a far better state than the period preceding Riccitiello’s appointment in 2007. The gaming company was battling with poor performance, scaring shareholders into distrusting the corporation’s long term survivability. EA was losing market share to one of its primary rivals, Activision Blizzard.
Riccitiello had to put EA back on track, having to recover a failing strategy. During his second half, a poor execution dampened the company’s success. In the opening hours of Riccitiello’s career at EA, the corporation started to aggressively acquire gaming companies, cranking up game output and wasting time on the Nintendo Wii. The company failed to successfully reboot its once popular franchise Medal of Honor and flopped with its latest SimCity installment.
Despite these obvious missteps, Creutz believed the company was positioned better than 4 to 5 years before Riccitiello’s resignation. EA was able to develop solid IPs and create a stronger digital offering, seeing potential in the mobile space. The gaming company saw its fortunes grow steadily over this period. In 2007, when Riccitiello joined, the net revenue generated by Electronic Arts set a $3.09 billion. The following year, in 2008, revenue had grown to $3.66 billion increasing to $4.2 billion the year after.The company faced economic hardships during the global economic meltdown, but recovered a revenue of $4.14 billion in 2012.
By the end of 2013, the year Riccitiello left EA, revenue had increased to $3.79 billion. A much stronger position than is $2.95 billion a year prior to his appointment as CEO of the gaming publisher. The years that followed, net revenue started to grow exponentially. Dean Takahashi from VentureBeat replied in a similar fashion, noting that while Riccitiello’s tenure at EA was less than stellar, the financial results were far improved, despite the impatience from board members.
Takahashi pointed out that over the six years of his career at EA, the gaming company was entering uncharted territory. The gaming market was rapidly changing, with games, once primarily sold through physical discs, now being sold and delivered wirelessly. Gaming was no longer limited to consoles, but found their way onto mobile devices. A trend which started in Japan at the turn of 2000s and was rapidly finding its way to audiences across the globe.
Triple A games started to receive fierce competition from free to play games, which introduced microtransactions, drastically lowering the barrier to entry, flipping the traditional gaming publisher revenue model. The gaming market was falling apart around EA and executives had to find a way to stabilize the business and adjust to this new competitive dynamic. Takahashi said that for all the company’s wrongdoings, Riccitiello had craftily navigated EA through treacherous waters where titans such THQ succumbed to its forces.
Riccitiello put in place the many different parts that would serve vital for EA’s future success, as witnessed in its growing revenue the years after. Furthermore, Riccitiello had to manage a company with thousands of employees, making sure they all aligned and adjusted for a vision of the future. A future where the company would be able to generate revenue for current and new, untapped sources. Unfortunately, there were missteps that diverted the attention away from his success and put a spotlight on poor reboots such as Medal of Honor, Crysis, SimCity and Star Wars: The Old Republic, with the latter blowing a massive dent into the company’s balance sheet.
In an attempt to address the public concerns, Peter Moore, then COO at Electronic Arts published a statement in April 2013, where he acknowledged its missteps, referring to being awarded the position as the worst company in America. Moore pointed toward game releases that didn’t meet their customer’s expectations, running from poor performance to pricing. Adding that these concerns were valid, saying that gamers deserved better. The statement was only a month after the disastrous launch of SimCity which would go down in history as one of EA’s most tragic releases.
In September 2013, Electronic Arts announced Andrew Wilson would become the company’s new CEO. Between Riccitiello’s resignation and Wilson’s appointment Probst oversaw operations at the organization, with the board looking for an appropriate successor. Wilson’s appointment marked the first internal executive to become the company CEO. Probst praised Wilson’s proven track record, mastering the art of creative and business acumen. Wilson was tasked to rebuild the company’s reputation after the SimCity disaster, The Verge noted.
The SimCity disaster
In 2012, fans of the massively popular gaming franchise SimCity were eagerly awaiting the next installment. In March 2012, EA finally responded to the rumors, announcing the next SimCity. A reboot, parting ways with the four previous installments, paying tribute to the game captivated many hearts back in 1989. EA touted a major overhaul, a graphical leap, filled to the brim with novel technologies to revolutionize city planning simulators. Players could extensively detail their digital cities, setting parameters to make it wholly their own, coming back to the PC for the first time in a decade. The fanfare however was short lived.
A year later, in March 2013, as SimCity was being installed across countless PCs across North America, with players ready to start creating their city, they were quickly met with a host of problems that rendered the game unplayable. The game was highly controversial for its always online requirement, meaning SimCity had to be able to communicate with EA’s servers at all times. Unfortunately, the servers themselves couldn’t handle the thousands of new players coming online simultaneously, causing the servers to time out and rendering SimCity unplayable. In response, Maxis, the developer for SimCity, published a statement where it apologized for the miscalculation.
The team didn’t expect so many new customers to start gaming at once. In order to meet the increased demand, Maxis had expanded its server capacity by 120 percent, seeing an uptick in gamers being able to start building. Despite the attempts to make the game up and running again, the damage had already been done, The Guardian noted. Amazon suspended sales for the game in the US in response to the server outages. SimCity received a wave of poor reviews, and received 5 out of 10 ratings from GameSpot. The always online feature, designed to combat piracy, in turn created a game entirely unplayable for its customers.
Gaming with loot boxes
A little over a decade after EA introduced FUT, it decided to step it up through the integration of loot boxes into Star Wars Battlefront 2. While loot boxes and other in-game microtransactions weren’t limited to Star Wars Battlefront, its successor introduced a controversial, new mechanic, namely loot boxes could change gameplay dynamics, rendering the microtransactions into a pay-to-win addition. This has been one of the frowned upon microtransactions and EA themselves denied it would turn these game add-ons into a pay-to-win mechanic. However, this time it had parted with its promises.
EuroGamer pointed out that the loot box in Star Wars Battlefront 2 contained weapon power ups, boost health and grand special abilities. These elements can change the game’s gameplay dynamics and give players ways to bypass the Battlefront organic progression. Furthermore, gamers were allowed to purchase more loot boxes if they so desired through real-world payments. While at the time it was unclear how the loot boxes would impact the game, EuroGamer noted, in hindsight we know that it sparked a fierce debate around the legality of microtransactions, which turned into glorified gambling.
In April 2018, The Netherlands investigated the loot boxes and deemed that a portion of them were going against gambling legislation. The claim was refuted several years later, but it placed massive scrutiny on EA, who was the leading party in integrating loot boxes into its games. The Netherlands Gambling Authority (Ksa) found that four out of ten loot boxes were against the country’s gambling laws. The authority found that coincidence determined the contents of the virtual treasure chests and the contents hold economic value, meaning they could be traded. Under Dutch gambling laws, providers of such products need a dedicated license.
The gambling authority also feared that the nature of the loot boxes in their current setup might promote addictive behavior. The Ksa advised that gaming publishers remove elements such as visuals and persuasive texts to decrease the temptation to continue. It didn’t take long before other European regions started to raise their concerns and take appropriate measures. In the same month as The Netherlands, Belgium declared loot boxes to be unlawful and urged publishers, investigating games published by EA, including FIFA, Overwatch and Star Wars Battlefront 2.
Policymakers in Belgium drew the same conclusion, finding that loot boxes were against the country’s gaming laws. If the company failed to comply, it would risk a fine of 800,000 euros or a prison sentence up to five years. The penalties would double if legislators discovered minors being targeted with gambling products. Minister of Justice, Koen Geens, expressed particular concerns related to gambling and young players, who were more vulnerable to such practices.
A tainted reputation
As with many origin stories, EA’s one started with a few passionate individuals who found success with their novel products. It was an era of trial and error. Experimenting with new technologies, pushing hardware to the limit. As time progressed and the founders saw there was serious money to be made, a new wind started to blow. Hawkin’s himself witnessed the enormous potential of its creations and it was Probst who brought the strategic insight to turn the publisher’s creations into gold. The Midas Touch provided by Probst served as the fuel that would turn EA into a gaming behemoth. However, this success couldn’t last forever and in order to maintain profits, new ways of generating revenue had to be invented. With Riccitiello’s arrival, EA ventured into uncharted territory.
Riccitiello’s tenure was marked by an era of severe technological disruption. He entered an era where electronics giants saw their mobile business evaporate in favor of the slick new iPhone that heralded the smartphone era. The PC or gaming console were no longer the exclusive domain for gaming publishers. The smartphone ushered in a new era where gaming could be free, supported by ads, and accessible anywhere at any time. EA had to find new ways of securing revenue, otherwise it would become a relic of the past. Over the course of Riccitiello’s career at EA, microtransactions started to mature, with FIFA seeing massive returns through its in-game trading card game FUT.
FIFA Ultimate Team would lay the groundwork for future executives who extended microtransactions to other franchises, generating billions of dollars in doing so. However, for every monetary gain that EA was able to create, it was planting the seeds for strong resentment, with SimCity’s always on DRM protection and Battlefront 2’s obscene loot boxes symbolizing a company so desperate to generate profits it was willing to break the law. This build up led to the company receiving the infamous status of worst company in America and becoming one of the least respected publishers across the gaming community. What can business executives and marketers learn from EA’s missteps during its hunt for ever increasing profits?
From a pure business standpoint, executives at the gaming publisher had superbly navigated the treacherous times that lay ahead. They survived the smartphone disruption and maintained sales as years progressed by integrating novel ways to extend a game’s shelf life. However, from a brand reputation perspective, the communication could be handled more thoughtfully. Building a strong brand is a work of art, destroying it requires little imagination. Executives at EA could’ve been far less aggressive in their approach, whilst still maintaining a healthy profit and not see their reputation crumbling at the seams.
