How EA Integrates European Game Startups

Global videogame giant Electronic Arts has made lots of acquisitions—especially in the mobile arena—but how does it make the deals work? “M&A is a challenging, risky activity,” admits Barry Cottle, senior vice-president and general manager of EA Interactive, the division of Electronic Arts that includes Playfish, a London-based social gaming company acquired last year, as well as EA Mobile and Pogo. EA doesn’t pretend to have all of the answers, but its executives agreed to talk to Informilo about how the gaming company integrates startups once it acquires them—an issue of interest to multinationals in all sectors.

“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 Playfish, the fourth European games studio acquired by EA since 2004, include allowing it to stay in London and to 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 degree of autonomy is a formula that has worked well for EA, helping it launch new blockbuster games, retain the management of start-ups it acquires, and infuse its top management with young talent.

Take the case of Digital Illusions Creative Entertainment (DICE), a Swedish game studio specializing in first-person shooter games, which was 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 for the EA Games Label, including DICE, Britain's Criterion Games and Germany's Phenomic. In that role he has helped drive game franchises such as Need for Speed and BurnOut, first person shooter genres Battlefield and Medal of Honor, and the development of free-to-play games for EA's Games label by teams in Stockholm, Frankfurt, and Redwood Shores, Calif.

Soderlund says he never imagined working for a big company. DICE, which was founded in 1992 by seven Swedish entrepreneurs in Gothenburg, started out as a maker of games for personal computers. Soderlund came into the picture when a company he created, called Refraction Games, was acquired by DICE in 2000. A few weeks later, DICE's CEO left the company. Soderlund was asked to run the newly merged Swedish gaming studio, which began to grow rapidly, working with the likes of EA and Microsoft and growing 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 PCs, and in 2003 EA bought an 18% stake in DICE. The two companies 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 then purchased the rest of the company in 2006.

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 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 became the fastest-selling game ever to reach one million units on Xbox Live Arcade.

DICE has other successes, too. Battlefield Bad Company 2, a game released last month for the Xbox 360, PlayStation 3, and PC, was the best-selling March release on record in North America and Europe. Users of the game, which puts the player in a fictional war between the U.S. and the Russian Federation, have racked up more than 81 billion points in online multiplayer sessions. The game also has more than 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 parkour games. DICE's first parkour game, called Mirror's Edge, for PlayStation 3, Xbox 360, and the PC, is set in a society where communication is heavily monitored by a totalitarian regime and a network of runners transmit messages while evading government surveillance. The game 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 financial reporting and travel. But the key to its successful integration and that of other studios, such as Criterion Games, is that EA "allows studios to keep their brands, keep their teams, and lets the leadership use the creative process that works for them," Soderlund says.

It's not surprising, then, that EA plans to treat Playfish the same way. The videogame giant said last November that it would acquire Playfish for about $275 million in cash and $25 million in EA stock. EA Interactive general manager Cottle says the company decided to buy Playfish because duplicating its success in social gaming would have been difficult.

Playfish produces games for friends to play together over social and mobile platforms such as Facebook, MySpace, Bebo, Google Android, and the Apple iPhone. It now counts more than 60 million monthly active players across its 11 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's significantly more than the benchmark multiplayer online game, Vivendi's World of Warcraft, which has 12 million players.

"The acquisition enables us to be a leader right away," says Cottle. That's important because games are shifting rapidly from products to digital services. The acquisition is expected to help EA make the transition.

The deal also will give Playfish access to additional resources expand its portfolio. "The reason we thought it was such an exciting deal to combine with EA is the fact that we feel we have only scratched the surface of where the games industry is going," says Kristian Segerstrale, Playfish's founder.

Social gaming could permit publishers to reach customers who haven't typically played on consoles, including women and people over 50. "Imagine how big the industry can be once we are able to get those people who play games because they want to have fun with friends, not for the immersive journey on the console," says Segerstrale. "That's what excites me, and that's why I'm 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 tailwind from EA," he says.

Guest blog post from Jennifer L. Schenker.

This blog post was adapted from www.informilo.com. Click here to read the original posting, provided courtesy of Informilo.

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