Over the past year or so, Zynga has lost a lot: customer enthusiasm, stock value, uniqueness, employees, profit, their strategic partner and even their minds. This quarter they have lost the biggest thing they still had - their title as social gaming king. The salt in the wound is that they lost the title to a small gaming company called King.
Zynga has almost 3,000 employees, while King has only 400, yet their games have more daily active users than Zynga and, probably turn a significantly higher profit with such little employee overhead. Zynga has had a good run getting to that 3,000 employee mark, joining the Facebook application platform immediately upon launch in May of 2007. They have essentially created an industry around themselves, purchased high-profile companies and even tangled with the big boys in legal action. Many of their games are so big they are household names - Farmville and Mafia Wars being the best examples.
We have seen a lot of companies come and go - including EA-owned studio Playfish, which is currently leaving the market entirely. That shutdown is not entirely Zynga's doing, though. King has had a big hand in their demise, as their growth has clearly cut into everyone's active user count. CEO Riccardo Zacconi said of the transition,
King now has more than 66 million daily players of our games, and in Candy Crush Saga, we have a global hit on Facebook and on mobile. Our players love being able to switch from mobile phone to tablet computer to PC without losing their progress in the game - the cross-platform synchronization that makes that possible is a big reason for our popularity. Our bite-size games are perfect for coffee breaks, bus journeys, or any spare few minutes in your day.
The build-up wasn't quick, but it was calculated. Transitioning from tournament games to social games in 2009 with Candy Crush Saga started a trend, and King knew how to capitalize on it. They recognized long before Zynga or EA that situational games were no longer what was wanted, but instead quick-hit games like PopCap's Bejeweled were becoming popular. Games that you could get in and out of in a few minutes. Zynga's OMGPOP studio recognized this, but it never made it into the primary studio in a timely manner, and with that mistake, King expanded.
Another advantage king had was not being bound to Facebook. Their mobile offerings, like Bubble Witch Saga helped get the name out, and was the final step in outperforming Zynga at its own game. King focused on engaging new players, while Zynga merely relied on a percentage of Facebook's growth to join, which has backfired as Facebook's growth has slowed.
Zynga COO, and possible turnaround savior, David Ko is optimistic about the challenge from King,
The way I look at it is, we have a belief that social gaming is a huge opportunity. Not only from the estimate that it is a $9 billion market but also from what we're seeing in the marketplace. Competition like this just reinforces the opportunity. My biggest thing is, I want to make sure that we're confident that you're going to see more of our franchises in that mix.
Competition drives innovation, but only if a company can be innovative. We will see if Ko is the visionary to steer the ship or an optimistic lunatic that will end the company. Either way, congrats to the new king, King.
Regular readers will remember Betaworks; they were the company that bought and relaunched Digg, regaining market share quickly. This week, the company purchased successful read later service Instapaper, adding another content aggregator to its already impressive portfolio, which already includes Digg and Bitly.
Any time a company starts purchasing this many related companies, there is always a fear: new products will be closed and cannibalized to enhance current offerings. We have seen it happen with Google many times, including Meebo and this week's Wavii closure, as well as some of Facebook's acquisitions. In a lot of cases, especially with Facebook, the interest is in the employees, who already have domain expertise in whatever area into which the company is trying to expand.
In this case, however, Betaworks has promised that the service will remain active. This is good news for the founder, Marco Arment, who only sold because he knew the platform was getting too big and popular for a single person to develop and he was not the type to lead a full staff of people. In fact, Arment contacted Betaworks about the sale, knowing the companies were a good fit for one another and knowing that Betaworks, if interested, would keep the service alive and enhance it.
The concept of the app is a great one, but a wider distribution of the platform will help its long-term success. Hopefully Betaworks' acquisition of the product will help officially bring it to other platforms, like Windows Phone and Windows 8, both of which currently have an app called "Stacks for Instapaper."
Have you had the opportunity to use Instapaper? Do you like the concept? Would you like to see it on other platforms? Let us know your thoughts in the comments.
While Cisco was able to beat VirnetX this year, Apple was not so lucky last year, resulting in a $368 million penalty. The company, in its quarterly filings, included a form that states they have not taken a write-off for this money, because they intend to fight the ruling.
Now, I don't think anyone expected them to NOT fight the ruling, because if there is one thing Apple loves, it's court battles. In fact, they are already in another battle with VirnetX regarding the exact same patents they lost with before, but on new devices, such as the iPhone 5 and iPad mini.
The company said in its filing,
The Company is challenging the verdict, believes it has valid defenses and has not recorded a loss accrual at this time.
While they believe they have defense, they did make a semi-breaking change to the infringing software removing the option to maintain VPN (Virtual Private Network) access and instead changed the option from "always" to "when needed" for connections. That sounds like an admission of guilt to me, or at least an admission of NOT fighting the ruling. The setting, in a recent update, has been reverted, however.
The flipping change in policy could either indicate giving in to massive frustration from customers, who apparently hated the change, or a change of direction from the legal department. It is possible that the initial intention of Apple was to not fight the ruling and merely pay the fine and move on with its day, but something has changed their mind. It could be the customer feedback on the setting change, or it could be some new information, or newly acquired patent, that allows them to believe in a win.
The other possibility is that someone just got a bug after Cisco's win and decided to use their strategy in court. No mater the reasoning, I am glad to see Apple fighting the ruling. VPN services are essential on mobile devices and not being able to accurately support them hurts the entire ecosystem. A loss here could mean a loss for everyone; go get the win, Apple.
More shutdowns and layoffs are hitting the Electronic Art studios after the former CEO, John Riccitiello, stepped down earlier in the month. This comes after last week, when we EA studio Playfish announced closure of the entire studio.
So what's the damage this go-around? EA has said that PopCap Vancouver and Quicklime, who's in charge of the Need for Speed: World series, are both shutting its down. This "reorganization" should bring the total amount of workforce reduction from these three rounds to 10 percent. Kotaku has reported that the headcount of employees who have been let go from EA due to the three rounds of layoffs are in the 900 range. Now, we know every time a CEO steps down and a new - or in this case, old - one enters, things will go away and employees will be terminated. However, EA has put the hammer down once before Riccitiello resigned and twice immediately after.
In the statement from EA,
In recent weeks, EA has aligned all elements of its organizational structure behind priorities in new technologies and mobile. This has led to some difficult decisions to reduce the workforce in some locations. We are extremely grateful for the contributions made by each of our employees - those that are leaving EA will be missed by their colleagues and friends. These are hard but essential changes as we focus on delivering great games and showing players around the world why to spend their time with us.
Now, we've also discovered an internal notice sent from the new CEO, Larry Probst, which does not disclose the exact amount of people being fired, but goes into detail about EA's restructuring. Here it is, in full.
As we begin the new fiscal year, I want to provide you with a brief update on some important changes to our organization. As Executive Chairman, my focus is to ensure EA is delivering high quality games and services to our consumers, while helping the executive team develop a FY14 operating plan that drives growth, rationalizes headcount and controls costs.
In recent weeks, the executive team has been tasked with evaluating every area of our business to establish a clear set of priorities, and a more efficient organizational structure. This process has led to some difficult decisions about the number of people and locations needed to achieve our goals.
The workforce reductions which we communicated in the last two weeks represent the majority of our planned personnel actions. We are extremely grateful for the contributions made by each of these individuals - they will be missed by their colleagues and friends at EA.
We are also taking action to streamline our organization, including changes in two key areas:
•Core marketing functions have been consolidated under our COO, Peter Moore. The combined group will bring together our Label marketing teams, Global Acquisition Marketing and Marketing Analytics into one multi-talented team under Todd Sitrin's leadership. The development and marketing teams will continue to work as cohesive units, driving clear and consistent messaging and consumer engagement for each of our franchises.
•Origin will move into Frank Gibeau's Labels organization. Andrew Wilson will take on the leadership of Origin, working with CJ Prober and the team to create more value and an enhanced entertainment experience for our consumers.
Change is sometimes difficult, but essential. The adjustments we are making will put us in the best position to build great games and services, deliver them more efficiently to consumers, and demonstrate to players around the world why they should spend their time with us.
EA is a great company, with talented and hard-working teams, a strong portfolio of products and an extremely bright future.
Thank you all for your dedication and commitment to our long term success!
So, now that Probst has hopefully eliminated all of the waste, can EA continue moving forward? Will this be a wake up call to all of the studios EA owns, causing them to wake up from producing horridly bad games, followed up with ridiculous customer service and all-around business policies? I'd love to hear the consumer's thoughts on all of this in the comments below.
In the race to stay competitive, Amazon has found new and interesting ways to try and get customers to switch over to their Amazon Prime Instant Video service. Most recently, they've piloted 14 different shows, in hopes that you, the customer, will pick the ones you want to see the most. Now, since all the cool kids are rumored to be doing it, the gigantic e-store is said to be planning to release a TV set-top box for streaming video.
Sources who have wished to remain anonymous but are very close to the matter said that the set-top box would further expand the Instant Video service, including the Amazon Video on Demand store. With Apple, Roku and Boxee all having STBs plus Microsoft, Sony and Nintendo pushing their own media services through their gaming consoles and the upcoming 4th iteration of GoogleTV, there is a lot of competition in the space right now. Amazon's Instant Video service has quickly surged to the front of most of these services, and is even available on a huge array of tablets and smartphones, giving Amazon enough justification to push their own STB.
Co-founder of Sling Media, Jason Krikorian, agrees with Amazon's plans moving forward.
It would certainly make some sense. They have a ton of content, an existing billing relationship with millions of users.
Amazon reps have declined to officially comment on the matter. However, we do have some details on who is creating the actual box: Amazon's Lab126 division, which is headquarted in Apple's stomping grounds of Cupertino, California. The same sources say Lab126 has been playing around with connected TVs and set-top boxes for some time and has an extensive background in these products. Running the entire operation is Malachy Moynihan, who was previously Cisco's VP during Cisco's time messing around in video offerings. Moynihan was also with Apple during the late 80s and early 90s. Complimenting the exec are Andy Goodman, who came from TiVo and Vudu and Chris Coley, who was formerly with ReplayTV, a DVR start-up.
No rough figure on pricing was given from these sources. However, with all of the news we have right now, would an Amazon set-top box be something consumers would be interested in, given all of the other options? The Xbox 360 is really becoming a solid media hub with each passing day and if that isn't up your alley, the Roku is a less expensive, yet powerful little alternative. Is there room for the Kindle TV, the proposed name for Amazon's device? Let your text be read in the comments section below.
We've talked about counterfeiting in the past, with government agencies taking down fake product sites worldwide. Trying to pass off fake merchandise as real is also common when it comes to well-known brands of headphones, like Monster Products and Sennheiser. This week, the UK took down a heavy-hitter in what the country is calling the largest-ever seizure of fake Monster products, among other brands. Michael Reeder has been convicted and sentenced to 30 months in prison on 13 different counts of selling the knock-off products.
Reeder's house and workplace were stormed by federal agents in February of 2011, where the task force found over 2,000 counterfeit products from big-name brands like Monster, Sennheiser, Apple, Sony and Nintendo. The con artist was already under watchful eye by the courts after a 2009 case for not giving customers refunds and shipping product in an excessively untimely manner. Since the initial case, hundreds of customers have complained to Monster directly about receiving headphones from Reeder's company, Odds and Pods, saying that the headphones had bad sound quality, buzzing and came in very strange packaging.
Fast-forwarding to September of 2011, government officials found another 1,500 fake Monster, Sennheiser and Sony headphones, along with Sony PS3 controllers and Wii accessories in the handful of raids they performed that month. The raids even caught the attention of David Tognotti, Monster's General Manager and Vice President of Operations, when he said,
Everyone at Monster is gratified that this long and complex investigation has finally reached such a favourable conclusion. The sale of counterfeit products literally hurts everyone, including manufacturers and retailers, but most especially honest consumers who might have no idea that the goods they purchase are not genuine.
At the sentence hearing this week, the actual size of Reeder's operations were exposed. A report submitted by Sennheiser showed that the seizure of all of their products came to a total of 4,000 different headphones, worth over $250,000 if they were legitimate. The court added that they estimate this was just one percent of all of the illegal activity and inventory Reeder was trafficking, as officials found a handful of sites selling the counterfeit headphones and gaming items.
Sennheiser's President of Corporate Services, Volker Bartels, said the company received an extremely high amount of reports of fake product from Reeder's companies.
At one point we estimated that almost 80% of all the complaints we received were due to the fake products he was selling illegally under our brand name... This is why Sennheiser launched a global anti-counterfeit campaign last year. We will not accept fake product in the market place as we want to protect our customers from fraud.
So after the 2,000 pages of evidence the Portsmouth UK City Council collected on Reeder and all of his fake product, is 30 months in jail enough of a punishment for what seems to be a multi-million dollar scam? The UK court also ordered refunds to all affected customers, although a final number and judgment has not been determined as of yet. I'd be curious to see the exact figure in damages they reach once they sort through all of the transactions.