John Riccitiello Out at Electronic Arts
MARCH 19, 2013 • Six years after taking the reins at Electronic Arts, John Riccitiello resigned as chief executive and board member. In a blog post to EA employees, Riccitiello described his departure in financial terms. “My decision to leave EA is really all about my taking accountability for the shortcomings in our financial results this year. It currently looks like we will come in at the low end of, or slightly below, the financial guidance we issued to the Street, and we have fallen short of the internal operating plan we set one year ago. And for that, I am 100% accountable,” he explained. During Riccitiello’s tenure, EA’s stock value has declined 65%. During four of the first five years Riccitiello was chief executive EA posted losses. The publisher also ran in the red during the first nine months of the current fiscal year. Unlike Activision Blizzard, which managed to publish profit-boosting hits despite the worldwide recession, EA’s releases did not add to the bottom line nearly as well. Riccitiello also paid huge sums for acquisitions of Elevation Partners, Playfish and PopCap, with mixed results. In streamlining EA’s publishing operations Riccitiello was successful to the extent that the company is now generating more revenue on fewer titles released. EA has also made strides in distributing content digitally. For example, although the recent release of SimCity has been marred by serious technical glitches, 54% of the 1.1 million units sold during the first two weeks were distributed digitally. Chairman of the board Larry Probst will succeed Riccitiello in the interim. Probst served as CEO prior to picking Riccitiello for the job in 2007. Thanks to his contract, Riccitiello will receive his full salary for the next 24 months.
Impact: Like a football coach on an underperforming team it was really a question of when for Riccitiello. Riccitello came on in 2007 when EA’s stock had been flat for years and revenue growth had been stagnant. Developing compelling new IP is probably the most important task EA can’t seem to accomplish under anyone’s tenure as CEO. With some major acquistions, Electronic Arts was able to grow revenue some but it came at the expense of profits. EA has a history of making some savvy acquisitions, only to proceed to dismantle whatever made that development studio valuable.
Although Electronic Arts had always been stingy with its money, under Mr. Riccitiello’s command, EA opened the purse and made some of its most expensive acquisitions ever. This started soon after he came on board after EA acquired Riccitiello’s previous company, Elevation Partners, for $680 million. Elevation owned two elite development studios, Pandemic Software and BioWare. Under EA, Pandemic did very little and was shut down. Meanwhile, Bioware was tasked with developing Star Wars: The Old Republic online game which turned out to be a disappointment. In 2009, EA acquired social network game company Playfish for $300 million, but once again the investment did not pan out. The 2011 investment in casual game maker PopCap has been somewhat more fruitful but the $750 million price tag was steep. Of course, Riccitiello was faced with the difficult task of taking a packaged goods distribution and publishing company and making them successful in the digital distribution age. He made a few in-roads, but the odds were stacked against him from the start. Considering the poor financial performance, Riccitello actually lasted longer than expected. Nevertheless, in the end, investors simply lost patience.