To Fix Itself, Electronic Arts Needs More Than Just Job Cuts

ertsstock2008Last year, Electronic Arts CEO John Riccitiello told The Wall Street Journal that his company was “boring people to death and making games that are harder and harder to play.” Prophetic words, though no one was listening at EA. In early December, EA said it was going to miss its revenue target of $5-5.3 billion for 2008.

And on Friday, it announced that it would cut 1,000 jobs or 10 percent of its workforce so it could save $120 million annually. They will only put efforts behind preexisting blockbusters or those in the making.¬†Does this strategy shift really address the company’s bigger problems?Earlier this month, on Sarah Lacy’s TechTicker show, I pointed out that the company was “reliant on big, expensive Hollywood-style games, instead of more nimble social, mobile or Wii games.” The latest EA move to focus on a few hit games is nothing but recycling of the old strategy, especially at a time when the video games business is amidst a major transition.

In his piece, “Game Business and its Crisis of Attention,” Wagner James Au described some of the issues facing the video gaming industry as it grappled with the changing dynamics of interactive entertainment and rising competition for time spent on EA-styled big video games. If the recent sales of Wii are any indication, growth lies in simplicity. EA’s Riccitiello knows that. It’s just not clear if he can do doing anything about that in a company that seems to be a wee bit out of sync with the times.

Looks like the stock market is reflecting some of that skepticism: From 2004-2008, EA’s stock was one of the more stable scrips on Nasdaq, fluctuating between $45 and $65. This year it has dropped 70 percent, to about $17.39 a share.

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