"Our vision of the company isn't changing, okay?"
Zynga founder Mark Pincus is getting a little heated. It's a muggy Saturday morning in July, and in 48 hours, just after the July Fourth holiday and just before his annual trip to Allen & Co.'s Sun Valley "summer camp for media moguls," Pincus will officially hand off the title of CEO at the social gaming company he founded in 2007.
His replacement? A largely unknown though well-connected executive named Don Mattrick, architect of the $78.5 billion gaming industry's highest-profile new product launch, the Xbox One.
Pincus, Zynga's controversial and colorful leader, had birthed, nurtured, and controlled the company through one of the most dramatic rise-and-falls in Silicon Valley history. Less than two years ago, his company was worth $9 billion. It was a paragon of the shift toward casual, social games like FarmVille and away from expensive, high-production epics like Halo that were available only on consoles like the Xbox. By the time Pincus signed Mattrick at the end of June, Zynga's failure to find a hit akin to FarmVille and its spin-offs or Words With Friends, to develop a mobile strategy, and to keep its revenue and audience had driven down its value to $2.2 billion, barely more than the company's $1.7 billion cash hoard. The company had hemorrhaged high-profile executives and more than a sixth of its workforce through layoffs. With Pincus unable to devise a comeback strategy, Zynga was surpassed by mobile-centric competitors such as King, maker of this year's time-wasting megahit Candy Crush Saga.
For better, and just as clearly for worse, Pincus, 47, has always been deeply embedded in the company he named after his beloved, now deceased, bulldog. He had taken significant measures to retain power, even creating a special type of stock so he would always hold a majority of voting control. Pincus was renowned for telling employees at all-hands meetings: "The only way I'm leaving Zynga is feet first."
Mattrick, meanwhile, had transformed the Xbox business in six years at Microsoft from a money loser targeted at Dudes Who Live in Mom's Basement to a profitable, fun-for-the-whole-family living room device that was as much about watching Netflix as playing Call of Duty. But Mattrick, 49, comes to his new gig with serious baggage. This past spring, while he was being wooed by Pincus and their mutual friend Bing Gordon (a Zynga board member who, back in the 1990s, acquired Mattrick's gaming startup for Electronic Arts), Mattrick debuted the next-generation Xbox One, which is designed to be Microsoft's great genre-defying, platform-crossing, Apple-confounding consumer mega-product. Yet Mattrick made a hash of the debut, which blew up in his face, and was passed over for a bigger job at Microsoft.
The shotgun marriage of Pincus and Mattrick stunned the industry. With Pincus staying on not just as chairman but also chief product officer, everyone is left to wonder, Can this partnership possibly work? Especially when Pincus makes it clear that Mattrick's mandate is not to remake Zynga? "We remain committed to social and mass market," Pincus tells me. "You're not gonna see the company pivot and be a hard-core gaming company or something like that."
The arrangement raises more than a few red flags. Pincus, the social network whiz, is a micromanager who has struggled to retain senior talent. Mattrick, who spent 15 years at Electronic Arts before landing at Microsoft, is an autocratic leader who has always executed his distinct vision. His most successful partnerships have been with beta males who happily ceded him the lead spot. Can these two headstrong leaders cross the crazy minefield of the in-flux gaming business--next-gen consoles! Facebook's kingmaking power! mobile!--without blowing up themselves and their company? Now that would be a helluva game.
"He was ready to be CEO." Bing Gordon--Zynga board member, Kleiner Perkins Caufield & Byers venture capitalist, and Nick Nolte soundalike--is explaining how his old compadre Mattrick had confided in him early in 2013 that he was getting itchy in year six of his five-year plan at Microsoft. Being a public-company CEO had always been a goal. Gordon told him, "You've got to talk to Mark."
Despite the many moats Pincus had built to protect his power, he had always said that if he found someone better to run Zynga, he'd lower the drawbridge. To hear Pincus describe his ideal CEO now, it's a wonder he held the job as long as he did. "Over the years, I thought about what leadership the company needed, and I separated it into three buckets," he tells me. "The first bucket was deep excellence in game development." Pincus admits that as an "outsider" he came to gaming without this experience.
Second, he says, "I knew the company needed great management." Pincus had met Mattrick years earlier and was "always really impressed by the way he approaches the management job." Pincus is a self-improvement junkie: He's hired private tennis instructors and personal trainers to push him to his physical limits, and has sought executive coaching and counsel from the likes of Gordon, DreamWorks Animation's Jeffrey Katzenberg, Amazon's Jeff Bezos, and Apple director Bill Campbell. Despite all that, he says, "I was never bringing world-class management." (Pincus's third bucket is entrepreneurial spirit, which he has in great abundance.)
So starting in March, Pincus and Gordon went a-wooing, beginning with a bike ride. "Biking is the new golf," says Gordon, in his gravelly rasp. "You can talk, you can see how competitive someone is, how honorable, how good they are in a group." Mattrick was ready to listen, even though he was in the middle of prepping the Xbox One rollout. He was growing uncomfortable about a companywide reorganization that Microsoft CEO Steve Ballmer was planning, according to a number of Microsoft sources. As it seemed that his new role would be overseeing hardware, which he saw as a minor outpost within the software giant's empire, Mattrick began considering other options. When I asked him about this in early June, he said, "Microsoft has a whole new set of challenges in front of it, and we're just gonna wait and see what gets announced inside the company."
As Mattrick contemplated his future, Zynga's stock remained mired 70% below its IPO price from November 2011. In early April, Pincus added famed Kleiner VC John Doerr to his board, creating a highly unusual situation: Rarely do public companies have two partners from the same VC firm on their board. But Doerr, who in late 2010 crowed that Zynga was Kleiner's most successful investment ever, was presumably worried about the $72.5 million stake his firm still had tied up in Zynga. Justifiably so: Less than three weeks later, Zynga announced that first-quarter revenue was off 18% from the same period a year ago, from $321 million to $264 million.
Both Gordon and Pincus cite Mattrick's serendipitous appearance at Zynga's May all-hands quarterly meeting as a seminal moment in their talks. Gordon says he was squiring Mattrick around Silicon Valley to meet with Internet companies he thought he should know for Xbox, such as the social rewards company Klout. One day Mattrick met him at Zynga's corporate offices in San Francisco. Despite the dire financial results and layoffs looming for approximately 500 people, the meeting that day was a celebration. The company handed out its regular Level Ups and Killing It awards for standout employees, and a parade of about 40 female team members dressed in superhero costumes took to the stage doing leg kicks while everyone clapped. ("As Zynga faltered," says one former employee, "the meetings remained a little cheerleady.")
Mattrick, who has a long-standing love for spectacles big and small--he hired Cirque du Soleil to kick off the 2010 rollout of the Xbox's Kinect motion controller and wears rainbow-stripe Paul Smith socks--stood in the back and took it all in, eventually telling Gordon, "Boy, was that cool." This was nothing like a Microsoft meeting, where the only chorus line is a series of PowerPoint presentations.
Amid more bike rides and meals, Pincus assessed whether Mattrick was the guy he could hand control of his company. He decided to make the offer in Seattle, in late May. "Bing and I flew up there to present our offer to him," says Pincus. "We wanted to do it right." And just what does "right" mean? The already-rich Mattrick could make more than $50 million in cash and stock options over the next several years--if stock targets are met.
The coup de grace? Pincus wrote Mattrick a love letter. "I wrote him a personal note that really tried to, from my heart, tell him just what the company meant to me, and how important a move this was, and how much I believed in him coming and doing this." Pincus says Mattrick told him, "The letter was more meaningful than the offer."
Mattrick was impressed with the opportunity. As he tells me just days into his new job as Zynga's CEO, "Social gaming is the fastest-growing Internet industry since search." And Zynga had already reached more than 1 billion users and exceeded $1 billion in revenue (in 2012). Still, Mattrick had some difficult, legitimate questions. First and foremost was just how ready Pincus was to step aside. Over a "series of conversations," Pincus says, he told Mattrick "that I was serious about making him the actual CEO of the company and that I understood what that meant." Pincus has had trouble ceding authority in the past. He had cycled through several C-level operators, including John Schappert, Mattrick's former colleague at Microsoft, who had a brief, tumultuous stint as Zynga's COO in 2011. The partnership "decayed after about three to four months," according to one former senior Zynga employee, "and caused all kinds of chaos internally." When Zynga announced its layoffs in early June, it convinced Mattrick that Pincus was serious, as he says, about trying to "make the hard decisions." Mattrick, for his part, says, "Mark did a very skillful job representing his vision for Zynga and making me believe that this partnership is something he really wanted to do."
While all this recruiting was going on, Mattrick was making a royal mess of the Xbox One's rollout. He debuted the device in two stages, at an entertainment-centric "reveal" event on Microsoft's campus on May 21, and then on June 10 at the gaming industry's E3 convention in Los Angeles. The applause he received for announcing to the Microsoft crowd that the goal of the new machine is "All your entertainment, all in one" quickly devolved into carping about two controversial Xbox One features. The first would have eliminated the resale market for Xbox game discs. The second would have required an always-on Internet connection; when asked about this at E3, Mattrick glibly responded that people who didn't want such a connection could content themselves with playing video games on the eight-year-old Xbox 360. For that, the blog TechCrunch dubbed Mattrick the Marie Antoinette of gaming--Let them play Xbox 360!--and called Microsoft, and by extension Mattrick, an "asshole." On June 19, Mattrick apologized publicly in a blog post and pulled the features from the Xbox One.
When I ask Gordon if his and Pincus's full-court press may have distracted Mattrick, he pooh-poohs the idea. "Most creative people," he says, "start thinking about the next game before the current one's done." Mattrick signed his new deal with Zynga on Friday night, June 28, just days before Microsoft planned to announce its reorg. The CEO swap left Xbox--and Microsoft--looking flat-footed and clueless. Mattrick celebrated his new job along with Zynga leadership at the St. Regis hotel in San Francisco.
Vision is perhaps the most overrated, overused, and oft-abused term in both Hollywood and Silicon Valley, but it is the word one hears again and again when people talk about Mattrick. "What Don understands is how to paint a vision that's sexy and that gets you excited," says Evan Hirsch, a gaming industry veteran who worked with Mattrick at both EA and Microsoft. "Don has this really ambitious vision," says Hanno Lemke, the general manager of Microsoft Studios in Vancouver, who in the 1980s watched Mattrick develop the pioneering game Test Drive, which, in an industry first, put the player's point of view behind the wheel. "I went with a group of friends from Vancouver to Whistler one weekend and I was driving a sports car," Mattrick recalls. "I'm looking through a windshield. Got my hands on the wheel. I'm shifting. I'm paying attention to the road, to the passing lanes, and thought, Wow, this is just, a) beautiful, and b) something that I think a lot of people would connect with emotionally."
Much as in Test Drive, Mattrick believes that putting users in the driver's seat is the formula for gaming success. At EA, Mattrick was a force behind The Sims, which was initially designed as an architecture tool that let players build houses until Mattrick argued that the people inside the homes should be the focus. He also pushed to personalize sports games such as Madden NFL and FIFA Soccer. "Now you could not only be 'in' the game, like a TV broadcast, but you could be the hero," says Paul Lee, who was Mattrick's COO and wingman at EA.
At Xbox, this guiding principle led Mattrick to the pearl within Microsoft's unfocused research initiatives, a motion-control technology that had gone nowhere at the company. The tech, which was later dubbed Project Natal, prompted smiles and joyous laughter from whomever played with it, says Marc Whitten, Xbox's chief product officer. "But it wasn't finished. It was like, Well, this isn't even possible. But Don would say, 'Did you see how everyone came out of the room smiling? What if we made it happen?'" Mattrick describes his philosophy as "You'll never solve it if you don't have a dedicated group of people working on it."
When the product finally came out in November 2010, it was called Kinect and became the fastest-selling consumer-electronics gadget of all time, with 10 million units sold in just over four months. This is a fact Microsoft loves to trumpet, even though sales of the sensor fell off sharply after its initial launch, according to three former Microsoft executives.
Mattrick has been honing his instincts as a product guy ever since he was a teenage computer nerd growing up in a suburb outside of Vancouver. The son of a truck driver and a bank comptroller, he started hanging around ComputerLand, learning about software and studying what clicked with shoppers. "It was really interesting to watch people walk by and see what they went and actually touched," says Mattrick, who had initially applied for a job at the store--and was rejected.
Over the years, he married his man-of-the-people insights with a ruthless drive to execute. This has not, needless to say, made him the easiest guy to work for. "He's relentless," says Lemke, "dogged about pushing people beyond their comfort zones." Even as a young executive at EA, Mattrick succeeded in getting the company to ship games on time "by scaring the crap out of people," remembers Gordon.
In one of his first meetings at Xbox, Mattrick walked up to a whiteboard and wrote: "$100 million." He then announced, "That's how much we're gonna make this year." As the team's skepticism bubbled up--after all, the division had lost billions and its blue-sky projection was to lose only $500 million that year--Mattrick said, "If you can convince me that my math or logic is wrong, I will listen. If you can't, then this is what we're signing up for." A year later, he had Xbox in the black.
Activision CEO Bobby Kotick credits Mattrick with transforming Xbox Live, the console's Internet-based multiplayer network, from something for hobbyists to a fully realized product. "The perfection of Live into a service that people were willing to pay for changed the fortunes of the division," he says. Even Ballmer acknowledged in his note marking Mattrick's departure that the turncoat had taken Live from 6 million users to 48 million--each paying at least $5 a month for access. Michael Pachter, a gaming analyst at Wedbush Morgan Securities, also credits Mattrick for closing the deal to have the Xbox stream Netflix, an arrangement that has added more than $1 billion in incremental revenue over the past five years.
So now what happens? Will Pincus get out of the way and let Mattrick do his thing?
The two men have much in common, both professionally and personally. They have highly accomplished, independently wealthy wives. They have showplace homes: Pincus's 11,500- square-foot mansion on San Francisco's Gold Coast in Pacific Heights cost $16 million; Mattrick's 25,000-square-foot Vancouver estate is the largest in British Columbia and worth an estimated $27 million. Among its amenities is a 10-car garage, which Mattrick, who bought his first Ferrari before he turned 20, has filled. When I ask him exactly how many cars he owns, he just smiles. "A dozen?" I ask. "Ish," he replies, acknowledging his taste for not only Ferraris but also Lamborghinis and Lotuses.
Both even were slated to attend Sun Valley before Pincus hired Mattrick. (Zynga's new CEO stayed behind this year.) Mattrick counts among his friends Hollywood luminaries such as Steven Spielberg and George Lucas. He sits on the prestigious board of the University of Southern California's film school with the two directors, in addition to Katzenberg and seemingly everyone else who's run a movie studio in the past two decades.
They even share a common, yes, vision for the future of gaming, seeing it as a mass, not niche, market. Says Mattrick, "Our gaming space hasn't had great storytelling to date, and there's room for improvement, room for us to learn some of the things that people [like Spielberg and Lucas] practice in their art." Pincus has previously floated the idea that Zynga could create games designed to be played while watching TV. Mattrick talks about entertainment as a continuum that "started as film and there's a TV component and now interactivity, whether it's in the form of gaming or in film and TV becoming interactive." As Pincus says of his new CEO, "Our visions of the future of entertainment are very positively overlapping."
Many in the gaming business see Zynga's hiring of Mattrick as a commitment to become a true gaming company, as opposed to a social networking company that just happens to make games. Mattrick is expected to help build out Zynga's social platform, Zynga With Friends, in much the same way that he developed Xbox Live. "Over the course of 30 years, I've seen over a hundred platform transitions," he says, unfazed in his ability to help Zynga move away from Facebook to mobile and its own network.
One rap on Zynga is that it has always copied other people's games: The company's next hit that doesn't feel derivative of another game will be its first. "Mark understands social design, which is an element of game design, but he really doesn't know much at all about creating new game mechanics," says one former Zynga employee.
Mattrick, by contrast, has always been able to develop games that are truly distinctive. (The gaming studio Mattrick sold to EA was called Distinctive Software.) He is a product guy who sweats the details, things like whether the headlights on an Audi he favors are turned on in a Forza Motorsport trailer. Netflix CEO and Microsoft board director Reed Hastings told me that among Microsoft executives, "the unique thing about Don [was] that he's creative." As his former colleague Phil Spencer, head of Microsoft Studios, told me when Mattrick was still his boss, "If you want to see the man light up, walk him into a development studio."
But Pincus will be chief product officer, and Zynga's product teams, he says, "will be seeing more of me." So how, I ask Pincus, will he and Mattrick work together to develop games? "If you think about a movie or a TV show or media, it's more about trying to get to something that sings," he says. "It's not like a single decision point and a single decider." This leadership ambiguity may be exacerbated by Zynga's new reporting structure. Pincus will not report to Mattrick; he'll report to the board, which he controls. Pincus stresses that he listens to his board--a point that others back up--and that people like "Reid Hoffman and Jeffrey Katzenberg and John Doerr are not pushovers. . . . I really look to use my board as an ultimate sounding board and for guidance for the company."
And when pressed repeatedly, he finally concedes that Mattrick is in charge.
"We had an all-hands meeting [on July 2, the day after Mattrick was announced to be CEO], and I was really clear to everyone in the company that we have one CEO and he's making the final decisions on all the day-to-day, all the execution moves that we make. . . . It's not consensus."
Observers wonder whether Pincus will really be able to abide the arrangement. "If the organization is reporting up through Don to the board, then it will be very clear to the organization, and it will work," says one former Zynga employee. "But I think Mark will also become frustrated by that," this person says. "And it will get tested early."
Mattrick doesn't seem worried. "He sets a high bar," he says of Pincus, acknowledging his excitement. Mattrick has finally leveled up. Now Pincus just has to let him kill it.
Photo by Rainer Hosch; illustrations by Hey Studio