Electronic Arts (EA) is an American developer, marketer, publisher, and distributor of computer and video games. Established in 1982 by Trip Hawkins, the company was a pioneer of the early home computer games industry and was notable for promoting the designers and programmers responsible for their games. Originally, EA was a home computing game publisher. In the late 1980s, the company began developing games in-house and supported consoles by the early 1990s. EA later grew via acquisition of several successful developers. By the early 2000s, EA had become one of the world's largest third-party publishers. In May 2008, the company reported net annual revenue of US$4.02 billion in fiscal year 2008.^[1] Currently, EA's most successful products are sports games published under their EA Sports label, games based on popular movie licenses and games from long-running franchises like Need for Speed, Medal of Honor, The Sims, Command & Conquer and the later games in the Burnout series.

History

Electronic Arts' original corporate logo, 1982–1999.

1982-1991 - Seeing Farther: The Emergence of an Industry

In February 1982, Trip Hawkins arranged a meeting with Don Valentine of Sequoia Capital^[3] to discuss financing his new venture, Amazin' Software. Valentine encouraged Hawkins to leave Apple Inc., in which Hawkins served as Director of Product Marketing, and allowed Hawkins use of Sequoia Capital's spare office space to start the company. On May 28, 1982, Trip Hawkins incorporated and established the company with a personal investment of an estimated US$200,000. Seven months later in December 1982, Hawkins secured US$2 million of venture capital from Sequoia Capital, Kleiner Perkins Caufield & Byers, and Sevin Rosen Funds.

For more than seven months, Hawkins had refined his Electronic Arts business plan. With aid from his first employee (whom he worked in marketing with at Apple), Rich Melmon, the original plan was written, mostly by Hawkins, on an Apple II in Sequoia Capital's office in August 1982. During that time, Hawkins also employed two of his former staff from Apple, Dave Evans and Pat Marriott, as producers. The business plan was again refined in September and reissued on October 8, 1982.

Between September and November, employee headcount rose to 11, including Tim Mott, Bing Gordon, David Maynard, and Steve Hayes. Having outgrown the office space provided by Sequoia Capital, the company relocated to a San Mateo office that overlooked the San Francisco Airport landing path. Headcount rose rapidly in 1983, including Don Daglow, Richard Hilleman, Stewart Bonn, David Gardner, and Nancy Fong.

Early Sales strategy

Hawkins was determined to sell directly to buyers. Combined with the fact that Hawkins was pioneering new game brands, this made sales growth more challenging. Retailers wanted to buy known brands from existing distribution partners. Despite this, revenue was $5 million in the first year and $11 million the next.^{[citation needed]} Former CEO Larry Probst arrived as VP of Sales in late 1984 and helped the company sustain growth into $18 million in its third full year. Teaming with the existing sales staff that included Nancy Smith, David Klein, and David Gardner, Probst built the largest sales force of any American game publisher.^{[citation needed]} This policy of dealing directly with retailers gave EA higher margins and better market awareness, key advantages the company would leverage to leapfrog its early competitors.

In December 1986 David Gardner and Mark Lewis moved to the UK to open a European headquarters. Up until that point publishing of Electronic Arts Games, and the conversion of many of their games to compact cassette versions in Europe was handled by Ariolasoft. A small company in Wales was already called Electronic Arts, and until 1997 Electronic Arts in the UK was known legally as EOA, a name derived from its square/circle/triangle logo. The Welsh company ceased trading in 1997 and Electronic Arts acquired the rights to the name.^{[citation needed]}

Name change

Some of the early employees of the company disliked the Amazin' Software name that Hawkins had originally chosen when he incorporated the company.^{[citation needed]} While at Apple, Hawkins had enjoyed company offsite meetings at Pajaro Dunes and organized such a planning offsite for EA in October 1982. Following a long business day at the offsite, the dozen employees and advisers who were present agreed that they would stay up that night and see if they could agree unanimously on a new name for the company.^{[citation needed]}

Hawkins had developed the ideas of treating software as an art form and calling the developers, "software artists." Hence, the latest version of the business plan had suggested the name "SoftArt". However, Hawkins and Melmon knew the founders of Software Arts, the creators of VisiCalc, and thought their permission should be obtained. But Dan Bricklin did not want the name used because it sounded too similar (perhaps "confusingly similar") to Software Arts. However, the name concept was liked by all the attendees. Hawkins had also recently read a best-selling book about the film studio, United Artists, and liked the reputation that company had created. Early advisers Andy Berlin, Jeff Goodby, and Rich Silverstein (who would soon form their own ad agency Goodby, Silverstein & Partners) were also fans of that approach, and the discussion was led by Hawkins and Berlin. Hawkins said everyone had a vote but they would lose it if they went to sleep.^{[citation needed]}

Hawkins liked the word "electronic", and various employees had considered the phrases "Electronic Artists" and "Electronic Arts". Other candidates included Gordon's suggestion of "Blue Light", a reference from the movie "Tron".^{[citation needed]}

When Gordon and others pushed for "Electronic Artists", in tribute to the film company United Artists, Steve Hayes opposed, saying, "We're not the artists, they are..." meaning that the developers whose games EA would publish were the artists. This statement from Hayes immediately tilted sentiment towards Electronic Arts and the name was unanimously endorsed.^{[citation needed]}

Sharing credit

A novel approach to giving credit to its developers was one of EA's trademarks in its early days. This characterization was even further reinforced with EA's packaging of most of their games in the "album co pioneered by EA because Hawkins thought that a record album style would both save costs and convey an artistic feeling.^{[citation needed]} EA routinely referred to their developers as "artists" and gave them photo credits in their games and numerous full-page magazine ads. EA also shared lavish profits with their developers, which added to their industry appeal. Because of this novel treatment, EA was able to easily attract the best developers.^{[citation needed]}

The square "album cover" boxes (such as the covers for 1983's M.U.L.E. and Pinball Construction Set) were a popular packaging concept by Electronic Arts, which wanted to represent their developers as "rock stars".

Hawkins exits

After a very successful run on home computers, Electronic Arts later branched out and produced console games as well. Eventually Trip Hawkins left EA to found the now defunct 3DO company.^{[citation needed]}

1991-2007 - The Probst Years: Explosive Growth and Industry Maturation

EA is currently headquartered in the Redwood Shores neighborhood of Redwood City, California. Following the departure of Trip Hawkins, Larry Probst took over the reins and led the company to its current size and stature.^{[citation needed]}

Probst considered himself a man of principle and has refused to follow the M-rated example set by Take Two Interactive, whose violent Grand Theft Auto franchise became the dominant brand in many key demographics from 2000 through 2003.^{[citation needed]} As a result, Probst was heavily criticized by Wall Street analysts, who believe that because of this policy, EA's stock price is lower than it should be.^{[citation needed]} In late March 2005, Electronic Arts issued its first ever mid-quarter profit warning blaming hardware shortages and lower than expected fourth quarter sales.^{[citation needed]}

Not that M-rated games are new to EA: in 1999 EA approved its first M-rated game, System Shock II for the PC. Probst later changed his overall stance on M-rated games, and now EA has several titles that compete in the M-rated, adult game arena.

In 2004, EA made a multimillion dollar donation to fund the development of game production curriculum at the University of Southern California's Interactive Media Division. In addition to the funds, EA staff members have been actively teaching and lecturing at the school.^{[citation needed]}

On February 1, 2006, Electronic Arts announced that it would cut worldwide staff by 5 percent.^[4]

On June 20, 2006 EA purchased Mythic Entertainment, currently working on Warhammer Online.^{[citation needed]}

Exclusive licenses

After Sega's ESPN NFL 2K5 successfully grabbed market share away from EA's dominant Madden NFL series during the 2004 holiday season, EA responded by making several large sports licensing deals which include an exclusive agreement with the NFL, and in January 2005, a 15-year deal with ESPN, much as with Take Two Interactive's exclusive licensing deal with baseball's Major League. The ESPN deal gave EA exclusive first rights to all ESPN content for sports simulation games. On April 11, 2005, EA announced a similar, 6-year licensing deal with the Collegiate Licensing Company (CLC) for exclusive rights to college football content.

Development strategy

Much of EA's success, both in terms of sales and with regards to its stock market valuation, is due to its strategy of platform-agnostic development and the creation of strong multi-year franchises. EA was the first publisher to release yearly updates of its sports franchises—Madden, FIFA, NHL, NBA Live, Tiger Woods, etc.—with updated player rosters and small graphical and gameplay tweaks. Recognizing the risk of franchise fatigue among consumers, EA announced in 2006 that it would concentrate more of its effort on creating new original intellectual property.

2007-: Riccitiello Takes Over

In February 2007, Probst stepped down from the CEO job while remaining on the Board of Directors. His handpicked successor is John Riccitiello, who had worked at EA for several years previously, departed for a while, and then returned.^{[citation needed]} Riccitiello previously worked for Elevation Partners, Sara Lee and Pepsico.

The Emergence of the City State Label Model

In June 2007, new CEO John Riccitiello announced that EA would reorganize itself into four labels, each with responsibility for its own product development and publishing (the city-state model). The goal of the reorganization was to empower the labels to operate more autonomously, streamline decision-making, increase creativity and quality, and get games into the market faster. This reorganization came after years of consolidation and acquisition by EA of smaller studios, which some in the industry blamed for a decrease in quality of EA titles. In 2008, at the DICE Summit, Riccitiello called the earlier approach of "buy and assimilate" a mistake, often stripping smaller studios of its creative talent. Riccitiello said that the city-state model allows independent developers to remain autonomous to a large extent, and cited Maxis and Bioware as examples of studios thriving under the new structure.

Mac Games

Also, in 2007, EA announced that it would be bringing some of its major titles (such as Madden NFL 08, Need for Speed: Carbon, etc.) to the Macintosh. EA has released Harry Potter and the Order of the Phoenix, Need for Speed Carbon, Battlefield 2142 and Command & Conquer: Tiberium Wars for the Mac. All of the new games have been developed for the Macintosh using Cider, a technology developed by TransGaming that enables Intel-based Macs to run Windows games inside a translation layer running on Mac OS X. They are not playable on PowerPC-based Macs.

Recent Acquisition Activity

In October 2007, EA purchased Super Computer International, a long standing industry provider of game server hosting for development studios, who were currently developing the new PlayLinc software. A week later they then purchased VG Holding Corp, the parent company of BioWare and Pandemic Studios.^[13] In November 2007, EA signed an agreement with GigaMedia for the online game, NBA Street Online.^{[citation needed]}

It was revealed in February 2008 that Electronic Arts had made a takeover bid for rival game company Take Two. After its initial offer of $25 per share, all cash stock transaction offer was rejected by the Take Two board, EA revised it to $26 per share, a 64% premium over the previous day's closing price and made the offer known to the public. Rumours had been floating around the internet prior to the offer about Take Two possibly being bought over by a bigger company, albeit with Viacom as the potential bidder.

In May 2008, EA announced that it will purchase the assets of Hands-On Mobile Korea, a South Korean mobile game developer and publisher. The company will become EA Mobile Korea.

Game quality

For 2006, the games review aggregation site Metacritic gives the average of EA games as 72.0 (out of 100); 2.5 points behind Nintendo (74.5) but ahead of the other first-party publishers Microsoft (71.6) and Sony (71.2). The closest third-party publisher is Take 2 (publishing as 2K Games and Rockstar) at 70.3. The remaining top 10 publishers (Sega, Konami, THQ, Ubisoft, Activision) all rate in the mid 60's. Since 2005 EA has published three games Battlefield 2, Crysis and Rock Band that received Universal Acclaim (Metacritic score 90 or greater).

However, EA's aggregate review performance has shown a downward trend in quality over recent years and is expected to affect market shares during competitive seasons. Pacific Crest Securities analyst Evan Wilson has said, "Poor reviews and quality are beginning to tarnish the EA brand. According to our ongoing survey of GameRankings.com aggregated review data, Electronic Arts' overall game quality continues to fall...Although market share has not declined dramatically to date, in years such as 2007, which promises to have tremendous competition, it seems likely if quality does not improve."

EA has also received criticism for developing games that lack innovation vis-à-vis the number of gaming titles produced under the EA brand that show a history of yearly updates, particularly in their sporting franchises. These typically retail as new games at full market price and feature only updated team rosters in addition to incremental changes to game mechanics, the user interface, and graphics. One critique compared EA to companies like Ubisoft and concluded that EA's innovation in new and old IPs, "Crawls along at a snail's pace.", while even the company's own CEO, John Riccitiello, acknowledged the lack of innovation seen in the industry generally, saying, "We're boring people to death and making games that are harder and harder to play. For the most part, the industry has been rinse-and-repeat. There's been lots of product that looked like last year's product, that looked a lot like the year before." EA has announced that it is turning its attention to creating new game IPs in order to stem this trend, with recently accquired and critically acclaimed studios Bioware and Pandemic would be contributing to this process.