Wednesday, May 14, 2008

EA Putting the "Q"s in Perspective: Quality is Job 1 Edition


I must give credit where it is due, and today, credit goes to John Riccitiello and EA. EA made some pretty cool announcements about relieving the tension between quality and quarterly reports. EA's new CFO announced EA will no longer be giving quarterly guidance, and John Riccitiello announced EA will focus on quality and raising their Metacritic score.

Eric Brown explained:

"We are only providing annual guidance from this point forward. Let me explain why. As you know, our business is hit driven, seasonal and significantly impacted by the release dates for our titles. This creates uneven quarterly comparisons, both sequentially and year-over-year. If we delay a title for quality reasons from one quarter to another in the same fiscal year, while good for the long-term future of the franchise, it could have a significant impact on our quarterly performance without necessarily affecting our annual performance."
Quarterly guidance gives the company a report card every 90 days - a useful tool to monitor my 12 year old, but not so good when it comes to game quality. The quarterly guidance requires publishers to make painful decisions about pushing a product or making the numbers for the quarter. As we consumers know, the decision too often favors the quarter. If products slip, the quarter will be down, and the stock will fluctuate more than it should. Since most companies fiscal years end after the first calendar quarter, and their mammoth launches are usually in the 4th calendar quarter, a one quarter slip of the most important titles will allow them to remain in the calendar year, allowing the company to meet its annual guidance. The decision to step off the treadmill in favor of quality is bold, as investors may also see the lack of quarterly guidance as a risk. Realistically, EA will be surrounded by "whisper numbers" regarding quarterly numbers, but will not have official releases.

Even more exciting is Riccitiello's quality commitment - you may think I am being sarcastic here, but I am not the announcement is good enough and reasonable enough to give him the benefit of the doubt. Kind of like the automaker's commitment to meeting CAFE standard of 35 miles per gallon by 20 something, he committed EA to meeting an average metacritic score of 80 by 2011. It is really easy to argue the number is too low, or three years out is too far away, but even I can't throw stones. The fact he is making the commitment, coupled with the new policy on guidance is a great move for the industry and a way for him to put his money where his mouth is.

Our business is still the game "business," but EA is recognizing creativity more than ever.  Great games mean great sales, shit games mean shit sales, no matter when they come out. A balance between quality and predictability must be struck. Creativity, especially on the scale we are working today and built on fluid technology cannot always be delivered on a schedule forecasted 2 to 3 years prior to release. Some games make it, some games deserve to be killed and some games deserve more time. Very rarely does a great one make on the date originally set.   The example at the front of our minds is GTA IV, but what about Tomb Raider, Super Mario Galaxy, Metal Gear anyone of them, Bioshock or any one of your favorite games? I challenge anyone to name the first installment of a franchise which released on its original date. Every franchise is the result of some smart guy at a publisher saying "we can move this from good to great with x more months."

There was a time when EA built the highest quality games on the market. It was not long enough ago to enjoy brand resurgence simply through the 20 year nostalgia cycle, they will really have to work on it. By setting a goal of 80 and allowing flexibility in the release date, Riccitiello is giving the runway to his developers to make quality games. Let's put a pin in this and revisit in 2011.




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