The games guru poised to change TV
31 Aug 07
EA’s John Riccitiello has set his sights on transforming television, warns Kate Bulkley in an article first published in the RTS Television Magazine, August 2007.
When 47-year-old John Riccitiello landed his “dream job” as CEO of the US games publishing giant, Electronic Arts (EA), earlier this year the news failed to register with the television industry. But this was short sighted in the extreme.
In the US investors knew better: the financial community reacted positively to his return and EA’s stock price headed north.
Riccitiello is regarded as a visionary. His knowledge of the $30bn gaming industry is unquestioned. It has taken Riccitiello only a matter of months in the CEO’s seat to be seen as more than just a hugely successful games executive.
The timing of his appointment is very significant. There is a widespread view that it is only a matter of time before television and games start to converge.
Crucially, financial imperatives suggest there are mutual gains to be had from the convergence of two media that need to create new revenue streams as a matter of urgency. Whoever cracks this part of the convergence conundrum and comes up first with new, innovative content and takes games to a new level stands to make a killing.
As convergence gathers pace, Riccitiello, who originally worked for the company from 1997 to 2004 as president and COO, is uniquely placed within the context of convergence.
“I think the industry has yet to find the DW Griffith of the X-Box,” Adam Singer noted in a keynote address to the Edinburgh Interactive Games Festival two years ago. John Riccitiello does not create games but his skill as a manager and marketer could provide the catalyst for EA to raise its game and provide the industry with that elusive DW Griffith moment.
EA, the world’s largest independently owned games publishing company, recently signed a major deal with Endemol to co-create a “revolutionary online idea” that will seek to capitalise on the best of the gaming and TV experience.
The project, called Virtual Me, was unveiled at MipTV. It will allow users to create a virtual version of themselves (known as an avatar) that can participate in online versions of shows like Big Brother. In addition, EA is also working with MTV and games developer Harmonix on a project called Rock Band. This enables gamers to perform music alongside world’s biggest rock artists in a virtual band.
The hope is that initiatives such as Virtual Me and Rock Band connect with the hard-to-reach young audience that is hooked on games, but is increasingly agnostic about traditional linear TV. In such a model, the potential revenue opportunities are huge.
EA already works closely with the movie business. A new Harry Potter game and a game tied to the opening of The Simpsons Movie are in the pipeline.
These are not isolated experiments in TV and film franchises, but are part of Riccitiello’s commitment to move hard and fast beyond the games console to ensure that, in a converging world, games become a medium as powerful as TV or film.
He believes that the games industry in general, and EA in particular, needs to expand both in terms of the kind of games it designs and the way those games are distributed to consumers, be it online, via mobile or wirelessly. And he is in a hurry.
“It’s a challenging time but John is an energetic and passionate guy and has a track record to see him succeed,” says Chris Deering, former chairman of Sony Computer Entertainment Europe, now non-executive chairman of UK games publisher Codemasters. “EA does not need to be fixed so much as adjusted so it can grow share in a changing market with many new platforms and new ways of interacting with games.”
Level 1: expand into casual games
It is no coincidence that his appointment as CEO came as analysts called for the games publisher to move more aggressively in creating new, wholly owned game franchises while continuing its push into digital distribution.
EA has posted losses and sales declines in recent quarters, at a time when new technologies have shaken up some conventional ideas about where the greatest opportunities lie in the games industry.
One of his first moves on returning to EA in early April, taking over from 23-year company veteran Larry Probst, was to put more emphasis on developing so-called casual games – in other words, games that can be played relatively quickly on a variety of portable devices.
Among the things that interest EA from a television perspective are television’s strong brand names – important if gaming is to evolve into a medium that some predict will eventually supplant TV for those water cooler, shared experiences.
Riccitiello believes that television can benefit from the gaming industry’s knowledge of interactivity and software development.
Level 2: become more agile
An early priority he highlighted to analysts after returning to EA was to increase the company’s “speed to market” and the “acceleration” of its growth strategies.
“The most important thing right now is agility and speed to market to drive segment share,” Riccitiello said. “We have had a little too much predictability in our titles.”
In a bold move to grow company market share, in June Riccitiello reorganized the company into four labels: EA Sports, EA Games, EA Casual Entertainment and The Sims (a game where players create virtual communities). To get new products to the market as quickly as possible each one will act as a dedicated studio.
“I think that his vision is well-suited to the back half of this decade,” Michael Pachter, a senior analyst at Wedbush Morgan, said on hearing that Riccitiello was returning to EA following a three-year stint working in private equity.
“If he had done today the same things he was doing (at EA) in 2001, 2002 and 2003, building out online and trying to be dominant in that area, he would have been considered brilliant. But back then the world wasn’t ready for The Sims Online. We didn’t have the technology to deliver in-game advertising and micro transactions like we do now.”
Level 3: dominate the consoles
Since its conception 25 years ago, EA, which has an annual turnover of around of $3bn, has successfully worked to provide games for console giants Sony, Nintendo and Microsoft. One of the reasons EA has thrived is its hefty R&D budgets: $965m last year.
In its most recent financial year, EA had 24 game titles that sold more than 1 million copies each. The Sims is one of its most robust franchises; to date it has sold 22 million copies.
During his previous stint at EA, Riccitiello spearheaded efforts to develop online games and helped launch The Sims Online in 2002.
He left the company two years later because there was no clear path to the CEO job. Instead, Riccitiello, who prior to joining EA had led the worldwide bakery division at US food and drinks giant Sara Lee, decided to gain first-hand experience of the private equity world.
He joined Elevation Partners, a company launched by Silicon Valley investor and former stock analyst Roger McNamee and Bono, the lead singer of U2. Elevation (named after a U2 song) raised $1.9bn from individuals, pension funds and institutions.
At Elevation Riccitiello led investments in video games companies BioWare and Pandemic Studios, the creators of the Baldur’s Gate, Mercenaries and Star Wars games.
At the private equity company he signed a deal with EA that will see the two organisations co-publish the upcoming BioWare/Pandemic title, Mercenaries 2.
Riccitiello lives in the Bay Area of San Francisco with his wife and children. He is a bachelor of science from the University of California, Berkley, and his first jobs were in fast-moving consumer goods companies, including Pepsi and Häagen-Dazs. He also served as president and CEO of Wilson Sporting Goods.
Level 4: develop new IP
EA, known for its popular franchises Madden NFL; Need for Speed; Tiberium Wars; Fifa Soccer and, of course, The Sims, has been criticised for not making enough games for the blockbuster Nintendo Wii console.
“In the past several years EA hasn’t been standing still but it has been releasing sequel after sequel and not generating much new intellectual property,” says Todd Greenwald, an analyst at Nollenberg Capital Partners.
“Some of the franchises have got a little tired. This was starting to change even before John joined but if anything he will accelerate the process.”
Level 5: hit the acquisitions trail
Having masterminded private equity deals at Elevation and commanding a war chest of at least $1.4bn at EA, the chances are high that Riccitiello will go on the acquisitions trail. Indeed, EA had already inked several acquisitions prior to Riccitiello’s return, but a number of analysts say it is only a matter of time before he starts buying companies, even ones on the scale of rival games publishers UbiSoft and Activision.
And the TV business is already in his sights, as the recent Endemol tie-up suggests. A key reason why gaming and TV can work together is that more demographic groups are discovering the joys of gaming.
There is an increasing number of sports-based games while women, relatively high users of video games, are particularly drawn to games that are shorter and can be played on mobile phones.
TV brands depend on big audiences, and shows that benefit from worldwide franchises are highly appealing to games publishers trying to develop outstanding and marketable intellectual property.
Level 6: TV star
EA is a pioneer in converging media and exploiting new trends. At the moment legendary games maker and creator of The Sims Will Wright is working on a much-anticipated new game, Spore, a kind of MySpace meets The Sims Online that allows gamers to develop the game themselves.
It’s this kind of out-of-the-box thinking that Riccitiello could be bringing to the TV business. He is an avid gamer, straightforward and meticulous, and fully understands his audience.
Riccitiello’s move back to Electronic Arts might not have made many television executives sit up and take notice at the time, but his next few moves almost certainly will.
