Global video game maker Electronic Arts does not pretend to have all of the answers but the company’s executives agreed to talk to Informilo about how the global gaming company integrates start-ups once it acquires them, an issue of interest to multinationals in all sectors .
“M & A is a challenging, risky activity,” says Barry Cottle, senior vice-president and general manager of EA Interactive, the division that includes Playfish, a London social gaming company acquired last year, plus EA Mobile and Pogo. “The gaming space moves fast, market segments and different types of genres pop up, so we not only have to use internal efforts to try and innovate but also look at outside companies that are attacking those places, and, when it makes sense, to acquire them and bring them into the organization,” says Cottle. “What is key is you have to get an agreement on the objectives and the measurements but not dictate the culture on how to get there.”
Plans for London-based social gaming company Playfish, the fourth European games studio acquired by EA since 2004, include allowing it to stay in London and retain its culture. The hope is that Playfish will help EA create more hits in social gaming, an area that is expected to help significantly expand the gaming market by attracting a broader audience.
Giving acquired game studios a certain degree of autonomy is a formula that has worked well for EA, helping it launch new blockbuster games, retain the management of start-ups its acquires and infuse its own top management with young talent.
Take the case of Digital Illusions Creative Entertainment (DICE), a Swedish game studio specializing in first person shooter games, purchased by EA in 2006. Swedish computer scientist Patrick Soderlund, DICE’s chief executive officer at the time of the acquisition, not only stayed on, along with most of the team, but has risen in the ranks at EA. Soderlund, 36, now holds the title of senior vice president and group general manger at EA. He oversees European studios in the EA Games Label, including DICE, Britian’s Criterion Games and Germany’s Phenomic, driving genres such as Need for Speed and BurnOut, first person shooter genres Battlefield and Medal of Honor as well as the development, by teams in Stockholm, Frankfurt and Redwood Shores, California, of free- to play -games for the Games Label.
Soderlund says he never imagined working for a big company. DICE, which was founded in 1992 by seven Swedish entrepreneurs in Gottenberg, started out life as the maker of games for personal computers. Soderlund came into the picture when a gaming company he created, called Refraction Games, was acquired by DICE in 2000. A few weeks later, DICE’s CEO left the company. He was asked to run the newly merged Swedish gaming studio, which began to grow rapidly, working with the likes of EA and Microsoft and jumping from 40 to 250 employees in two years.
In 2000 EA and DICE partnered on a first person shooter game called Battlefield 1942. The game became a big hit on personal computers and in 2003 EA bought an 18% stake in the company. EA and DICE went on to create several games together, including Battlefield 2, all of which were commercial successes. In 2005 EA acquired more shares in DICE and purchased the entire company the next year.
Soderlund and the DICE team had some qualms about the deal. “One of the fears we had when we joined EA is that we were joining a big beast of a company and we would just be told what to do,” says Soderlund. But the reality turned out to be far different, he says. “I feel like we have a complete mandate to run and drive our businesses, I couldn’t work inside a company that did not have that kind of trust and freedom.”
DICE, which by that time had moved to Stockholm, did more than retain its creative freedom. Its relationship with EA helped the Swedish studio expand its franchise onto multiple platforms and significantly increase the Battlefield brand’s visibility.
Under EA ,DICE released an online multiplayer World War II first-person shooter video game called Battlefield 1943, which rapidly became the fastest game ever to reach one million units on Xbox Live Arcade.
That’s not all. Battlefield Bad Company 2, a DICE game released last month for the Xbox 360, the PS3 and the PC, was the best-selling March release on record in North America and Europe. Players of the game, which puts the player in a fictional war between the United States and the Russian Federation, have racked up more than 81 billion points in online multiplayer sessions. The game also has over 44,000 Twitter fans, the most of any EA title, according to the company.
The link-up with EA also allowed DICE to move into an entirely new area, a first person action-adventure video genre known as a parkour game. DICE’s first parkour game, called Mirror’s Edge, built for PlayStation 3, Xbox 360 and the PC, is set in a society where communication is heavily monitored by a totalitarian regime and so a network of runners are used to transmit messages while evading government surveillance. The game uses bright colors and differs from most other first-person perspective video games in allowing for a wider range of actions such as sliding under barriers and shimmying across ledges.
“DICE wanted to create another intellectual property beyond the Battlefield brand, which is expensive and a huge risk,” says Soderlund. ” I am not sure we could have pulled this off without EA.”
Working for a big company has required DICE to make some adjustments, such as adhering to corporate policies on things like financial reporting and travel. But the key to its successful integration and that of other studios – such as Britian’s Criterion Games- is that the company ” allows studios to keep their brands, keep their teams and lets the leadership use the creative process that works for them,” Soderlund says.
It is not surprising, then, that plans are to treat Playfish the same way. EA announced last November that it was acquiring Playfish for about $275 million in cash and $25 million in EA stock. The decision to buy the company was made because Playfish’s success in social gaming would have been difficult to duplicate, says Cottle.
Playfish, which produces games for friends to play together over social and mobile platforms such as Facebook, MySpace, Bebo, Google, iPhone and Android, has over 60 million monthly active players across its eleven titles, driving more than one billion game play sessions every month. The company’s games have been huge hits on Facebook, including Pet Society, which boasts 19 million players per month and Restaurant City, which has 14 million monthly players. That is significantly more than one of the most popular multiplayer online games, World of Warcraft, which has 12 million.
“The acquisition enables us to be a leader right away,” says Cottle. That’s important because games are shifting from products to digital services and the acquisition is expected to help EA make the transition.
The deal will also give Playfish access to additional resources which will allow it to expand its portfolio. “The reason we thought it was such an exciting deal to do to combine with EA is the fact that we feel we are only scratched the surface of where the games industry is going,” says Kristian Segerstrale, Playfish’s founder.
Social gaming allows the gaming sector to reach players who have never played console games, including women and people over 50. “Imagine how big the industry can be once we are able to get those people who play games not because of the immersive journey on the console but rather because they want to have fun with friends,” says Segerstrale. “That is what excites me and that is why I am in it for the long term.” He and the majority of the Playfish team are now working for EA and are committed to staying. “We expect to get a lot of tail wind from EA,” he says. (For more on Segerstrale’s view of the future of the gaming industry and life with EA please click on the video interview with Informilo below)