With BioWare's Mass Effect a few weeks from release, the recent purchase of BioWare and Pandemic by Electronic Arts seems brazenly timed. The reactions from all corners defy classification, and in their most common form equally defy serious analysis and unbiased discussion. Electronic Arts, burdened by a tumultuous and controversial history, has become an entity which many people criticize and condemn by default, its dealings automatically perceived as some extension of corporate evil defined by nefarious misdeeds and malicious motives. Vilifying Electronic Arts is virtually a pastime for most bloggers and forum posters, and so common as to be nearly cliché. How the BioWare/Pandemic deal might affect future products and franchises is a debate of pessimistic one-upmanship, and the consensus is this will be a bad thing for gamers. However, these conclusions often lack any compelling evidence beyond "if EA is involved, it must be bad."
What has not been discussed is how this deal came to pass, who benefits and why EA dumped more than three-quarters of a billion dollars on a premier developer.
This deal's story pretty much begins and ends with John Riccitiello and a three-and-a-half year game of executive musical chairs. From late 1997 until 2004, Riccitiello was President and Chief Operating Officer of Electronic Arts, when, in 2004, he suddenly left to co-found the private equity firm Elevation Partners, along with former Apple CFO Fred Anderson and U2 front-man Bono. It was an unusual partnership, but one imbued with a healthy stash of funds from which to invest in prominent media and tech companies, and among the company's first significant investment was BioWare and Pandemic.
In the deal, BioWare and Pandemic were merged under a company called VG Holdings, which would manage the business operations of the companies while relinquishing creative control to the two developers. The widely publicized idea was that this new approach to game development would fund creative and proven developers, supplying the resources they needed to commit to a creative vision, while putting them into strong positions to negotiate favorable contracts. Eventually, VG Holdings might even be strong enough to go public, though many Wall Street insiders at the time suggested that such an opportunity was highly unlikely.
In the wake of the deal, John Riccitiello took over as CEO of the new VG Holdings while remaining a Managing Director at Elevation Partners, a company that now owned franchises such as Star Wars: Battlefront, Star Wars: Knights of the Old Republic, Mercenaries, Baldur's Gate and Mass Effect. In an article with the New York Times, Riccitiello said his responsibility at VG Holdings was to let the developers "focus more on creating games and less on dealing with the mundane business operations."
Meanwhile, at Electronic Arts, Larry Probst, who had served as EA CEO since 1991, was already making plans for succession. In an interview with Newsweek, Probst said succession is a long-term process, and that even when Riccitiello left his President and COO position in 2004, the discussions were already beginning in preparation for when the timing might was right.