EA.COM FROM THE INSIDE [Author: Lum the Mad]

I wanted to write this to give some background on the tortuous road to being borged by the EA beast that Kesmai took, and offer a little insight into why EA is where it is today, on the other side of a job cut that didn’t have to happen.

Back in June 1999, Kesmai stood at a crossroads. We had GameStorm, which had been limping along and not quite generating profits. We were a wholly-owned subsidiary of NewsCorp, with headcount pressures that meant many contractors were employees-in-fact, simply to cut the Gordian knot of NewsCorp’s refusal to authorize additional headcount even in the face of a staffing crisis. What Kesmai CEO Chris Holden decided to do was stop the cost-containment mindset and bet the farm. He wanted NewsCorp to spin Kesmai back off into its own company, mostly backed by outside investors, to put together the game service to end all game services, that would finally make Kesmai a well-known name, not just among gamers but among all Internet users.

We set to work on the Banzai reengineering project, involving the entire company, from top to bottom. At the end of three weeks, we had a thick document detailing from the ground up just what the service would do and what it would use. It was all there — peer-to-peer games, message boards, IMs, client-server games, shopping, trading… Next we had two tasks: find investors and start proving that we really had the expertise to pull this off.

The original all-hands meeting was a turning point: Holden said (in so many words), “I want everybody to get behind this 100%. If you can’t… there’s the door.” Succeeding meetings started to take a gradually quieter and yet more desperate tone. After several months, no investors we’d courted had stepped up to the plate. We were doing a lot of prep-work but still had nothing concrete. Then one day in November, we got the word that there was an all-hands meeting that morning. At that meeting it was announced that we were being acquired by EA, to be spun off into a new company called EA.com. The room got quiet. This wasn’t The Plan. What happened?

Apparently EA was one of the companies courted by the executive team to invest in us. EA made a counter-offer: we’ll buy you outright and fund this Banzai plan of yours, and we’ll use our clout to get you deals you can’t get starting from scratch on your own. EA also really wanted some of the technology Kesmai was developing, and were willing to buy them for that reason alone.

The new unit, EA.com, was duly formed, funded in the minority by NewsCorp and AOL (who had somewhat more of a stake in the business, since EA.com was to become the new AOL Games Channel), and majority-funded by EA. Employees were promised stock options (which, it later turned out, were to be options in a new class-B tracking stock, *not* ERTS, or even class-A stock in a new company).

It was at this time that word came down that EA was going to evaluate all the games on GameStorm and AOL and, as much as contracts allowed, cull the “unsuccessful” ones. This brings me to a point about EA: EA management does not think long-term. The phenomenal commercial success of UO is the only reason it’s still around — EA has no room in their plans for a nice loss-leader game to draw people in, or even for long-term development on a really killer game.

Have we seen this in the recent brouhaha? Yes. For example, Air Warrior was killed. Air Warrior, the flight sim that WWII pilots lavished praise on, the next version of which had rendering so high-res realistic that an editor of a game magazine calendar initially rejected the Air Warrior entry because “You can’t submit pre-rendered posed shots — they have to be in-game screenshots.” And was stunned when he was told “They are.”

Back to the startup phase of EA.com. Staffing was a problem. EAHQ was in Redwood Shores, CA, and EAVA was in Charlottesville (this was partly alleviated when Anjelina Halstead was sent to EAVA to be the on-site HR coordinator). Site space was a problem — in June 2000 we ended up moving into a cubicle farm in a bank building south of town, with all the attendant headaches of both moving and cubicles.

Then the site “launched”, not with a bang, but a whimper. Part of the trouble was that EA.com had a cobbled-together feel. Parts of the game technology, like GILS (Game Install and Launch System), just didn’t work right all the time, and there wasn’t really a “GILS team” like there were game development teams, so a lot of issues simply went unresolved. Then there was the sudden dumping of support content for all EA games into EA.com, which put a huge burden on game producers and support leads (not least because much of the information was out of date). Site specs and even game formats (Java vs. Shockwave) changed on a daily basis.

The biggest headache by far, apparently, was that Andersen Consulting had been called in to help spec and implement infrastructure. I heard more than one person griping about the AC consultants being less than adept, and I have it on good authority from friends in the IT industry that AC has a well-earned reputation for being clueless. Anybody with clue jumps ship from AC as soon as they can.

We also suffered from what I can only describe as total incompetence on the part of EA marketing. In the entire time since EA.com was formed, I have never heard or seen a single EA.com television, radio, or print ad, and I should have been deluged with them. Maybe they’re running things in the gaming press, but I wouldn’t know, because I don’t read hardcore-gamer magazines — and (news flash, EA!) neither does most of the online-game-playing public. Being the AOL games channel doesn’t mean people will magically hear about all the cool stuff you have by osmosis.

The end result was, for various reasons, the site was posting something like 10% of the targeted metrics.

I said earlier that these layoffs didn’t have to happen. Here’s what EA should have done to avoid this:

1) Ship it when it’s done. WHEN IT’S DONE. Not when Marketing says it’s the right time to ship to catch the Christmas-season wave. Not when you get the 400th plaintive letter from a fan asking when the game will finally be done. Kesmai had a “when it’s done” policy and, by and large, Kesmai’s in-house games were solid products. Everybody who played on GameStorm will remember the contrast between games like, say, Air Warrior and Legends of Kesmai, developed in-house, and schlock like Aliens Online and Godzilla developed by schlock-meisters Mythic Entertainment.

2) Be Prepared. It’s the Boy Scout motto, and it’s just as true in

business. EA was unprepared to deal with taking a company of a little over 100 people and growing it to 300 in a period of months. They had to scramble to find space and resources to support all those employees. They had trouble converting some of the contractors to employees. Then they found out they were unprepared to carry those employees long-term in the face of stiff competition.

EA was also unprepared for the tanking of the banner-ad market. A *lot* of the revenue projections were dependent on banner-ad income. The moral there is, make sure you can cover your bets.

3) Think long-term. Air Warrior 4 had years of steady development behind it. UO2 got all the attention with its cancellation, but Air Warrior 4 was probably closer to shipping and could have recouped its costs in a shorter time with the right long-term support. But as I said before, with EA you either make a big splash or you sink without a trace. This is fine for a box-game company, where all you have to do is tell people to go to the store and buy it, but for an online subscription service it’s a terrible way to run a business.

4) Don’t set unrealistic short-term goals. This sort of grows directly out of point 3. Morale at Kesmai tanked over GameStorm when it didn’t “make the numbers”. Morale at EA did the same thing when EA.com finally coughed and wheezed its way onto the stage. In both cases what got overlooked was that the service had steady incremental growth. In both cases there were high expectations with little broad-spectrum marketing support to make them happen — both management teams paid lip-service to the idea of appealing to the “casual gamer”, but they didn’t do a good job getting the message out to that market segment. Ask 100 people on the street what EA.com is if you don’t believe me.

5) Keep your commitment to your employees. The greatest damage that’s been done to EA with these layoffs is to its reputation. We know now that it really *is* all about bucks at EA, and that all the spewing about the challenge of building a successful company and how the company will help you grow is just happy blather. When it comes down to the profit-or-loss line on the 10Q, employees take a backseat and become mere assets, to be purchased or liquidated at will.

In my opinion this last is the most damaging of all. The hardcore gaming community was stunned that EA took such a hard fall last week. A lot of EA employees will probably be polishing up their resumes, and a lot more folks will probably be giving second thoughts to submitting theirs. Because who knows? You might have a job there today, but next time EA decides to spend some cash gobbling up their competition, it could be your salary and benefits they’re rebudgeting.

It’s their right to spend their money how they want, but I think this

decision was penny-wise, pound-foolish. And there’s no going back — you can’t go to the employees you let go and say “oops, uh, we made a mistake, you’re really *not* fired, it was all just an accounting error.” If they needed huge amounts of extra labor to spin up the service, fine — but that’s why you hire contractors. They’re there specifically to work short-term contracts and move on. Hire a bunch of contractors on a six-month plan, with an option to renew month-to-month after that. Then you have no guilt, no bad reputation, and no morale hit when employees’ friends get dropped like pebbles from a rolling boulder.