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Microsoft Pretends to Be Sad

"Zynga announced today that Don Mattrick would be its new CEO, effective July 8. This is a great opportunity for Don, and I wish him success."
-- Steve Ballmer, in an email to employees

After Zynga (NASDAQ: ZNGA  ) announced that it was getting a new CEO by taking Don Mattrick from Microsoft's (NASDAQ: MSFT  ) gaming business yesterday, I guess Microsoft had to put on a sad face. "Oh no," it cried. "The guy who helped us launch the Xbox One is going to a sort-of rival."

What no one brings up is that there are two scenarios that Mattrick could have left under. Either he knew he was leaving when the new Xbox was rolled out, or he thought he was staying. If he knew, then his lackluster attitude toward the new product makes a certain kind of sense, but it also makes him a liability. From the outside looking in, the options for Mattrick weren't great.

Moving along
Mattrick's launch of the Xbox One was greeted with limited enthusiasm. Gamers were happy to see a new system, but many questioned the requirement for an Internet connection, the rigid new digital rights management rules, and the $499 price tag. Then, during June's E3 video game conference, Sony (NYSE: SNE  ) unveiled its PlayStation 4, and the world went mad.

The revolution that the Sony announcement sparked was based on... no evolution. Used games will work like they currently do. Internet requirements, the same. As an added insult, the PS4 will cost $100 less than the Xbox One. By not changing anything, Sony put Microsoft on the defensive.

Mattrick was the face of the Xbox while the controversy swirled, and he didn't make all the right moves. For instance, when asked what gamers without reliable Internet connections should do, since the Xbox One needed gamers to check-in online once every 24 hours, Mattrick said, "Fortunately we have a product for people who aren't able to get some form of connectivity. It's called the Xbox 360." I don't want to vilify Mattrick, but "keep what you've got and be happy" was the wrong answer. It seems that Microsoft may have agreed, given that it pulled a dramatic 180 soon after E3.

The Zynga position comes with a significant title, as Mattrick will be CEO of the whole company instead of just one portion, like he was at Microsoft. That increased responsibility doesn't actually come with a bigger job. Zynga pulled in $263.6 million last quarter, while the entertainment and devices division that Mattrick is leaving generated $2.5 billion.

Who wins?
Even if it's not great for Mattrick's ego, he's the biggest winner overall. The Xbox bungling was made out to be bigger than it was by hardcore gamers and gaming media. The combination put Mattrick in a difficult PR position if he were to stay at Microsoft. By moving to Zynga, he can put that episode behind him.

Microsoft is no worse off. There are plenty of internal and external candidates for the role, and the evolving nature of the Xbox One means that even a new hire could make some real differences. I imagine that role will be filled in the next month, or possibly left vacant until after the launch.

While Zynga certainly doesn't lose in this scenario, it's clearly not the winner. The CEO position could have gone to someone who had a history of making real game-changing decisions. Mattrick is well-qualified, but that seems to be it. I can't imagine him being more than a manager -- but Zynga really needs a leader.

No Pitch

Read/Post Comments (6) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 02, 2013, at 1:46 PM, Wingeddamnation wrote:

    Major Nelson should be the next to go. The guy was all about 'Come with us into the future...DRM is the integral part of the Xbox One and you can't just flip a switch' and all other nonsense. A week later, after Pre-Order sells are not meeting expectations, they 'flip the switch'. I understand he had a job to do, and it was to appease the masses with the new format and all that; but coming out in an interview and being as pompous as Don Mattrick shouldn't be the way to address consumers who want to buy your product. Let's not forget about the investors becoming scared of losing money as well..they were the real reason behind Xbox flipping the switch. If they were going to lose money, of course they were going to pull out..who wouldn't?

  • Report this Comment On July 02, 2013, at 3:18 PM, LucifersHammer wrote:

    "The Xbox bungling was made out to be bigger than it was by hardcore gamers and gaming media."

    No... It wasn't. These Motley Fool's need to get their noses out of Microsoft's butt. Microsoft bungled in every way imaginable and just kept digging themselves in deeper and deeper. They were a bunch of arrogant douches who believed that they could shove an expensive system, with severe restrictions, that no one in their right mind wanted, down the consumers throat and we'd just smile and take it.

  • Report this Comment On July 02, 2013, at 4:08 PM, XMFRedRam wrote:

    Thanks for reading.

    Lucifer, while it's not for everyone, it was clearly not a total bomb. The Xbox was reportedly having fine presale numbers, which jumped even higher after its backtracking. Mattrick did a horrible PR job, but the company did capitulate, which is what everyone wanted.

    I think MSFT should have done its market research before it launched the Xbox, but now that it's made the change, I don't think it will affect buyers.



  • Report this Comment On July 02, 2013, at 6:00 PM, AusTexican wrote:

    No offense, but Mattrick's attitude before the 180 is endemic of Microsoft's attitude towards it's customers. It forces changes on them without even doing a modicum of market research.

    Then, they rush a product out and it does horribly (see Win 8). Finally, they have to backtrack after enough egg has been thrown on their face.

    It's all about offering choice. Had MS said, "hey, we think digital media is the way to go and this is why..." but still offered the choice to continue hard copies, then gamers might have been cool with it.

    Mattrick did come off as a douche with his responses. He basically discounted what PAYING CUSTOMERS were saying and for that MS took a hit.

  • Report this Comment On July 02, 2013, at 9:35 PM, don1941t wrote:

    Egg on your face and douche. You screamers will be red-faced when the MSFT re-org is announced and there is no more IEB and no box for on the org chart for Mattrick. Good for him for bailing out and landing where he has a new set of challenges.

  • Report this Comment On July 02, 2013, at 11:43 PM, tundrowalker wrote:

    The problem, unfortunately, is that what we hear now can easily get changed upon console release. Sony already set a trend with the PS3. They let other OS' get installed on it. That was one of the selling points to some consumers (eg: some folks installed Linux on it and used it to crunch BOINC & Folding At Home projects on the cell shader). Then Sony renegged on that with an update that shut out other OS'. Folks first experienced this "system shock" when Tivo's rolled out. Another person controlled when your system updated, and your system was forced to update. After updates, you may or may not be happy with it. Functionality you liked may be gone. Sony did that with the PS3. Unforunately, both MS and Sony are baking that kind of stuff into their new consoles. MS already backpeddaled hardcore on the DRM scheme. You think they would have been able to do that if it wasn't easy to "undo" it? The problem is the software is so malleable. While Sony promises no crazy DRM schemes, and MS back-peddles, we could see all of this just being lip-service until a customer base is formed. THEN they roll out patches and updates to the EULA requiring folks to bend over and take it in the rear with a crazy DRM scheme foisted on them. Either accept the new EULA or let your new console sit there like an expensive, worthless brick. That is the era we live in, and that is the real problem here. People are used to buying software with EULA's, and that EULA changing. But they are still under the assumption that hardware is there's to do as they please with. We've seen Sony take hardware hackers to court for messing with their PS3 hardware. We've seen Sony and MS change their EULA's on their hardware, and you have to accept it if you want to keep using all the ameneties that go with the console. In the past it was mostly just social extras, but now ... the EULA's cover the whole hardware. That is where the X-box One and PS4 are going to make or break the gamer crowd. MS & Sony want to control everything... the software and the hardware. And, their EULA's are going to start making it very clear that while you paid for a console, you don't get to control what happens to it. You will be forced to accept updates and changes in policy if you want to keep using it. This will make it clear to folks that you did not pay for a console ... you are merely long-term renting it. You are paying $300-400 for the privilage of using MS or Sony's "service" which happens to come as a console. This is going to be a huge eye-opener to customers, and if the companies get too draconian in how much they control they will severely damage consumer confidence for years to come. So, for now you can invest in MS and/or Sony while they lip-service folks with PR and wet their appetites to buy these things. But, you may want to have the "Sell" button ready after about 6 months when the consoles roll out and you start seeing just how cut-throat both companies might get on changing their EULA's / policies and how much they piss their customer bases off.

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