Acting on a Strategic Vision
Established as Amazin’ Software in 1982 by an ex-Apple
marketing executive named Trip Hawkins, Electronic
Arts (EA) was a pioneer in the home computer game
industry. From the outset, EA published games cre-
ated by outside developers—a strategy that offered
higher profit margins and forced the new company
to stay in close contact with its market. By 1984,
having built the largest sales force in the industry,
EA had generated revenue of $18 million. Crediting
its developers as “software artists,” EA regularly gave
game creators photo credits on packaging and adver-
tising spreads and, what’s more important, developed
a generous profit-sharing policy that helped it to
attract some of the industry’s best development
talent.
By 1986, the company had become the country’s
largest supplier of entertainment software. It went
public in 1989, and net revenue took off in the early
1990s, climbing from $113 million in 1991 to $298
million in 1993. In the next 13 years, the company
continued to grow by developing two key strategies:
• Acquiring independent game makers (at the rate of
1.2 studios per year between 1995 and 2006)
• Rolling out products in series, such as John Madden
Football, Harry Potter, and Need for Speed
Activision’s path to success in the industry wasn’t
quite as smooth as EA’s. Activision was founded in
1979 as a haven for game developers unhappy with
prevailing industry policy. At the time, systems provi-
ders like Atari hired developers to create games only
for their own systems; in-house developers were paid
straight salaries and denied credit for individual con-
tributions, and there was no channel at all for would-be
independents. Positioning itself as the industry’s first
third-party developer, Activision began promoting
creators as well as games. The company went public
in 1983 and successfully rode the crest of a booming
market until the mid-1980s. Between 1986 and 1990,
however, Activision’s growth strategies—acquisitions
and commitment to a broader product line—fizzled,
and it had become, as Forbes magazine put it, “a com-
pany with a sorry balance sheet but a storied history.”
Enter Robert Kotick, a serial entrepreneur with no
particular passion for video games, who bought one-
fourth of the firm in December 1990 and became
CEO two months later. Kotick looked immediately to
Electronic Arts for a survey of best practices in the
industry. What he discovered was a company whose
culture was disrupted by internal conflict—namely,
between managers motivated by productivity and profit
and developers driven by independence and imagina-
tion. It seems that EA’s strategy for acquiring and
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