D.I.C.E. '08: Riccitiello lords over "city-state" studio model

LAS VEGAS--The year 2007 saw Activision claim the crown of largest third-party publisher, even before its looming merger with Blizzard Entertainment was revealed. But for almost all of the prior decade, that distinction was held by Electronic Arts, which grew rapidly in the 1990s and early 2000s via a flurry of acquisitions.

EA's still-ongoing shopping spree has given it a massive library of marquee licenses, including the immensely profitable Sims series. However, in many gamers' eyes, the publisher has been a ravenous behemoth, gobbling up independent studios then grinding them down with an oppressive and byzantine corporate culture. EA critics pointed to the closure of once-mighty independent studios such as Origin Systems and Westwood Studios which were first subsumed and then shuttered by EA when their games ceased to be profitable.

For much of the time EA was painted as a corporate villain, John Riccitiello was its president and chief operating officer. After seven years, the Berkeley-educated businessman, who cut his teeth working at PepsiCo and Clorox, left the company in 2004 to cofound the venture capital firm Elevation Partners. The following year, he presided over the union of famed studios BioWare and Pandemic into an independently financed "superdeveloper" that bore their names. In 2007, he returned to EA, which turned around and bought BioWare/Pandemic for a whopping $860 million just months later.

THE "CITY-STATE" STUDIO SYSTEM
EA's myriad detractors saw conspiracy in the buyout, with some theorizing the publisher rehired Riccitiello just so it could acquire BioWare/Pandemic and further feed its insatiable acquisitional appetite. However, today at the D.I.C.E. Summit, he made the contention that when EA buys a studio, "They're taking us, we're not taking them."

While the concept of EA as egalitarian assimilator might sound laughable to many, Riccitiello stuck to his guns. He said working with the founders of BioWare and Pandemic taught him to truly appreciate how independent studios' independence allows them to blossom creatively. Now back at the helm of EA, Riccitiello says he intends to let the megapublisher's various studios operate more autonomously than they ever have before, a theory he describes as the "label" approach to studio management.

"When we're doing it right, we're not synchronized swimmers paddling in unison," he told an attentive but weary audience. "We're like the NFL, with specialized teams with specialized cultures. Culture makes a difference. The studio model allows them to keep their own individual culture, like city-states responsible for their own houses."

As shining examples of the city-state system, Riccitiello held up a series of internal EA studios that were all once famously independent: Digital Illusions CE (DICE), EA Mythic (nee Mythic Entertainment), EA Black Box (nee Black Box Games), Criterion Games, Pandemic Studios, and BioWare.

Then, he surprisingly admitted that EA didn't create the "label" at all. Its rival Take-Two Interactive did when it set up the semi-independent Rockstar Games after buying Grand Theft Auto creator DMA Design, now called Rockstar North. "What Sam and Dan Houser have done there obviously worked," Riccitiello said, before going on to say he was "really looking forward" to Grand Theft Auto IV.

Ideally, Riccitiello believes, studios within a large publisher should operate like independent studios freed from having to worry about making payroll and strategizing marketing. He said he hoped EA's own internal studios would be like Valve Software or Blizzard Entertainment--self-contained organizations with strong leaders primed for massive growth and creativity.

"The command and conquer model, the command and direct model doesn't work," said Riccitiello. He went on to concede that EA's past post-acquisition tactics backfired badly. Bullfrog, Origin, Westwood--all no longer exist today because something broke. ... and I'll simply state that EA blew it, and to a certain degree, since I was involved, I blew it."

To learn from his mistakes, Riccitiello spoke with unnamed members of the aforementioned dissolved studios. "They told me they were stifled by politics, bureaucracy, and a fact they felt they weren't heard," he said. As a result, he is empowering his studio heads by giving them the corporate equivalent of the Bat-phone. "Large organizations will screw up, and if you have a strong leader at a studio, they'll call me up directly and change the direction of the company."

MORE TALENT = LESS RISK
During his address, Riccitiello's affection for EA's high-profile studios was apparent. "The heart and soul of our company is out there with the developers, and we will never forget that," he gushed. That said, the executive also has a less sentimental reason for his new approach--it makes good business sense in a time of skyrocketing development costs.

To prove his point, Riccitiello said the independent nature of two of EA's studios, Maxis and EA Canada (nee Distinctive Software), led to the creation the company's wildly popular Sims and Need for Speed series. "In essence, these two companies took over Electronic Arts," the executive said, referencing the publisher's new hands-off approach. He said several new properties currently in development within EA's city-state system--including BioWare's Dragon Age, Mythic's Warhammer Online, and DICE's Battlefield: Bad Company--had the potential to be big successes.

In short, Riccitiello said the fact semi-autonomous studios can more easily create popular--and profitable--franchises offsets the risk of developing next-generation games. He had no compunction about spelling out the amount of effort a publisher wagers on each game as well. He estimated it takes at least 200 people--including outside contractors--to develop a triple-A title, which, with the introduction of Blu-ray, could grow to be as large as 25GB in size.

In other words, tens of millions of dollars are at stake in development costs alone. "We're in Vegas, and I don't have to tell you putting $34 million down on 34 [in roulette] and losing isn't a good thing."

In summary, Riccitiello feels that motivated, semi-independent studios are the operations best-suited to take on such mammoth projects with a minimum of risk. "The biggest cost is creative failure, and our consumers need to know that their 59 dollars are well spent. ... If you think that you can take [a studio's] label off the game, put your label on, and expect them to work as hard, you're crazy. ... Talent is migratory. If the talent leaves, there is no value in the business."