EA’s No. 2 exec shares five tips to avoid the game industry’s mess

When John Schappert returned to Electronic Arts in the middle of 2009 to become the video game giant’s chief operating officer, he walked into one of the toughest transitions the company had ever had.
Losing money, EA was cutting lots of jobs, shelving game projects, and closing offices even as other companies were growing fast in new parts of the game business. These days, if you don’t have a game in the top 20 titles — which in the U.S. account for 50 percent of console game revenue — you are not making money. And EA had too few titles in the top 20 in the past year.
The rest of the core video game industry had a tough year in 2009, with 11,488 layoffs among 95 companies during the year, according to M2 Research. But EA created a “WTF moment” in the industry when it announced last fall in the same day that it was cutting 1,500 jobs and had purchased social game company Playfish for $300 million plus earnouts.
If you follow the money here, you might conclude that the hardcore, disk-based industry dominated by consoles is dying. Not so, said Schappert in a speech at the Dice Summit executive game conference today.
In a subtle dig at the previous day’s speaker, Bobby Kotick, CEO of Activison Blizzard, Schappert began, “I’m not going to talk about my great deals. How smart I am. How much money I make. How great my company is. How dumb others are.”
Rather, he offered five tips on how the industry can navigate the challenges of the industry.
“We are in a transition,” he said. “This is harder, more difficult, more complex. There are more platforms now. The sheer complexity makes it tougher. But we have done this before.”
His first tip: Make your commitment to quality. EA has done this, cutting back on the number of its titles and doubling down on the ones it is making. An example is the latest FIFA 2010 soccer game, which won the top sports game award last night. Schappert said EA lost its edge in game play to Konami’s rival Winning 11 soccer game. So EA refocused its team on product quality and became less obssessed with shipping a new version of its sports titles with every single season.
“It’s hard to regain the trust of consumers,” he said. “It took a long time to regain ground.”
Tip No. 2: Get more from your marketing. Good marketing can’t save a bad game, such as EA’s ill-fated Catwoman title. Consumers are too smart and can see through pure fluff. On the other hand, EA made some bad moves with titles such as Mirror’s Edge and DeadSpace, launching them without enough marketing in a busy season when the brand new franchises were competing against strong titles such as Fable II and Gears of War 2. Now EA has pushed the launch of new titles such as Dante’s Inferno into the post-holiday season. And with Dante’s Inferno, EA took out its first ever Super Bowl ad to put the game in front of 115 million viewers two days before the launch of the game.
Tip No. 3: Invest in the future. Get online. Consider the fresh revenue streams such as online subscriptions, premium downloadable content, free-to-play games with micro-transactions, and in-game sponsorships and ads. Much of this action is coming to fruition on the connected game consoles, where companies now have to support their titles with six months worth of online extensions.
“The days of shipping a game and being done with it are over,” he said. “People are buying fewer games but they want to play those games for a longer time.”
But Schappert warned about getting to excited about social games.
“We are a big supporter and believer and I couldn’t be happier to have our Playfish acquisition,” he said. “I do want to express caution. This industry is destined for consolidation. When you see crazy valuations, you could easily think we are in a bubble.”
He said the similarities to the mobile game industry bubble are similar. EA paid $680 million to buy Jamdat in 2005. After that, dozens of mobile game startups flourished. But even after the launch of the iPhone, the industry has now consolidated and the top iPhone games are now based on big brands. Schappert believes a similar consolidation will happen in the social game market.
Tip No. 4: Don’t abandon your consumer base. This is the flip side of don’t get too excited about new investments. Disk-based games sold in retail stores aren’t going away and may still be around in the long term, Schappert said.
Tip No. 5: Don’t let the cynics get you down. Given the negative headlines, it’s easy to get depressed and walk away from the industry. But Schappert said there is ebb and flow, withering and dying and then regeneration. And each time, the game industry emerges bigger than before. Creators of great games have to stick to their visions and continue to drive the industry to new heights, he said.
Schappert will participate in a fireside chat with Los Angeles Times staff writer Alex Pham at our GamesBeat@GDC executive game conference on March 10 at the Game Developers Conference.