Experienced Points: Now That You’re Done Firing Everyone…

By Shamus
on Jan 8, 2010
Filed under:
Column

I’m sure publishers will listen to my advice, and that will fix everything.

This is going to be great.

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  1. mark says:

    they’ll never stop spending on graphics. :(

  2. correnn says:

    Actually, the “stop firing people” thing would save them money in the long run, as once things stablize and they’re in need of people again they wouldn’t have to train new hires to replace the hires that already knew the job. Wasted time and money.

  3. Aaron says:

    The dilemma is that when you fire people, you get to hire people to replace them with lower salaries and fewer benefits. Though it might cost a company to train them up, it costs substantially less in the long term.

  4. Heron says:

    @Aaron: That’s not true when you’re buying an entire company instead of just replacing the employees you just fired. Company mergers usually involve agreements like “not reducing salaries”.

    At least for management.

    Uh, never mind.

  5. Mari says:

    I hate to say it Shamus but you’re preaching logic to the livestock. Somehow in the process of getting those MBAs the logic usually (not always) gets sucked right out through the ear. I think ultimately the problem is that there’s this huge misconception that common sense money practices no longer apply when you’re talking large scale like a corporation (or even a “small” business of 500+ people). What I mean is that all of the things you picked on seem so logical if you paralleled them into personal finance but somehow there’s this mythical divide that say “Oh, but those things don’t apply to US; we’re a BUSINESS.”

    We run our business by the same principles we use on our personal finance and we’ve got a lot more stability for it. We still grow but it’s a slower, stable growth that we can support. Granted, agri-business is a whole different industry than tech but that’s kind of my point. The same principles of finance work no matter what industry you’re in, whether you’re talking personal or business, large or small.

  6. Hipparchus says:

    I think all of the recently unemployed video game software creators and workers should unite and make a company with their diverse skill set together.

  7. Bryce says:

    I hate to out myself, as you will pro’lly defriend me on Steam once you see how tainted I am, but I worked at EA from 1998 to 2002.

    I can tell you with good inside (but dated) knowledge that they don’t eat other game companies to get the people…they eat the companies to get the IP. The people they just spit out like watermelon seeds unless they are protected by a poison pill in the takeover…

  8. Kalil says:

    Bryce: Yah, I kinda figured that. It took them longer than I expected to fully digest Maxis, but that excrement ain’t so pretty nowadays…

    It’s sad. First video game I ever bought was SimLife. It was awesome. If Spore had been half as intricate.. I’d have bought it.

    They do have some very good people working for them. A lot of EA games have a core of genius, hidden within the filth. In a way, those are the worst, because of the disappointment over What Could Have Been…

  9. toasty says:

    I agree on the graphics. Counter-Strike Source looks just about as good as Modern Warfare on my computer.

    Actually, if games like Modern Warfare cut their graphics budget in half they might have made a better game…

  10. Paul says:

    Have you considered the possibility that the layoffs were reasonable? EA brought in 4.2B in income last year. They spent 5.28B. Laying off 1/7th of the company when you’re 1/5th of the budget in the red for the year isn’t necessarily a bad idea.

    As for the people laid off, justification for the cases have to be looked at on an individual basis. If you’ve got a graphic designer who knows what he’s doing and a graphic designer who doesn’t, which one, all other things equal, is more likely to get laid off?

    Granted, in the real world, this is a lot more nuanced. A graphic designer who knows what he’s doing might be stuck on a project that’s not worth a goddamn and the guy who doesn’t know what he’s doing might be stock on a project that’s amazing. Seniority may play a role and

    The difference between good management and bad management is that good management:
    1.) finds the people who do good work,
    2.) puts them on profitable projects, and,
    3.) retains them;
    and that bad management can fail at one or more of these tasks.

    If EA generally succeeded at point number 1 with respect to the people that were fired, then they numbers 2 and/or 3. If they failed at point number 1, then they’re doing the right thing for point number 3.

    We run our business by the same principles we use on our personal finance and we’ve got a lot more stability for it. We still grow but it’s a slower, stable growth that we can support. Granted, agri-business is a whole different industry than tech but that’s kind of my point. The same principles of finance work no matter what industry you’re in, whether you’re talking personal or business, large or small.

    It’s very difficult to handle the finances of a large corporation. You cannot personally survey the degree to which each individual employee handles their job, so you delegate that to managers. You cannot personally handle the budget for each project, so you delegate that to managers. Hiring can be done by these managers individually or by a separate department.

    Layoffs and firing can also be done by these managers individually or by a separate department, depending on the corporation.

    The potential for miscommunication and mismanagement that leads to waste here is huge, but the advantages of corporate finance (financing projects through money borrowed against stock held by the company as an asset; resources, capital and people shared among projects) and the potential to optimize is so great that we are probably better off with than without.

    It’s very unwieldy, but it’s the only way you take advantage of the collective potential of the savings and investment of everyday people.

    And an MBA really doesn’t hurt most holders of ’em, Mari. ;)

    • Shamus says:

      Paul: I’m totally open to the idea that they needed to do the layoffs, but it just makes no sense in the face of spending 300mil on another company. There’s the wasted resources of all the canceled projects from the layoffs. There’s the expense of absorbing a new company and integrating it, sorting out what to keep and what to cut once you take control of it. There’s the expense of doing a deal like this and the overhead you’ll pay – they’ll charge you for the whole company (and then some) even if all you want is the brand, a couple of IPs, and a smattering of the talent.

      Buying Playfish strikes me as being an investment. It’s the kind of thing that will take years to recoup, and thus not something you do when you’re losing money AND firing people.

      I’m sure it’s POSSIBLE that all of their actions make sense once you see the books, but it certainly looks absurd on the face of it and so I’m inclined to call them out on it. I would be happy if they could prove me wrong by making great games and turning a profit.

  11. Daemian Lucifer says:

    Your second advice is the only one that holds real economic merit,the others are just wishful thinking.

    Your third advice,however,is completely wrong.Buying a company doesnt just give you new manpower for making games,it also eliminates one of your competitors,so it is a sound move.

  12. Mephane says:

    I wholeheartedly agree with everything said in your article, Shamus. Companies, heck, business in general is going more and more nuts with each passing year, and I am wondering where exactly between greed, malice and stupidity some companys’ bosses actually stand.

  13. Sean Riley says:

    Shamus, you had a punch in here you could have taken, but didn’t.

    With the money you save from not trying so hard for dazzling technical graphics, spend some on good writers. Not Orson Scott Card. Good writers. Trust us, they’re cheaper than new graphics engines, and equally improve a game. If you’re worrying that this is a waste of money, give Bioware a call, see if they agree.

    To hit a note you’ve hit before. :)

  14. Abnaxis says:

    @Daemian Lucifer: What you say would be true, except Playfish wasn’t a competitor of EA (from what I understand at least). Playfish produces games in a different genre, directed at a different audience than EA games. While it is conceivable for an EA customer to decide to choose a Playfish game when they would have bought an EA game, this strikes me as the exception rather than the rule.

    EA’s competition is other AAA companies, not small indie and “casual” developers. Buying Playfish is an attempt to spread into another market, not a strategy to eliminate competition. It’ s like if a meat-packing company decided to buy a vegetarian grocery store–sure, they’re both food, but they’re not really in direct competition.

    As Shamus said, it is an investment.

  15. Daimbert says:

    Shamus,

    I’m not going to claim that EA knows what they’re doing, but what they did is, in fact, consistent with decent business practices, especially for such a huge company.

    Essentially, they could be cutting people in areas that they don’t think will or that aren’t making money, so that they can shut down and stop making those products. They also might be cutting people in areas where they don’t need as many people to make a profitable product. After all, considering all the sports games that they’ve done, how many people do they need to change rosters every year? New features are likely to be small, simple tweaks. So you can cut some people from there.

    What they’re doing by buying Playfish is, in fact, trying to get into a market that they aren’t in now that they think is going to take off. For large companies, you do that even when you aren’t doing well for two reasons:

    1) If you don’t do it then, you might not hit the product window. Essentially, you HAVE to get into the market and don’t have time to do it in-house.

    2) $300 million is nothing compared to their billions of revenue; it shows up as a line item under “other” but isn’t likely to save the company or its stock price. They don’t really need to worry about it.

    So, if EA is being smart, they’re chopping products that aren’t or won’t make money and trying to get the products in a market they need to hit in-place before its too late. Which, thus, makes sense at that level..

    Again, I make no guarantee that EA is being smart.

    (And I’ve seen the “buy to get technology” angle from BOTH sides. My company bought a company to get into a market, and then was bought by a bigger company trying to get into the markets we traditionally did well.)

  16. RPharazon says:

    I don’t agree with the graphics issue, as such.

    Sure, the latest graphics cards are literally better than my current computer in its entirety, but this graphics card treadmill encourages innovation and advancement in the processor industry.

    I’m not saying that the graphics card treadmill is the sole factor in this, but the continual push to produce better GPUs, graphics cards, and graphics resources only leads to producing system components that can actually handle those graphics cards. There’s no sense in having a BlingBlaster XT4070GTX EXXXTREME if you have a DinkyProc M.

    Case in point, I think every mainstream Intel desktop processor since the Pentium 4 has had an “Extreme” or “Gaming” Edition of the processor, catered specifically to the gaming or workstation crowd, using the latest technology. It’s not like the learnings from making that processor just go to waste. The processor company learns from the research and development phase, gets feedback from the very vocal gaming and technology crowd, and then applies that knowledge to further processors, processors used in the mainstream market.

    What about the gameplay and story? Well, that’s really a hit or miss these days. Old graphics does not a good game make, and good graphics does not a bad game make. Look at Episode 2. It was pretty shiny when it came out, not exactly a Crysis but it still had awesome graphics, and a great story.
    Or what about Ace Combat 6, a very niche game? It had great ground environments (better than pretty much any other flight sim out there) and even greater plane detail, along with some very nice explosions and a very, very large amount of contrails. What about TF2? It doesn’t exactly have very shiny graphics, but the art style depends heavily on the underlying shading engine, something that would have been impossible to make in the Half-Life 2 era. If you put TF2 into the GoldSource engine, it wouldn’t be nearly as enjoyable due to the graphics.

    So you see, a game might not have great graphics, and might not be as shiny as GraphicsWhoreGame 5, but it still does need current GPU and graphics card methods to create neat effects and art styles that contribute to the gameplay and enjoyment of the game. Saying we should abandon graphics development altogether because games look nice and well enough is to abandon enormous game environments and unique graphics usage.

    Plus, we need all the related processor development we can get if we’re to reach the Singularity by 2045, even if it means suffering a bit through mediocre games and graphics whoring.

  17. Karl says:

    I actually blame the whole it’s-all-about-the-graphics thing on the existence of really-cheap-really-massive storage media. I doubt companies would be making games that look like Crysis or Fallout 3 if they still needed to package them on 3.5″ floppies.

  18. AGrey says:

    The graphics problem is a cycle that feeds itself.

    A big-name reviewer who depends on advertising dollars has to write a good review of a game.
    Unfortunately, the only good thing about the game is the graphics, so an article is written gushing about the graphics.
    The developer sees the review, sees the sales, puts one and one together and decides that the graphics were the reason people bought the game.
    The next game is made with even better graphics and an even worse story, and the reviewers struggle to say good things about the game so that they don’t lose valuable advertisers, and write another article about how good looking the game is.
    Look at all the press coverage about our wonderful graphics! That must be what people really care about!
    And around it goes….

    I honestly think that independent reviewers (meaning: do not rely on advertising from the people they are supposed to criticize) who are taken seriously by enough people to make a difference will be the end of the graphics glurge.

    Once we all start to make noise about well written games, developers will hop on the bandwagon.

  19. Paul says:

    Shamus: It does seem pretty foolhardy of them. I don’t have enough skill at interpreting financial statements to be able to determine whether or not the layoffs were justified in the face of a $300M investment, assuming the necessary financials are even public.

    Considering also how repetitive their franchises look for me, it also could be possible that we’re past the point of diminishing returns on all of them…and that some new IP is just what EA needs to get past the slump. This *is* plausible: money made by a company like this is much more inconsistant, much more like a photographer on commission than a programmer on salary. And that photographer might need some new, more expensive equipment to reach audiences he hadn’t previously (like those lovely medium-format Hasselblads).

    Of course, this is all speculative until somebody produces and explains the necessary financial analysis.

  20. Phase says:

    You seem to have forgotten to mention that Valve fired EVERYONE except Robin Walker recently after the whole “Meet the Spy” fiasco.

  21. Monsieur Vatel says:

    My uncle, a chemical engineer at a pharmaceutical company, got laid off about a year ago in a round of firings at the company he’d worked at for 26 years. He’d saved up quite a bit of money, so it wasn’t like he was going to be destitute, but he enjoys his work and it was frustrating for him to be trying to find a job in this economy.

    Two months ago, he was rehired by his company as a full-time contractor for almost triple what he’d been earning before plus generous overtime rates (he had been on salary), and an armful of new perks.

    My point is that the people who replace the fired employees aren’t necessarily going to get paid less; and there’s a strong likelihood that EA will have to spend top dollar on new programmers to get their products to market in a timely manner. They fired a bunch of people to look good for their quarterly or annual statements, but when deadlines start to slip they’ll have to pick people up again, and the net cashflow change for the company will be negative or zero.

    Speaking of MBAs, I think it’s the received wisdom that you have to get into a market at the very beginning in order to make money off of it. I don’t know where this idea came from, since there are plenty of high-profile counter-examples, especially in computer-related fields: mp3 players were around for four years before the first iPod, Sony and then later Microsoft broke into the game console business against entrenched competitors, Japanese and Korean automobiles started to wipe out the American car industry, Gmail came late to the webmail party, Weta Workshop competes with Industrial Light and Magic and Dreamworks Animation is as well-regarded as Disney/Pixar, and so forth and so on. It makes sense to use acquisitions to break into a mature market with high barriers to entry, but casual video games are a fledgeling market that will ultimately have far lower barriers to entry than its harder-core cousin, which adds up to one thing: buying firms is a lazy, half-solution to a problem that doesn’t exist yet.

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