Sep
11
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. This video is brought to you by Squarespace,
by far the best platform for making a professional website out of scratch. Sign up with the link below to get 10% off
your first purchase. 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. Our reputation is important to us here at
Business Casual, which is why we’re finally building our own website. This endeavor seemed daunting, especially
considering all the features we’ve got planned for our site, but to tell you the truth it
has been surprisingly easy thanks to Squarespace. Their all-in-one award winning platform truly
lived up to its reputation. They’ve got over a hundred beautiful templates,
which are perfect for any fansite, blog or business website you may want to build. There is no need to install, upgrade or patch
anything, ever and that’s why we’re building our website with Squarespace right now. If you visit http://squarespace.com/businesscasual,
you’ll get 10% off your first order. In doing so you’ll not only be on your way
to making an exquisite website with minimal effort, you’ll also be helping to support
this channel. Of course, I want to thank our patrons for
supporting us and to you for watching. Follow us on Twitter and Facebook to stay
in touch, and as always: stay smart.