Riccitiello: How EA "failed well"

EA boss John Riccitiello has described the difficulty he faced turning the game giant into a profitable business following the transition into the current generation of consoles.

Four years ago Riccitiello told employees the company had to go through a radical change or accept a "shrinking share of a shrinking pie and eventually die".

"We were facing a world going through unbelievable change with the rise of smartphones, social networks, and more recently the iPad - each of which has turned out to be a platform where gaming is the No. 1 application," he said in a speech at the Haas business school at the University of California (reported by VentureBeat).

EA had to dramatically improve game quality, enter into online distribution and cut headcount.

In 2009 EA announced plans to axe 1500 jobs by the end of March 2010 as part of a new cost reduction plan.

The publisher narrowed its product portfolio and concentrated efforts on titles with "higher margin opportunities".

"We knew it would be hard but we had no idea how hard," Riccitiello said.

"We had to do these three hard things when the press and the financial analysts told us we were crazy. That the cutting was great, but the investment in digital was just not a good idea. It proved very hard to hear the negative drumbeat while tackling very hard challenges at work.

"I lost a few friends in the process: smart creative people who just couldn't stomach the transition."

Now, buoyed by the rising quality of games such as Battlefield, Dead Space, Need for Speed and Mass Effect, EA is in ruder health than it was at the start of the console transition.

But, according to Riccitiello, the job is far from over.

"I wish I could tell you that it has all paid off," he said. "That, like Truman, Jobs and Chambers, we have been fully vindicated. Not yet. Yes, we've had a few wins but there is much more to do.

"I would argue we failed well. We are students of our own failure. We used our failure to shape and impel us to a better strategy. One that we believe that will ultimately succeed in ways that our previous strategy, even if perfectly executed, could never have done... Trust me. Sooner or later, you're going to get knocked on your ass. Will you fold? Or will you fail well?"