We saw some ambitious dreams in gaming fall apart in the past week. Sony bought OnLive’s patents and the cloud gaming pioneer said it would shutter its doors. And former Microsoft Xbox chief Don Mattrick resigned from Zynga, where he had planned to turn around the social gaming leader that brought us FarmVille but stumbled when it moved into mobile. His turnaround was unfinished.
Both of those outcomes were the latest chapters in attempts to reboot a big dream that had gone off the rails. They show that correcting a company’s course is a difficult thing to do once it has gone astray. Having talked to some of the principal parties in these dramas over the years, I’ve tried to find some lessons. In both cases, two companies failed, and then had a replacement CEO come in and try to make good on the company’s initial promise. The results are enlightening.
With Zynga, I thought it was mistake for Mattrick to come into the company and start replacing every senior exec in the company. This was a team that had a mixed record. It had won the social gaming wars on Facebook, beating rivals such as King and Electronic Arts. But it had fallen behind on mobile. Replacing some on the team was necessary. But Mattrick knew a lot of these people, since many of them had been recruited by Bing Gordon, a former colleague at EA with Mattrick. Did he really have to replace every one of them, including the EA veterans who knew the game business?
Perhaps he did. But it led to timing problems. Every time Mattrick brought in a new executive, in my opinion, it seemed to push the turnaround back further. These new execs had to figure out what was going on, restore order to their departments, and keep more people from leaving. The time for turning around the company and executing on the plans these new executives put in place kept on getting reset. One very telling piece of the puzzle was the quiet departure of Alex Garden, who Mattrick brought in from the Xbox team to run Zynga’s studios. Garden left in March, less than a year after he joined.
There was an opportunity cost. During the past two years, while Mattrick was remaking Zynga and acquiring NaturalMotion for $527 million, Supercell, King, and Machine Zone solidified their grip on the top-grossing apps. Now it’s very hard to knock them out of those top slots, given their combination of fan loyalty and big user acquisition budgets. Zynga, meanwhile, was delaying big mobile game relaunches like Words With Friends and Zynga Poker. And when Zynga Poker debuted, a lot of fans wanted the old version instead. There’s another lesson: If you are going to turn around a company, don’t mess up its cash cow.
Mark Pincus, chief executive of Zynga, said nice things about Mattrick’s achievements in an interview with GamesBeat. He noted that Zynga had staffed up to teams that had more than 100 people on major games, and Mattrick had to figure out how to do mobile games more quickly with a lot fewer people, even while they raised the quality bar. Pincus said Zynga has accomplished that and has become a true “mobile first” company.
But Pincus also made it clear that he wanted to accelerate progress on the turnaround. To me, that’s shorthand for the fact that Mattrick ran out of time on his turnaround. Indeed, if Mattrick came in and promised a turnaround on a certain timetable, then stretching out that timetable was probably a big reason for the change-over. Pincus took his company public, but he retained voting control over the company. That means he was able to remove Mattrick single-handedly, if he wished. We heard from one source that this scenario is actually what happened, even if everyone said publicly that the parting with Mattrick was mutual.
Now that Pincus has returned, it’s his job to right the ship with 2,300 people. Zynga is making better games, and it has some promising hardcore titles on the horizon with Empires & Allies and Dawn of Titans. But Pincus has to move fast. He doesn’t have time to replace all of Mattrick’s people with his own people again. That would be like running around in circles, while competitors move on to the next big thing. Zynga has to get its next big things out the door. That’s the only way he’s going to get back to his dream of “changing the world through play.”
While Zynga’s story isn’t over, the tale of OnLive has a sad ending. Last week, Sony announced it was buying certain assets of the cloud gaming company. Sony picked up OnLive’s patents, but it saw no reason to pick up OnLive’s business of providing cloud games to consumers. By April 30, OnLive’s services will be shut down. The purchase price wasn’t announced, but it doesn’t sound like a great outcome, given that OnLive once had a huge valuation of $1.8 billion.
Steve Perlman, the serial entrepreneur behind OnLive, filed for the company’s first patent in 2002. He patiently incubated the technology at his think tank Rearden, and slowly the broadband speeds that he needed began to fall into place. He spun the company out of Rearden and formed OnLive in 2007. He showed it to me that year, but he didn’t announce the company until 2009. He launched the first cloud gaming service, where you could play cloud-based high-end games on low-end computers, in 2010.
But even with all of that patient waiting, OnLive was a technology that was ahead of its time, said Phil Eisler, general manager of Grid cloud computing at Nvidia. The service debuted when most people still couldn’t use the cloud service to play games at a resolution of 720p. And the service was targeted at people who probably preferred to play their games at even higher resolutions of 1080p.
“Their initial contact strategy with publishers was flawed,” said Eisler, whose company is trying to launch a cloud gaming 2.0 service with the Nvidia Shield Set-top and its accompany Grid cloud gaming service.
Before the age of cheap 25-megabit-per-second DOCSIS 3.0 cable modems, OnLive just wasn’t that appealing. The company ran out of money in 2012, and investor Gary Lauder bought its assets.
Lauder tried to make a comeback. He continued the cloud gaming service for consumers and rebuilt the team. He brought in former IGN chief Mark Jung as executive chairman in 2014, and he relaunched new cloud-based services such as CloudLift and OnLive Go. Evidently, those new services didn’t make the company viable. It just didn’t work the second time around. I don’t know what the lesson is just yet, but I do know that OnLive never captured exclusive rights to any big games for its own platform. And platforms without exclusives can’t thrive.
Some observers are saying that just because one company failed doesn’t mean the idea is dead. OnLive may be dead, but its dream of cloud gaming isn’t. Sony is carrying it on with its PlayStation Now cloud-gaming service, which allows older PlayStation games to be played on the PlayStation 4 console.
“Cloud gaming should always have been, and still is, about truly next generation experiences that can never be replicated locally,” said Jules Urbach, chief executive of Otoy. “Place shifting games was meant to be an interim step to that goal. Any company that failed to see beyond this model was never prepared to succeed in the long run. The case for real cloud gaming has yet to be made.”
Eisler believes that cloud gaming is about more than one company. Even as one fails, another can pick up the torch. Eisler said that the Internet is fast enough for enough consumers now. And the convenience of instant game streaming, led by major gaming brands with better content, will be more appealing to consumers.
“OnLive was the end of cloud gaming 1.0,” he said. “Cloud gaming 2.0 is just beginning.”
For both Zynga and OnLive, the first part of the dream is over. The second dreamer has also failed. Now the participants have to decide if they will start the dream anew, or get a new dream.