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Creative Destruction in Electronic Arts
The videogame industry, like many of the protagonists in the games it creates, is under attack. The competition is fierce. Not only is there healthy competition amongst legacy companies – including Nintendo, Sony and Microsoft – but new devices are increasingly distracting consumers, and digital disruption elsewhere is changing the way these companies do business.
Part of the problem is cyclical; the market has gone longer than usual without a major new console launch from either Sony or Microsoft, which in turn makes game manufacturers hesitate from making new product. But the industry needs to be wary that their audience has changed, in multiple ways. Sony are now starting to talk about their PS4 (due to be released in around six months’ time), beginning with a dire two hour presentation recently that failed to reveal price, release date, or an image of the console. And the word over at TechCrunch? “A tired strategy… [O]verall the message was clear: Sony’s PS4 is an evolution, not an about-face, or a realization that being a game console might not mean what it used to mean.”
We’ve written before on creative destruction in other industries, and talked before about shifting parameters for companies like Nintendo. The inventor of NES and Game Boy is currently struggling with poor sales of its new console, while at the same the chief executive of Nintendo America recently stated that digital downloads of videogames were becoming a “notable contributor” to their bottom line. Companies like Apple are surrounded by perpetual rumours of developing their own videogame platform. New companies in their own right, such as the Kickstarter-funded company producing the $99 Ouya, is among several players shaking up the industry. The upshot of such turmoil – a “burning platform” as the Electronic Arts CEO described the situation in 2007, referring to the dilemma of holding onto the burning oil rig and drowning in the process, or risk jumping off into who-knows-what – is a loss of market share. Accenture in January published a report predicting the demise of single-use devices such as cameras and music players whose revenues would be eaten into as more and more consumers flocked to tablet and other multi-purpose gadgets. Videogame console purchase intent was not researched, but it is not hard to make the analogy.
It was enlightening and reassuring then to read McKinsey Quarterly’s interview recently with Bryan Neider, COO of Electronic Arts. Some interesting take-outs follow. First, in 2007, the company recognised there was a problem: “game-quality scores were down and our costs were rising”. The company wanted to shift from having a relationship with retailers to having one with gamers. This meant having a focus on digital delivery. This fiscal year, digital is forecast to represent 40% of the overall business. Neider recognises this closeness to the consumer makes them even more susceptible to their whims and preferences, so they’re relying far more on data-backed analysis than they have before, including a system with profiles of over 200m customers. This data is used for everything from QA to predicting game usage. Neider elaborates,
“Key metrics answer the following questions: where in the game are consumers dropping out? What is the network effect of getting new players into the game? How many people finish a game? Did we make it too difficult or too long? Did we overdevelop a product or underdevelop it? Did people finish too fast? Those sorts of things are going to be critical… However, the challenge is that parts of the gaming audience are pretty vocal—they either really like a game or they really don’t like it. The trick is to find ways to get feedback from the lion’s share of the audience that is generally silent and make sure we’re giving these people what they want.”
Interestingly, the company’s structure was changed to reflect individual fiefdoms according to franchise – be it FIFA or Need for Speed – the needs for which are managed in that line of business. Each vertical competes with the others to deliver the highest rates of return, while also being able to draw on central resources (marketing, for example). Electronic Arts, as a developer of software for other manufacturers, will to some extent always be at the mercy of which devices are in vogue and the cycle of obsolescence. It is impressive though to see that the company has recognised the need to change the way it does business. The operational and technological sides of business don’t seem to have distracted Neider from the key insight in the industry, “Ultimately, we’re in the people business“.
Could sponsors hold the key to stopping racism on the terraces?
So Lance Armstrong (under)stated recently that he’d had a ‘difficult couple of weeks’.
Just to recap. In the last fortnight or so (and despite his protestations of innocence), Armstrong has gone from being a much lauded athlete who overcame serious illness to dominate one of the world’s toughest sporting competitions to a discredited drugs cheat and stripped of all his titles.
A ‘difficult couple of weeks’ by anyone’s standards.
Since the evidence against him grew and former team-mates spoke out about his role in the doping culture in the US Postal team, the position of sponsors such as Nike has shifted. Where initially they stood by their man, they ultimately decided to cut the relationship, citing that he had “participated in doping and misled Nike for more than a decade“.
It’s one of the inherent dangers of sponsorship.
While your endorsee is sweeping all before them you are associated with success and glory. But as Tiger Woods sponsors found out a few years ago, if that star misbehaves your brand is associated with someone getting the headlines for all the wrong reasons.
The news that cycling has/had a doping problem is both unsurprising and depressing.
Unfortunately, the same can also be said for the experiences of the England U21 side in their recent play-off in Serbia.
Racism in football
Having been subjected to racist chants throughout the game, things came to a head at the final whistle when Danny Rose was sent off for kicking the ball into the abusing crowd and punches were thrown as players and coaching staff jostled their way towards the dressing rooms.
Racism is a blight on society. It exists in the UK and while it is not tolerated in public arenas, the economic downturn hasn’t helped our natural tendency to tribalism when things are tough.
For nations that haven’t experienced the levels of immigration of other ‘races’ that the UK has, attitudes to people with different colour skin are not as liberal. Let’s not forget that it wasn’t all plain sailing and painless for us to get to where we are.
Terminology that was common just a couple of generations ago is now taboo. TV shows of the 1970’s wouldn’t even be considered now. And footballers in the UK used to have to run the gauntlet due to their skin colour as recently as the 80’s and indeed, incidents are still being reported in 2012.
None of this excuses what happened in Kruševac and nor does it excuse the lenient approach footballing authorities have taken with racist incidents in the past. In a multi-billion pound industry, fines of tens of thousands of pounds have little impact.
FIFA and UEFA are keen to cite the power of football to change society when awarding tournaments to countries like Ukraine and Qatar but plead impotence when it comes to topics like racism.
The natural indignation in England has lead some to suggest that we should pull out of international tournaments to make a point. Such an action would most likely be met with champagne corks popping in Nyon and Zurich, and would only serve to further dilute our voice in the global game.
The Serbian FA could have offered UEFA a get out of jail card. A statement recognising the monkey chants, apologising to the FA and footballing family and a clear plan of action to ensure it never happens again would have enabled the games rulers to give them a slap on the wrist.
Yet the Serbian FA refuted clear evidence of racist chants and stated that any claims to the contrary were malicious.
‘FA of Serbia absolutely refuses and denies that there were any occurrences of racism before and during the match at the stadium in Kruševac. Making connection between the seen incident – a fight between members of the two teams – and racism has absolutely no ground and we consider it to be a total malevolence.‘
Had they sent a letter saying ‘Fuck you! We did nothing wrong and we’re not changing!’ their attitude couldn’t be any clearer.
And in doing so they batted the ball firmly into UEFA’s court making the question very clear.
Do UEFA believe there was racism at the game and if so, do they consider it acceptable?
Driving behaviour change
Behaviour change and persuasion are all about understanding what motivates of the people you are trying to influence. This means putting your own motives to one side for a moment.
In other words, if we want UEFA and FIFA to impose stronger penalties for incidents of racism we need to understand what influences them.
And let’s be honest, British indignation has never kept them awake at night.
Much higher on the list of priorities are the many sponsors who provide a huge chunk of the money that powers the multi-billion pound football industry.
Just like Nike and Lance Armstrong’s sponsors, FIFA and UEFA’s backers (which include brands like Coca-Cola, McDonalds and Adidas) have a rare opportunity to make their opinion on an unsavoury topic clear.
No brand wants to be associated with racism and upsetting the sponsors is something the footballing authorities do not tolerate. Just ask Niklas Bendtner who was fined £80,000 for showing his Paddy Power lucky pants during EURO2012.
Compared to the fines given to national associations for incidents of racism, it seems rather excessive.
Let’s face it, for all the anger, griping and T-Shirt protests in England we simply don’t have the clout to demand action.
The sponsors are the ones with real power to influence, and maybe only a rebuke from the people who line their pockets will make finally FIFA and UEFA start taking racism in football seriously.
They think it’s all over. It never even started.
The lessons marketers can learn from Englands World Cup bid.
One of the things Zeitgeist likes to do when not identifying first class insights is finding inspiration in the real world that can be brought into the world of marketing.
Sometimes it is as simple as this deconstruction of the Rolling Stones Gimme Shelter that demonstrates how a fantastic creative execution is made during the fusion and collaboration of individual genius contributing their own part to the mix.
However over the past week one half of Zeitgeist has been lucky enough to be given an insight of their own into the pitch process.
Last week I was lucky enough to attend the excellent APG Battle of Big Thinking which pitted planners from around the industry against each other as they debated their big thoughts.
In the semi-informal atmosphere of the architecturally interesting British Library the style and charisma of the presenters was often more influential that their actual idea.
Trapped by the snow and a lack of faith in the UK rail infrastructure, Zeitgeist was able to watch the doomed English bid for the FIFA 2018 World Cup from the comfort of the sofa.
It is rare to be able to watch another team pitch and in the much more serious arena of the Messe Zurich it provided a few more lessons that we can bring into our own business.
Lesson One
The most important of which is to understand the criteria against which you will be judged. This isn’t always as simple as looking at the brief. You have to understand what your audience really want and why you are there.
England received a glowing report for infrastructure and facilities and a 100% rating by McKinsey. They were even acknowledged as being the only bidders who could ‘hold the World Cup tomorrow‘.
However a quick look at previous World Cup hosts suggests that much of that is irrelevant and what FIFA want is to enter new markets and leave a legacy.
Up to 1990 the World Cup was alternatively hosted between South and Central America and Europe. In the 90’s with the break up of the Eastern Bloc and growth of technology like the internet and mass broadcasting the world and the world of football changed dramatically.
By the time those changes began to take effect the 1994 and 1998 World Cups had already been awarded to USA and France respectively.
Then in 1996, FIFA awarded the 2002 World Cup to Japan and South Korea for what was the first Asian World Cup.
The 2006 World Cup went to Germany but was supposed to go to South Africa. The influence of Kaiser Franz Beckenbauer and other shenanigans saw to that.
In 2010 the World Cup was indeed held in South Africa breaking a new frontier.
In 2014 it will be held in Brazil, the nation that puts the ‘B’ into ‘BRIC’. They haven’t hosted it since 1950 and it will be the first time the event has been hosted in South America since Argentina invited the world to sample the delights of a military dictatorship in 1978.
So with this knowledge at hand the question arises as to whether England really thought they stood a chance of winning the 2018 bid. All the attributes that would have made them a stand out candidate as hosts before 2000 now count against them. The irony is that before then, the Taylor Report had only just forced clubs to upgrade their dilapidated facilities so they wouldn’t have been ideal candidates for earlier World Cups either.
The pitch itself was excellent.
If FIFA president Sepp Blatter was a balloon he’d have popped as he introduced the future King, current Prime Minister and icon David Beckham to plead with him and his mates for the right to host the World Cup.
Opened by the excellent Eddy Afekafe the presentation answered exactly what England would have wanted to see if they were choosing the venue.
Unfortunately FIFA’s criteria was different and that’s why the bid failed.
So what other lessons can we learn that will help us when we pitch to prospective clients?
Lesson Two
It doesn’t matter how well you present if you don’t tick their requirements.
Lesson Three
It doesn’t matter who pitches if you don’t meet their requirements.
Lesson Four
It doesn’t matter how in love you are with your own solution if it doesn’t meet their requirements.
For all the claims of corruption and a stitch up, England were fighting a losing battle from the beginning. In any case, the idea that good Olde English values of fair play would somehow infect an international cabal of sports administrators when national and personal fortunes are waiting to be made does seem naive to say the least.
With the newly branded St George’s Park finally getting the go-ahead after years of delay it looks as though we might finally be investing in training a team of World Cup winners rather than trying to get home advantage. Maybe our efforts should have been spent getting it finished sooner instead of chasing impossible dreams.
And that’s the fifth and final lesson for agencies. Next time you get the chance to pitch, stop and think about whether you actually really stand a chance.
Does this company always appoint local or global agencies? Is the pitch just an excuse to justify giving it to the incumbant? What is your role in the process? Are they just after some new ideas? Who is actually making the decision?
Be brutally honest. If you don’t think you stand a chance, work out how much you would have wasted pitching and instead invest it in developing your own staff and boosting their morale. They already believe in you and will service your existing accounts all the better for it.
Knowing Your Audience
The World Cup runneth over with news happy and sad depending on which country you’re from. Insight into the context of a situation is always tremendously important; there are no essential truths, only whether people believe them to be true or not. For cephalopods, of course, it was a dream World Cup. Paul the ocotopus in Oberhausen, Germany, managed to guess with pure luck correctly predicted every one of Germany’s World Cup results, single-handedly raising the profile of these water-bound creatures and their ability to cogitate about the outcome of sports matches, out-predicting those boffins at Goldman Sachs. For those who enjoyed betting with this facade of insider information, it was also then a great tournament.
The results of the World Cup also tell us that people (and nations) deal with loss in different ways. Argentina was apparently one of the teams that had expected to do well in the tournament. As The Economist notes, France and England returned home to a disgusted populace; Argentina, after being thrashed 4-0 by Germany, came back to a hero’s welcome. This is not because the Argentinians are particularly cognisant of fair play or giving everything one can. For, when the team returned in defeat in 2006, the reception was a “non-event”, as opposed to the weeping on the streets that took place this time. The way people behave though, is not always due to a single linear circumstance. The article suggests the “tens of thousands of fans” who turned up to greet the defeated players was due to the political machinations of the not-so-squeaky-clean Kirchner couple, who currently preside over the country; an attempt to boost their own poor approval ratings by throwing their support behind football, after gaining much gratitude from the man on the street by taking football matches off a premium cable channel and making them available “over free airwaves”.
Elsewhere, broadcasters enjoyed the riches of their coverage of the event. In the UK, the FT reported that commercial network ITV saw “advertising revenues increase 45%… in June compared with the same month in 2009 due to the tournament”. In France, Telecompaper reported last week that “despite the national team’s poor performance”, around two million people watched some of the World Cup on their mobile device, according to a survey for La Tribune. Viewing was only possible after downloading “a pay application co-developed by Fifa and broadcaster TF1”. According to the study, “between 3 million and 5 million people, or 8 percent of French residents over 15 years old, watched highlights on the internet.” In the US, over 24m people watched the World Cup final, with the networks purporting to be “over the moon”. Indeed, despite some of the jingoistic rhetoric spouted by Republican mouths on the unpatriotic desire to play football, as reported by the New Yorker, football is growing massively in popularity in that country. When the US was sent packing after losing to Ghana, Nielsen recorded 19.4m viewers:
“It’s not just more people than had ever watched a soccer game on American television before. It’s also more people than, on average, watched last year’s World Series games, which had the advantage of being broadcast live in prime time. It’s millions more than watched the Kentucky Derby or the final round of the Masters golf tournament or the Daytona 500, the jewel in NASCAR’s crown.”
Again, like the example in Argentina, it would be easy to point to a simple, linear cause and effect correlation, in this case that the US is finally warming up to football, despite having a plethora of other sports at their obsessive fingertips. What these record-breaking viewing figures actually give us an insight into is “the changing complexion of the U.S. population, particularly the growth of immigrant and second-generation Hispanic and Asian populations with deeper cultural ties to the sport.” With the national census recently completed, we should soon have a much clearer picture of the continually evolving melting pot that is America. Broadcasters around the world are beaming, but may need to manage expectations; some 58% of U.K. TV audiences expect to watch the next World Cup in 3D.
Insights often come about from studying behaviour, even the simplest behaviours, because sometimes we make presumptions that turn out to be wholly inaccurate. Just as Goldman Sachs did by presuming England would be a semi-finalist and just as Zeitgeist did presuming that an octopus with nine brains couldn’t predict the outcome of a football match.
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