Had a wide ranging conversation with a very smart friend this morning about FarmVille, speaking at conferences, and different leadership styles.
During the conversation, he shared how early game developers used to complain that mistakes by retailers ruined the opportunities for their games to become hits.
Because of FarmVille and my experience making hit PC games for Westwood/EA, an instant set of connections flashed through my mind.
“Selling games at retail is like a glacially slow version of selling games on the internet.”
The thought process unrolled:
1. Selling at retail is a glacially slow versus using the internet.
2. The slowness and “physical-ness” of selling at retail creates it’s own set of problems (shelf space, inventory, cost of goods).
3. Debugging the problems with your product at retail are exacerbated by the problems created by selling at retail. (Do players not like the game or did the retailer forget to put it on the shelf?).
Now about selling social games online.
1. “Instant on”: player sees and clicks a link to your game on Facebook and starts playing instantly with no obligations.
2. If the player likes your game, they keep playing. If not, they quit playing. We know how as game makers how many people are playing the game each day.
3. Without looking at any personal information, we can know when people stop playing the game and can make daily adjustment to add fun, remove boring parts and fix bugs.
4. When a player spends money in your game, it shows up in your bank account that day.
Seems obvious to me. Hope other people see it too:
Don’t waste another minute selling games at retail.
Seriously…stop it. Right now.
Do you see it too or am I off track?
The financial analysis of the combination of EA and Take-Two is the easy part to figure out on whether it makes a good idea for these two companies to join.
The trickier part is the current debate about the key talent from Take-Two and will they continue to work for EA after the deal is done.
The answer to this is actually quite simple.
EA has the resources to make it very compelling for this talent to stay for the term of an employment contact that comes with the acquisition. Whether the term of the contract is 2, 3 or 4 years, these post acquisition contracts really cover the time it takes to develop only 1 or at most 2 more games.
History shows this to be true with every major acquisition they’ve made over the years (exceptions are the situations which called for the immediate relocation of all staff to another state, country or painful commuting distance away).
The fact that the major talent stays after the acquisition makes for compelling headlines and a short term win. Good for the stock price too. Good for the public relations stories where every game company wants to be seen as “talent friendly”.
When you look at the statistics for which talent stays after the end of their initial employment contract, the story is less compelling. Unfortunately, history shows a trail of broken and shut down studios, including the departure of major talent from each. This kind of information is rarely examined in detail with each new acquisition. Beyond being hard to quantify, it’s old news.
Sometimes the talent departed because the “lottery win” of being acquired by EA gave them financial freedom to seek other opportunities or “spend more time with their family”.
Other times, the departures came as a result of great talent getting fed up with “one size fits all” development processes and stock price driven mandates that come with working for a large public company or because the new “big company” culture and the resident politicos fighting turf wars all combine to actually destroy the very elements of the studio, talent and product which made them a target of acquisition in the first place.
So the real question is “Can EA retain the top talent beyond the term of the initial employment contract?”.
The answer to that question? I don’t think it matters.
Whether the top talent stays beyond one more game only matters if the costs of the deal and the justifications for doing it rely on benefits that must happen over 2, 3 or 4 years.
EA is smart enough to know this and structure their deal accordingly. Because so many variables regarding top talent are beyond their control, I would even go so far as to estimate that EA probably wouldn’t make the deal if they had to rely on the top talent staying past the initial employment contract.
So, oddly enough, the question of whether the top talent stays is moot.
If EA wants them, they’ll give them a deal (money, creative freedom, undocumented promises, etc) that simply can’t be matched by anyone else and the top talent will stay, at least for a while.
If EA doesn’t want them or doesn’t really care about them, they’ll be gone because other companies will woo them.
That’s the benefit EA has due to it’s size and financial assets.
So, let’s just get on with being clear whether the acquisition is in the best financial interests of EA’s and Take-Two’s shareholders and do the deal.
BTW – Does anyone out there think EA did their homework on all the scenarios on how this will play out? I would guess they pretty much already knew which talent would come on board before they made the offer and barring any “crazy out of the blue” offers by others, had a great idea on what they would need to acquire Take-Two.
