Lasky: EA is in the wrong business

Former Electronic Arts exec Mitch Lasky has said that the Madden publisher has the wrong business targets, team and cost structure, and its digital and distribution business is the only successful division in the company, our sister site GamesIndustry.biz reports.

The EA Games label has produced more failures than hits, said Lasky, and the EA Sports business is lumbered with expensive licensing costs as the publisher has failed to evolve in a rapidly changing market.

"EA is in the wrong business, with the wrong cost structure and the wrong team, but somehow they seem to think that it is going to be a smooth, two-year transition from packaged goods to digital. Think again," wrote Lasky on his blog.

"EA's sports business has been hamstrung by vastly increased licensing costs and failure to transition to a subscription/variable pricing model. This has substantially reduced the profitability of a business that EA used to rely on to fund other, riskier bets."

CEO John Riccitiello's focus on creating new IP for the EA Games label in a bid to grow the business has been "by far the greatest failure", according to Lasky, who said that upcoming titles such as Dante's Inferno and the Star Wars MMO The Old Republic are likely to be commercial failures.

"It's been a very ugly scene, indeed. From Spore, to Dead Space, to Mirror's Edge, to Need for Speed: Undercover, it's been one expensive commercial disappointment for EA Games after another.

"Not to mention the shut-down of Pandemic, half of the justification for EA's $850m acquisition of BioWare-Pandemic. And don't think that Dante's Inferno, or Knights of the Old Republic, is going to make it all better. It's a bankrupt strategy."

Earlier in the week EA lowered its financial forecasts for the full year, blaming poor boxed product sales in Europe and low margins in its EA Partners distribution business.

"Don't believe this is the end of the bleeding," added Lasky, who noted that the company could be ripe for takeover, even going so far as to drag up the long-rumoured Disney acquisition talk.

"With EA's enterprise value down below $4 billion, it's remarkable that nobody has stepped in to put them out of their misery with an acquisition. Certainly, Disney has been looking at them since I was at the house of the mouse back in the early nineties. And there are Chinese companies, like TenCent, that could easily swallow EA whole."

He added: "It's equally amazing that the board continues to support the existing management team through this debacle."