EA does it *again*...layoffs at Mythic?

Uhm, wow.

Ok, so EA recently acquired Bioware and Pandemic from Elevation Venture Partners for about $800M. The currentCEO of EA (John Riccitiello) was one of the founders of Elevation Venture Partners, and formerly the EA President/COO.

EA will pay up to $620 million in cash to the stockholders of VG Holding Corp. (Elevation Venture Partners) and will issue up to an additional $155 million in equity to certain employees of VG Holding Corp.

Now, this obviously raised a lot of eyebrows for several reasons (wonder who really cashed out on this deal eh?).

EA has a terrible reputation of destroying studios after acquiring them, and an equally bad reputation in the MMORPG space. There were some doubts when EA acquired Mythic, but promises were made and the world generally had happy thoughts that EA/Mythic would deliver Warhammer Online and have a nice success.

Oddly enough, after the acquisition, EA tasked Mythic with giving good ole’ Ultima Online (over ten years old now!) a cosmetic facelift. Ok fine, but aren’t these guys already busy with a MMORPG project?

So, EA picks up two extremely well respected studios, and more promises are made…they won’t be dismantled, EA is looking for hot new original content, Bioware is rumored to be working on a sweet Star Wars MMORPG (even though Sony already slaughtered that franchise and Lucasarts annoyed lots of people with the crappy last three movies), etc. etc.

Ok, fine, maybe EA has turned over a new leaf since Riccitiello returned earlier this year. But oh no! Rumors are flying about EA laying off a lot of staff (many of them from Mythic), and relocating the Mythic team to Virginia. What the hell?

If they can’t afford to be paying staff and need to cut costs, why the hell did they just blow $620M in cash to acquire two studios (800 employees) and take on the long term financial burden of all that staff? Is EA losing confidence in Mythic/Warhammer? Is this in any way related to the recent beta delays for Warhammer?

What is going on at EA? Are they going to use the acquisition for some accounting trickery for the end of the quarter? I dunno…

I do know that if I was an employee at EA, I’d be damn nervous and I’d start farming my resume out. That company has been a house of cards for too long now, and it wouldn’t surprise me if their stock starts tanking relatively soon. Sure, maybe acquiring Bioware and Pandemic will inject enough new blood to influence and catalyze some change, but EA (and all of their studios) are notorious for burning out talent quickly and replacing it with inexperienced college grads they just farm out of “game design” programs at various Universities.

It seems that EA has been playing the “increase valuation through acquisition” game for a long studios in multiple other countries (including China) have been launched in the last 24 months, and there is even a brand spanking new one here in Raleigh that will be working on a NASCAR title (cause, you know, North Carolina = NASCAR, so developers here would naturally be better at design…it’s a southern thing).

I’m giving EA a big thumbs down. Booo.

"If this is such a good idea...

Why aren’t the big companies doing it?”

This is, perhaps, one of the most frustrating questions that I have been asked by investors, venture capital funds, and colleagues/mentors kind enough to take some time to look at my business plans over the last decade and a half.

The mentality behind this question assumes that big companies are naturally successful, smart, and have both the will and the resources to continually push for bigger, better, faster. If the “big boys” aren’t doing something, than it probably isn’t worth doing…because of course, you have to assume that they already thought about your idea and have discarded it as unworthy.

Ok, this sounds like it makes sense, but it is a very weak assumption. Big companies are naturally slower than smaller ones, and usually bogged down in bureaucracy, policy, or conflicting interests. More often than not, it is simply easier (and cheaper) for a big company to sit back and wait for someone smaller to do something new and innovative, and then acquire them.

In the game industry, most of the “big companies” are either publishers that made a lot of money with a particular business model (put games in boxes on retail shelves) or they are other large media conglomerates that have bought into the industry through large publisher acquisitions. In both cases, these companies are very successful in their own rights, but are out of their depth when it comes to innovation or different business models. MMORPGs for example are still “new and mysterious” and not quite understood.

EA, arguably one of the most successful game publishers ever, has a horrible and dismal record with online games. They destroyed Origin after acquiring them and nearly destroyed Ultima Online as well. They have a long history of acquiring companies and then dismantling them. I’m not going to get into how they treat their employees or the terrible corporate culture they cultivate, and I’m not going to make a long list of all of the massive amounts of money wasted on funding projects and then canceling them at the last minute (remember battletech online?).

EA’s latest foray into MMORPGs (again) is through their acquisition of Mythic and Warhammer Online. Shortly after they acquired Mythic, they put the team to work on updating the graphics for Ultima Online and give it a facelift. WTF? I still don’t understand why you would divert a team working on a large project like Warhammer to spend time on a completely different game. This is just one example of the odd and backwards things that EA tends to do.

So why isn’t EA making multiple MMORPGs? Why is Sony picking up a lot of half-dead MMORPGs (cough, Vanguard, cough) and aggregating them instead of trying to innovate and push the industry forward? There are other companies, but I think I’m making my point.

The big companies “aren’t” doing X or Y because it simply hasn’t occured to them, or they are too focused on other things than hunting out every new opportunity. Or they are just sitting on the sidelines waiting to make an acquisition play. That is why our ideas are great and why the big companies aren’t doing the same thing.

Big does not equal smart or all-knowing.

Big is risk averse and will continue to do the same thing day after day because it is safe.

Small is where innovation and creativity occurs. Invest in small things, sell out to big things.

I’m not sure I feel like making a list of small ideas that challenged industry goliaths and found success. Anyone familiar with capitalism and industry in America can figure that out on their own. Just look at all of our inventors and scientists, or companies that revolutionized entire industries with a simple idea or process.

The next time you are looking at investing in a small team of people with an idea, don’t ask them “why aren’t the big guys doing this”, instead ask how they will execute and take their idea to market to knock the big guys off their horses, or at least make themselves a hot acquisition target.