Zynga Inc (ZNGA)

[august1991]

The DeanBeat: How Zynga snared Xbox boss Don Mattrick as its CEO
Zynga

Don Mattrick (left) and Mark Pincus of Zynga.

July 5, 2013 8:00 AM



Dean Takahashi

The kingmaker has struck again.

bing-gordon
Matt Lynley

Bing Gordon

Bing Gordon, the former Electronic Arts chief creative officer and Zynga board member, introduced his former colleague, Don Mattrick, to Zynga’s CEO and founder, Mark Pincus. It happened a few years ago, and Gordon made it clear to Mattrick that Pincus was something special in the new world of gaming. Gordon felt like Pincus had the right vision and strategy for the future of games. As Zynga grew into a social gaming giant, Pincus and Mattrick began to talk regularly.

Back when Zynga had fewer than a hundred employees, Mattrick thought that Pincus had high energy and high intelligence. That was enough to plant the seed that sprouted as Zynga announced this week that Mattrick would become CEO of Zynga, while Pincus would stay on as chairman and chief product officer.

A lot of people point out that Mattrick will get $50 million in compensation at Zynga, but that’s only if he turns around the stock in a big way. The deal was in the works for a while. Starting in 2007, Pincus’s company was one of many social gaming startups on Facebook. But he managed to make Zynga the center of attention. Thanks to games like Zynga Poker and FarmVille, the company grew to $1 billion in revenues in just a few years, something that no other gaming company had ever done. He expanded the game industry to new players via casual games on Facebook, and he had an ambition of reaching more than a billion people through social games. In doing that, he stayed on the radar of Mattrick, a 30-year veteran who was running the multibillion-dollar Xbox business. In his post on joining Zynga, Mattrick said he had admired Zynga for years in its capability to bring gaming to the mainstream.

Gordon’s played kingmaker before, and he was patient. He had recruited seasoned game developers like Brian Reynolds to Zynga before, and he also played a role in getting John Schappert, EA’s former No. 2 executive, to become Zynga’s chief operating officer in June 2011.

At 3,000 employees and $1 billion in revenue in 2011, Zynga was sitting pretty. The company went public in the fall of 2011, raising $1 billion at a $9 billion valuation. But as Facebook’s fast growth ended, Zynga’s own growth slowed in mid-2012. Schappert stepped down in August, and an exodus of former EA executives also resigned from Zynga.

Pincus came under fire as Zynga’s growth slowed, but he had retained voting control of the stock and couldn’t be fired. Pincus’s strategic task was to generate more hits and revenues in mobile games, but it seemed like he had plenty of time to accomplish that, as mobile was still a fragmented, free-for-all market.

Gordon stayed in close touch with Mattrick; he brought him to our GamesBeat conference in July 2012, where Pincus gave the opening chat. While Pincus was open to the idea of giving up the reins, he wasn’t going to do it with just anyone. He had to find someone he trusted and someone who could bring more than he could to the role. He wanted to find someone who could accelerate the growth of the company and broaden its potential. Game pioneers discuss gaming's future

Mattrick usually lived his life in five-year cycles. At Microsoft, things couldn’t have gone better. Mattrick had grown sales from 10 million consoles in 2007 to 80 million in 2013. The number of Xbox Live members grew to 50 million. On top of that, developers were making more money on games on the Xbox 360 than they were on the PlayStation 3. He was the key driver behind Kinect, the motion-sensing system that launched in 2010 and became a big hit. Microsoft has sold more than 24 million Kinect sensors, and Kinect 2 is a cornerstone technology in the new Xbox One video game console.

Last year, Mattrick and his wife bought a new home in Silicon Valley, where his wife, Nanon de Gaspé Beaubien-Mattrick, had begun to visit more frequently. As president and founder of Beehive Holdings, she invested in women-owned startups. Both of them had good reasons to return to the San Francisco Bay area. The Mattricks also became empty-nesters. Those life events were big ones that shook Mattrick loose from his usual routine.

At Microsoft, Mattrick put a plan in place for the Xbox One game console that launches in November. His job wasn’t done, but the executive team had clear directions. They had to execute. John Riccitiello, who had been chief executive of EA since 2007, resigned from the top job in March. Mattrick had spent his career at EA from the time he sold his Distinctive Software to EA in 1991 until he left for one of the top game jobs at Microsoft in 2007. He had finished his tenure there as head at EA as head of worldwide studios.

But at Microsoft, Mattrick had peaked. He was president of the Interactive Entertainment Business at Microsoft, reporting to CEO Steve Ballmer. If Mattrick would have risen any higher, he would have had to manage businesses as diverse as enterprise software, Windows, and Office. That would have taken him away from the game business that he spent his career dedicated to.

Meanwhile, Zynga’s troubles worsened. The company expects to post a loss this year and lower revenues. In June, Zynga said it would lay off more than 500 employees, shut down a number of game studios, and closed games that were no longer generating revenues. Ko, now chief operations officer, had warned that the company had now put up “guard rails” to keep the company’s costs under control. More than half of the company’s remaining employees are focused on mobile, but some high-profile titles like Draw Something 2 have underperformed, and Zynga closed down the OMGPOP studio (acquired for $180 million) that made it.

This hard slog for Zynga in mobile is happening at a time when others are racing ahead. King’s Candy Crush Saga has become the biggest game on Facebook. Helsinki mobile game startup Supercell raised $130 million at a $770 million valuation on the strength of its hit game, Clash of Clans. Japan’s GungHo Entertainment may have a $1 billion game on its hands with Puzzle & Dragons. Other big rivals in mobile include Japan’s DeNA and Gree as well as Electronic Arts. And mobile games have taken off on new platforms such as the Kakao Talk and Line mobile messaging networks in Asia.

Against those successes, Zynga’s progress in mobile looks puny. Zynga has more than 70 million monthly active users on mobile (figures will be updated on July 25). All it would take at this point would be a single smash hit, but that hasn’t happened yet. That’s a little embarrassing, since Zynga probably has more mobile game developers than just about anybody else. While Zynga has often been accused of cloning, it has a wealth of talented veterans from the early days of social gaming and as well as the core console business.

To help solve that problem, Gordon went back to Mattrick. Pincus started a more intensive set of talks, laying out the challenge to Mattrick. Mattrick had the chops in game development, managing a large organization, and an entrepreneurial spirit. The fact that Mattrick had dropped out of college at 17 to start Distinctive Software was a real plus to Pincus. EA bought Distinctive in 1991, and it started Mattrick on his long road to being a CEO again.

In the end, that appeal of running a company again won out. This week, the news broke that Mattrick was leaving Microsoft in a report in AllThingsD.

The news of Mattrick’s appointment gave Zynga’s stock a big boost. Mattrick talked to employees on Tuesday. Analysts noted that Mattrick’s reputation would help Zynga, but his experience in mobile was limited. To turn Zynga around, Mattrick will have to come up with hits. It’s a tough business, but that’s entertainment.

Read more at http://venturebeat.com/2013/07/05/the-deanbeat-how-zynga-snared-don-mattrick-as-its-ceo/#cmXrcqo7cmZrh1bM.99