Former EA Exec Lasky Lashes Out At EA’s Digital Goods Direction

This week former EA senior executive Mitch Lasky, who sold Jamdat Mobile to EA in 2005 for $680 million, lashed out at EA's current attempts to transition away from packaged goods, toward a digital goods company that monetizes by selling users intangibles like virtual goods and virtual currency.

"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," writes Lasky. "Think again."

Lasky wrote after EA CFO Eric Brown called for 2010 to be another down-to-flat year in EA's packaged goods business, with sales targets likely to be missed. Lasky writes that EA has essentially allowed its packaged goods lines, driven by its sports franchises and other series like The Sims, fall into disarray while focusing on growing its mobile and social gaming businesses. He blames this for recent drops in the cost of EA's enterprise value (now below $4 billion). Lasky argues that EA should be behaving more like current packaged goods gaming industry leader, Activision.

Jeff Brown, EA's Head of Corporate Communications, has responded by accusing Lasky of being bitter over the fact that John Riccitello went on to become EA CEO rather than himself. "It’s never easy being turned down for a job, but most people don’t
spend three years obsessing about it. Since Mitch left EA, Apple
invented the iPhone, Facebook evolved to include a gaming platform and
EAMobile became the world leader," said Brown, in a statement quoted by Venture Beat.

Lasky, who is now a partner at Benchmark Capital, states that EA is soon to reach the point where it will be ripe for an acquisition. He mentions now-Marvel owner Disney as a prospective buyer, and describes the Chinese online service Tencent as being able to "swallow EA whole." Tencent has active partnerships going with EA's main rival in the sports gaming business, 2K Sports.

Electronic Arts became a major player in the virtual goods space during 2009, earning about $80 million from its digital business alone. The $275 million it spent to acquire Playfish made it the year's single largest virtual goods-related acquisition. EA has also been aggressive in incorporating digital revenue streams into its packaged goods franchises, like Madden, Tiger Woods Golf, and The Sims. If EA's investment in virtual goods is judged a poor one, it will definitely have a major impact on the space.

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