Trouble at EA as gaming landscape shifts

Gamers are quickly moving to social, free-to-play titles, resulting in strategy changes for EA's PopCap and other online developers.

By Benzinga Aug 22, 2012 3:29PM
By Katey Stapleton

Electronic Arts (EA) has experienced a fair share of issues lately, recently taking failing game developer Zynga (ZNGA) to court for copying elements of "The Sims Social" game.


Adding to what has already been a difficult month, EA's online gaming arm, PopCap, laid off 50 employees this week and noted that the web-o-sphere is rapidly shifting from paid games to free-to-play.


While it is easy to blame Electronic Arts for the layoffs, as the company has been struggling in the market this year, PopCap co-founder John Vechey took responsibility for the move in a blog post on Tuesday. He described how PopCap alone made the choice to let employees go as the online gaming realm becomes difficult to monetize.


"Free-to-play, social and mobile games have exploded in popularity," Vechey noted in his blog post. "That happened fast. Surprisingly so. The change in consumer tastes requires us to reorganize our business and invest in new types of games on new platforms. It's a completely different world from when we started." 


PopCap now expects to end the year with the same number of people it started with in 2012.


As much as Vechey tried to separate PopCap's issues from its parent company, the bigger picture is hard to overlook. Could it be that Electronic Arts suggested the layoffs in order to pay legal fees from its recent courtroom battle with Zynga?


Though this scenario is unlikely, it is not completely unfounded. Electronic Arts shares have slid 34% this year. With the added legal costs associated with the Zynga lawsuit, the company has positioned itself for an uphill battle.


What Electronic Arts really needs is a win against Zynga -- and according to Business Insider, the company is likely to succeed based on the evidence submitted. Any monetary gain would surely help either struggling company, but would cause harm to the reputation and profit of the other.


As the online gaming community attempts to reboot and generate profits in innovative ways, it appears that lawsuits and layoffs will continue to be obstacles on the way to success.


Electronic Arts was trading down less than 1% Wednesday to $13.48.


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