4 moves Electronic Arts must make nowMarch 20, 2013: 7:31 AM ET
How to fix the ailing games giant.
FORTUNE – Have the mighty fallen? That was the question raised when Electronic Arts, the publishing giant behind hits like Dead Space 3 and Battlefield 3, announced that longtime CEO John Riccitello would step down at the end of March. Former CEO and current chairman Larry Probst will take over in the interim until the company finds a replacement. "I am proud of what we have accomplished together, and after six years I feel it is the right time for me pass the baton and let new leadership take the Company into its next phase of innovation and growth," Riccitello said in a statement.
The move comes in the wake of the EA's (EA) less-than-stellar results. Indeed, during the company's last three months of 2012, revenues were lower than the same period the year before, and the company warned that profits and revenues for the current quarter might come in on the low-end of guidance. Although Riccitello's resignation was seemingly well-received by Wall Street initially, the company's stock plunged nearly 11% on Tuesday.
So what's the struggling hit-maker to do? Here are ideas:
1. Find the right CEO. No less than 24 hours after the announcement, people are already talking about Riccitello's successor. According to Baird Research analyst Colin Sebastian, frontrunners for the position will likely include Chief Operating Officer Peter Moore and Frank Gibeau, President of EA Labels. Moore once served as President of EA Sports and also served as Corporate Vice president of Microsoft's (MSFT) Interactive Entertainment Business, which includes the successful Xbox 360 console. Gibeau's track record is also storied. Besides overseeing global product development and marketing at EA, he's credited with having a hand in the launches of hundreds of game franchises since 1991. With retail software sales declining industry-wide, Riccitello's heir apparent must be someone not only with a solid track record but savvy enough to navigate the ongoing transition toward digital.
2. Get your act together. To call the launch of SimCity earlier this month anything less than "disastrous" would be giving the company a pass. With SimCity, EA employed an online-only Digital Rights Management (DRM) technology which means gamers must be online and connected to EA servers at all times to play. But thanks to what the company called "overwhelming demand," players experienced a myriad of problems like failures to load the game entirely and wait times of 20 minutes to log in. Gameplay became so problematic that Amazon (AMZN) temporarily halted sales of the game, and EA offered users the option of downloading a free game from its online store. "I know that's a little contrived—kind of like buying a present for a friend after you did something crummy," wrote Lucy Bradshaw, general manager for Maxis, a division of EA, on the company's blog. "But we feel bad about what happened. We're hoping you won't stay mad and that we'll be friends again when SimCity is running at 100 percent." Hardly a way to make a good impression, particularly as the company increasingly pushes digital content.
3. Improve online security. Low-priority? Hardly. The last thing gamers need as they download and play their games off platforms such as Origin is a security breach akin to the ones that affected Sony's (SNE) online and entertainment networks back in 2011 and resulted in the theft of over 100 million users' information like names, home addresses, and phone numbers. A paper released last month, called "EA Origin Insecurity (When Local Bugs Go Remote... Again)," outlines a vulnerability within the online network that a hacker could take advantage of. EA reportedly has yet to fix the problem, but needless to say, they should do so ASAP and ensure its digital distribution platform is as secure as can be.
4. Spend less, innovate more. EA, like many other major gaming companies, often operates under the philosophy that if you throw enough money at a game, it will sell. Not always. Dead Space 3 may have been a bestseller, but the company's Medal of Honor franchise took a major hit with the disappointing release of Medal of Honor: Warfighter last year. The game was so poorly received, even EA confessed it was an "obvious miss" and pulled the franchise "out of rotation." "We don't think it's a genre problem. It's an execution problem," Richard Hilleman, EA's Chief Creative Director, admitted earlier this year. "It's much more that we had some things we should've done better." Instead of stuffing its release schedule with releases and rushing development, focus on product. Yes it's a tired adage, but quality over quantity.