The DICE unit, purchased by EA in the middle of the last decade, will be a key cog in the creation of a new series of “Star Wars” videogames. Walt Disney Co. announced last week that it enlisted EA to make “Star Wars” games weeks after closing its LucasArts games division.

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Since announcing that organizational update on April 25, EA has sacked 10 percent of its workforce, CFO Blake Jorgensen confirmed. The company had about 9,000 employees at 2012’s end, so some 900 of them lost their jobs as a result of the cuts.

The headcount reduction, which EA hopes will push it further toward its goal of achieving a 20 percent operating margin, increased the company’s operating expenses for the quarter by about $15 million. According to EA, that was largely due to severance, and the company says that following this spike, its OpEx will begin going down.

“We’ve taken a hard look at the organization,” said EA Chairman Larry Probst. “We have really focused the product portfolio. We’ve made some adjustments in terms of headcount and operating expenses. My job is to make sure that we’re growing the top line and the bottom line and rationalizing headcount and cost in conjunction with revenue. I think we’ve done a really good job of that in nailing down our fiscal ’14 plan.”

If that’s the case, EA should be well positioned for growth in the year ahead, particularly now that it has secured a long-term licensing deal with Disney to make games based on the “Star Wars” franchise.

EA ended the quarter with earnings of 55 cents per share on revenue of $1.04 billion, coming in below analysts’ expectations of 58 cents per share but nailing the $1.04 billion consensus.

“As we enter a new fiscal year, EA is well-positioned for dynamic growth on next-generation consoles, PCs, and mobile platforms” EA executive chairman Larry Probst said in a canned statement. “With world-class games, a rapidly growing digital business, and top-notch creative talent, we are excited about EA’s strategy for FY 2014 and beyond.”

Despite the earnings miss, however, the Street reacted positively. Shares of EA were up about seven percent in after-hours trading at $19.70.

It could be the reminder that EA and Disney announced a multi-year agreement yesterday in which EA will develop Star Wars games across multiple platforms.

“Our agreement unlocks a whole new future of Star Wars games that will span consoles, PCs, tablets, mobile, and more,” EA President of Labels Frank Gibeau said in a statement.

Or perhaps it could be the strong performance in mobile markets — particularly with iOS devices, in which the company claims to be the top global publisher in 2013 thus far. The Simpsons: Tapped Out was the company’s strongest mobile performer, generating $50 million in revenue since the game’s launch last August.

Update: More subscriber details and information on titles published by EA.

Electronic Arts and The Walt Disney Corporation announced on Monday a new, multi-year licensing agreement, allowing EA to develop and globally publish games based on Star Wars, every nerd’s favorite franchise (Trekkies aside, that is).

“The magic of Star Wars is interwoven into the worlds, characters, planets and amazing battles. It is a universe that lends itself perfectly to gaming,” said EA Labels President Frank Gibeau in a blog post. “Our agreement unlocks a whole new future of Star Wars games that will span consoles, PCs, tablets, mobile and more.”

As you may remember, Disney acquired Lucasfilm last autumn for a whopping $4 billion, bringing into the fold all of the company’s properties — including LucasArts, the now-defunct gaming studio which Disney shut down a few months after acquiring Lucasfilm.

LucasArts was in the midst of developing a number of Star Wars titles when it was shuttered, including Star Wars 1313 — the Boba Fett-focused game currently in limbo — and Star Wars: First Assault. Disney said at the time it would instead be licensing the Star Wars properties out to other studios.

DICE and Visceral, two EA-operated studios, will begin to create new Star Wars games “spanning all interactive platforms,” while BioWare — the studio behind two of EA’s most popular Star Wars games — will also continue to develop games from the popular franchise.

Disney, the company said, will continue to hold certain rights for developing mobile, social and tablet-based Star Wars games.

“This agreement demonstrates our commitment to creating quality game experiences that drive the popularity of the Star Wars franchise for years to come,” said John Pleasants, co-President of Disney Interactive, in a statement.

Mr. Riccitiello sent a memo to EA chairman Larry Probst, in which he said EA ”will come in at the low end of, or slightly below, the financial guidance we issued in January, and we have fallen short of the internal operating plan we set one year ago.”

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Frisina founded and formerly headed up EA Partners, which co-publishes games from outside of Electronic Arts. Now, he’s launching an independent company that will do almost exactly the same thing. “Almost,” because all the indie games Frisina’s new company, Tilting Point, partners with and invests in will be mobile.

Tilting Point says it will put $40 million into phone and tablet games over the next three years, backed up by mentorship and lots and lots of data-driven marketing.

“We’ve seen plenty of great games with solid development budgets this year fail because of a lackluster monetization plan or nonexistent marketing,” Frisina said.

Joining him at Tilting Point are three other EA veterans: Partnership expert Dan Sherman, development director Steve Coallier and lawyer Jim Hsu, who also added Zynga to his resume before joining Frisina’s team.

Beyond founding and managing EAP for more than a decade, Frisina’s biggest coup was probably bringing EA into the picture on both Medal of Honor in 1999, and Battlefield 1942 in the early 2000s.

More recently, EA Partners’ hits have included Crysis and its sequels, the Rock Band series and Valve’s Orange Box (a.k.a. the three-pack of Team Fortress 2, Half-Life 2 and the first Portal game). The division also handled the retail publishing of Portal 2, but by that point, Valve had already established its online store, Steam, which currently rivals EA’s store, Origin.

Those are all big games that require at least decent console or PC hardware, spanning multiple platforms. There’s still an audience and a future for those sorts of titles, but Tilting Point looks smart to focus on just the simpler mobile devices that are reaching much broader gaming audiences.

That focus clearly distinguishes the new company from both EA Partners and other publishers of games not developed in-house.

However, sources at both Tilting Point and EA stressed that Frisina’s new venture is neither a rejection of his old team nor a nose-thumbing “look, EA, this is what you should be doing!” statement.

That’s partly because Frisina, while important to EA Partners’ growth in the 2000s, hasn’t run EAP since way back in early 2007 — before the iPhone launched, and years before the iPad, so before mobile and tablet gaming hit a mass audience. He left his full-time job at the company in March of 2010. He’s still on the board of EA International, and is an academic consultant to the company by way of a position at USC’s School of Cinematic Arts that EA underwrites.

Sherman, Coallier and Hsu also all left EA in 2009 and 2010.

“Everyone [on my team] left for different reasons,” Frisina said. “Personally, I have the utmost respect for EA senior management and staff, and remain very proud of my current relationship and to have been given such great opportunities over my 13 years.”

EA’s corporate communications SVP, Jeff Brown, praised Frisina’s skills and said Tilting Point will have a “good team” at the reins.

Here’s the main section of the official announcement, which Tilting Point will release later today:

Tilting Point Created To Champion Premier Independent Video
Game Developers
Fostering talent, funding development, fueling discovery

New York, NY — March 14, 2013 – A contingent of seasoned game industry veterans, including lifelong video game and tech entrepreneur Tom Frisina, pulled back the curtain today on Tilting Point Media, a company built to address the growing needs of independent developers in the rapidly growing but capricious mobile and tablet video game markets. Evolving beyond the traditional definition of a digital publisher, Tilting Point aligns itself with top independent development talent and offers the funding, support, and resources to give carefully selected games mainstream success. The company is investing $40 million in the next three years to fund the development and marketing of mobile and tablet games while executing groundbreaking marketing campaigns and providing unbiased, data-driven advice to game creators through a number of strategic partnerships.

“Our view is that independent developers own the future of games,” said Tom Frisina, Executive Chairman of Tilting Point. “However, a studio’s potential can be severely hindered without a partner they can trust to help navigate the challenges of discoverability and monetization. We will nurture the best teams, positioning them for independent success over the long term. We’re taking the expertise and resourcefulness gained from our combined backgrounds and applying them to a new publishing model, where development talent gains the tools to control their own destiny.”

Over the past year, Tilting Point has signed agreements with several of the world’s most successful game makers, including Signal Mobile, Housemarque, and 1337 Game Design & Senri, with more high profile deals in negotiation. The company will release its first titles in 2013 while continuing to grow its assemblage of elite development partners.

“We’d describe Tilting Point as our co-pilot,” said D.R. Albright III, President and Creative Director at Signal Mobile. “They are facilitating us reaching our goals without taking over our intellectual property. Signal is excited to be working with Tilting Point and I look forward to releasing our first game together in 2013.”

The Tilting Point team will be at the Game Developers Conference in San Francisco from March 25-29. Contact information is available on www.tiltingpoint.com, and regular updates will be available on www.facebook.com/tiltingpoint and on Twitter @tiltingpoint.

In recent years, game sales have declined dramatically, with software and hardware making up only half of industry spending, according to NPD Group. The other half now goes toward downloadable content and microtransactions — in other words, digital content for consoles, smartphones and Facebook.

Because of this seismic shift in gamer behavior, many industry veterans are banking on the release of the new PlayStation, and a new Xbox coming later this year from Microsoft, to provide a jolt in traditional game sales.

On Wednesday, Sony is hosting an event in New York, where it is expected to unveil the PlayStation 4, as it has been nicknamed. Sony’s machine is expected to come in time for the holidays, along with the Xbox, although Microsoft declines to comment on its plans.

The good news is, that in the past, new hardware has always led to more software sales; as consumers bought one, they bought more of the other. But after a lackluster launch of the Wii U by Nintendo this holiday season, some wonder if a living-room-driven gaming experience has as much firepower as it once did.

“I feel like consumers are happy, and I’m not sure if there will ever be the right time to release a console again,” said Jerry Holkins, co-founder of Penny Arcade, a company that produces provides commentary on the industry through Web comics. “I think the spend is elsewhere. I don’t think they are waiting for the next generation; they are happy with where they are playing today.”

Electronic Arts’ John Riccitiello is more optimistic about the prospects of the next-generation devices. But then, as one of the industry’s biggest publishers, he has to be. During the company’s last conference call, he said that the December quarter was disappointing, but “that often happens when the consumer carries the expectation of a console transition.”

In January, Nintendo slashed its sales outlook after holiday sales of the Wii U failed to hit expectations. The poor turnout does not provide a lot of support for the theory that consumers were just holding back spending for the release of the new hardware.

The Japanese game company was hoping to rekindle consumer excitement by launching the Wii U with a controller that had a six-inch touchscreen display and acted much like Apple’s iPad. It also enabled consumers to interact with their TVs, by allowing owners to comment on programming within a closed social network. But the console was mostly trying to extend the life of the traditional videogame business, which relies on selling packaged software at $60 apiece.

Again, Riccitiello is hopeful that Nintendo’s performance is not an indication of the other two launches.

“I wouldn’t say that we see much correlation between the results that Nintendo has shown with their console debut of the Wii U, and what we see coming,” he said. “We see a pretty sharp distinction and, unfortunately, I am unable to go any further than that.”

But there’s no way to discount what has happened in the games industry since the last generation of devices launched. Social and mobile platforms have led to the rise of the 99-cent game and the free-to-play business model. Gamers have grown to enjoy playing a game without having to pay a dime. Then, if they want to, they can invest as much as they want.

If Sony or Microsoft are to be successful, adopting new business models may be the key.

There are already some signs of Sony’s willingness to change. According to The Wall Street Journal, Sony will provide a new streaming game service that will allow users to play games delivered over the Internet. The service is designed to use current PlayStation 3 titles on the new console. While cloud gaming hasn’t really taken off on other platforms, the technology does enable other pricing models, like subscriptions.

Another development since the last generation of consoles hit store shelves is how much the definition of a gamer has changed. With the massive popularity of Rovio’s Angry Birds and Zynga’s FarmVille, gamers aren’t just “hard-core” players but also housewives and touchscreen-savvy children.

To be sure, Microsoft has been aggressive in reaching out to a broader audience. Last week, it said that 38 percent of Xbox users are women, and more than 51 percent of owners are people who have kids. Overall, it said non-gaming usage has soared by 57 percent year over year.

Despite interest in other platforms, many also believe that there’s still a time and a place for the highest-fidelity experience possible. The console, with its high computing power, is often the perfect delivery mechanism for a gunshot to the face, or a perfectly depicted battle scenes — a fact that Activision proves year after year with its title Call of Duty, which defies industry trends. This year, for instance, the title under the name of Black Ops 2 crossed $1 billion in sales in just 15 days.

Anil Dharni, an SVP of Gree, has focused on publishing hard-core titles like Crime City for tablets, but still believes that consoles “serve an audience, who wants a high-fidelity experience that mobile devices can’t deliver today.” He thinks the traditional gaming market will decline, “but it’s not going anywhere anytime soon.”

Penny Arcade’s Holkins says he will continue buying consoles even if that makes him look old. “I liked having a console,” he said. “I enjoyed that, and I’ll still do that.”

According to a filing in the U.S. District Court of Northern California, the entire case was dismissed with prejudice. Both companies issued identical statements on the subject: “EA and Zynga have resolved their respective claims and have reached a settlement of their litigation in the Northern District of California.”

If you don’t recall, EA filed a copyright infringement lawsuit against Zynga in August, charging that Zynga’s social game The Ville was an “unmistakable copy” of EA’s The Sims Social. The complaint was seeking injunctive relief and damages.

The following month, Zynga filed a pair of motions to rebut Electronic Arts’ claims, arguing that The Ville on Facebook is not similar to EA’s The Sims Social. And, in a third filing, it countersued, alleging that EA participated in unlawful actions, including anti-competitive business practices, when it came to recruiting employees.

All of the cases have now been dismissed. The terms of the settlement are confidential, so exactly how the two companies worked out their differences is not known.

But in some respects, the issues EA had surrounding The Ville should no longer be a concern.

In October, Zynga said it was “significantly reducing” its investment in The Ville as part of a restructuring plan that is designed to return the company to profitability. The Ville was just one of more than a dozen games being phased out.

Electronic Arts Vs. Zynga

As most know, the San Francisco gaming company has struggled to find the right balance as consumer behavior has shifted from playing social games on Facebook to playing games on their phones.

In the third quarter, 60 million people played Zynga’s games on a daily basis, up 11 percent from the year-ago period. But those gains were only possible due to mobile offsetting declines on Facebook. The worry of Wall Street investors over the situation is apparent in the price of its stock, now at $2.66, which remains 72 percent below its initial public offering price at the end of 2011.

But Zynga management believes it knows how to turn things around, including expanding beyond its classic Ville-style titles, like FarmVille, to more genres that appeal to a wider audience, including casino and more hardcore titles.

In a story earlier today, I wrote about the three executives that CEO Mark Pincus has appointed to help turn things around. One of them is Steve Chiang, the company’s new president of games.

Here are some highlights from an interview I recently did with Chiang:

Tell me a little bit about your background.

Chiang: I got into computers early, when I was six or seven, and I was really into videogames and playing games on my computer. And then I got into programming. First, I got into the industry when I graduated from school as a programmer, by creating games for Super Nintendo. That’s when making a game included one programmer and two artists, or two programmers and five artists, so they were really small teams, so you really had to know all aspects of game development.

And then, in 1994, myself and some guys I went to high school with, and John Schappert, started Tiburon. We started making Super Nintendo games, and then we started working on Madden when the contract came up after the other company didn’t ship the game on time. It was the best-selling game on PlayStation that year, which led to the acquisition by [Electronic Arts].

I stopped programming in 1998 or 1999. When I left EA, I was overseeing all sports development for Peter Moore, who was heading up the sports label, and I headed up development across Vancouver and Orlando.

What was the attraction to Zynga?

Chiang: In 2009, when I was thinking of joining Zynga, we had FIFA Ultimate Team, which was a card-based microtransaction mode. It was a $10 mode you paid for, and then you had $1.50 card packs. We quickly saw the microtransaction part of it surpass the $10 for the mode. So you reduce the $10 to free to reduce the friction.

Microtransactions and free-to-play seemed like the future, for sure. The second aspect was time. Having an hour to sit down and play a game is not easy to come by when you have a family, so, as a person who loves games, the idea of playing games for five to 10 minutes with friends was really appealing. I saw myself reconnecting with people from high school, and I saw my parents playing with my kids. The only game my ex-wife will play is Words With Friends, except for SingStar, a karaoke game on PlayStation.

When you are creating a place where women, children and older parents are all playing, it’s an incredible feeling and experience. It’s like the first time I saw “Star Wars” in the movie theatre — that’s what we are creating for people. That’s what we are trying to create on a day-in and day-out basis.

I’ve spoken to people before about the initial draw of Zynga being that so many people end up playing your game, unlike a console title that has a limited audience.

Chiang: Absolutely, in entertainment, you want to make hits. When you are working on sports games year after year, it’s not super appealing. But the idea you get to work on a game played by millions of people? That’s great.

I mean, I always tell people, you spend the same amount of time on a game that gets canceled as one that is seen by millions of people.

Do you believe the definition of a social game is changing?

I do. It’s a moniker, like casual gaming. We label stuff, but essentially the business model is free-to-play, and gaming has always been social. I look at us as doing free-to-play games on multiplatform.

For a while, social equaled Facebook.

Yeah, that’s how I interpreted it, as well. But when you look at Words With Friends, that’s what a social game looks like, where you are interacting with a friend on a daily basis.

Zynga and Facebook just changed their contract language, which is less restrictive and will free you up to do more things, right?

Chiang: I think Facebook is a really valuable partner. We struck a new agreement, which enhances our partnership in some ways, and allows you to invest more in our platform and mobile.

Everyone talks about gaming as a hits-driven business. Is it possible to sustain that over the long term?

Chiang: I think we’ve seen companies like EA and Activision be able to sustain [that]. There’s aways peaks and valleys.

With social, it’s more about gaming as a service — it’s a TV model, if you will. We continue to put out new content every week, and on Facebook every single day. That keeps our players engaged. There’s games like Poker that have been around forever. There are certainly franchises. It’s not that different from a Call of Duty or a Madden Football, which has been going on for 15 years now. We have some of the same characteristics in Poker and Words With Friends.

Tell me about the story arc for Zynga’s Villes. How come some are not as successful as the ones in the past?

What we’ve seen is a few different things. We are seeing consumer tastes changing, and there’s a player movement toward mobile gaming. If you look at just a single platform, you’ll see a peak or a leveling-off of gaming on Facebook. But we are seeing growth on mobile. As we go multiplatform, we may have peaks and valleys on a single platform, but we’ll see overall growth.

That seems to be a platform issue, but is there something about Villes in particular that is no longer popular?

Chiang: When I look at FarmVille 2, it’s reengaging a lot of players, and is off to a great start. There’s an aspect of something new, and so players are saying, “Let’s try that.”

A game like Pokemon peaked at a $1 billion business, but over time, it’s still a big business and it has sustained. Traditionally, you’ll see a massive pop and then it will sustain. It’s a great business, and when we put out great content like FarmVille 2, our players respond and they engage.

Let’s go back to the cross-platform approach. Zynga is going after both Facebook and mobile, and has restructured its leadership team around that. How has your job changed?

Chiang: I took over all of the games business, so I have every game on mobile and Web, and just recently I reorganized around our players and genres.

We have some great leaders, and some of the most experienced in social gaming in the western world. We are going to run our “Invest and Express,” which are our Ville games. We have a new group in PVP (player versus player), which is focused on men 18 to 34.

Then we have our casino group, which is poker and male-skewing, and we have slots and bingo, which is focused on women. And then we have our mobile casual group, which is focused around some of our big franchises, like Draw Something and Words With Friends.

Some critics say that Zynga’s games are not fun. What do you say to that?

Chiang: I think when you look at a game like FarmVille 2 or Elite Slots, we are driving new innovation, and we are continuing to push innovation. At the same time, if we change too much, players complain. We saw it in sports games, and you see it in social gaming, you want a consistent feel and familiarity. You don’t want to redo everything.

Zynga is such a data-driven company, I’m curious what metrics do you look at every day, and which ones are most important?

Chiang: We look at the net promoter score, where we ask players to rate the game from one to 10. A nine to 10 is a promoter, and below a six is a detractor. We certainly look at overall how many people are playing and what our retention is, especially after launch, to check out retention after seven days to see which way it’s headed.

Why didn’t The Ville do well? Zynga announced it was cutting back on it as soon as it went live.

Chiang: I think with The Ville, the team made a great effort. But we did not deliver.

Our players didn’t respond to it as we would have expected. We hit a high DAU (daily active user), but they did not retain as well as some of our other games. We looked at all of that, and applied that to our future games. When you are going for hits, we’ll also have some failures.

Do you have a mantra, or a way to rally the troops right now that makes everyone believe you can create another hit? Something to inspire them? How do you manage the turnaround process?

For us, it’s about focus and getting back to basics. Our team across the board has delivered hits. We’ve had a number of great game makers who have been tied up with games, and now they are focused on new projects. We are reducing the number of games we are making, and focusing on a fewer with the highest potential in Invest and Express, player versus player and casino.

With many departures over the past few months, does Zynga still have the talent to make good games?

Chiang: Absolutely. We had a lot of people joining before the IPO, and some of those folks have opted out, but the bench is still really deep. We are also still attracting a lot of folks. Social is not for everyone, so some people came here to try something, but the future is really bright. We have a strong network of players on Facebook and mobile, and a number of great games in the pipeline that should be — and we’ll see how they do — but are going to be really fun and social.

Is there a message that you’d like to get out to people on Zynga’s game creation? Do you think there is an impression people have that you’d like to correct?

Chiang: I never thought about that. I firmly believe that we have a huge bright future and have the best position for talent, and in terms of our network and in terms of mobile and Facebook players to drive the biggest and best entertainment in the world. We are well-positioned that way, and hopefully you’ll see things in the future that will surprise and delight a lot of people.

Was it only just over a year ago that Zynga was the hottest game company on the planet?

Today — after seemingly endless executive departures (among the missing in action are the COO, CMO, CFO and the chief creative officer), a falloff in the popularity of its many games on the important Facebook platform, and a perpetually moribund stock price from a $9 billion valuation at its IPO in December of 2011 to $2 billion today — such a moment of glory seems but a very distant memory.

Now, in the wake of the crash, Zynga founder and CEO Mark Pincus is betting his dwindling chips on a trio of lieutenants to make things right: Steve Chiang, who is now president of games; David Ko, Zynga’s former chief mobile officer, who has been promoted to COO; and Barry Cottle, who was named chief revenue officer.

Establishing the three executives’ credibility and skill sets will be instrumental in regaining Wall Street’s confidence in the San Francisco gaming company, and perhaps reestablishing it as a growing and thriving concern.

So, can they do it? To find out, AllThingsD interviewed all three, as well as more than a dozen current and former co-workers of the managers, to get a handle on who they are and what roles they are playing in the company’s turnaround process.

Steve Chiang, president of games:

Chiang, 41, who is now leading all game development, has one of the toughest jobs at the company.

Zynga operates a hits-driven business, and must continue to make compelling games to draw in large audiences, something it has of late struggled to do.

One problem is that it has persisted in churning out its once powerful Ville-style games — FarmVille, CityVille, et al — while its competitors moved on to other genres, such as casino games and action-packed games aimed at males.

Those two new categories, as well as its original Ville genre, which it calls “Invest and Express,” will be at the top of the company’s priority list, in addition to developing across social and mobile.

In this, Chiang’s efforts are critical. But what has made this executive’s path at Zynga unusual was his rise, then fall —  and then rise again — within the corporate ranks.

Ahead of the IPO, Zynga was relentless in its efforts to build out a strong bench of C-level executives. One impressive hire was John Schappert, who came on board as chief operating officer to lead the company’s game strategy.

Schappert hailed from Electronic Arts, where he knew Chiang better than anyone else. Together, Chiang and Schappert co-founded Tiburon Entertainment, which was acquired by Electronic Arts in 1998, and continues to be responsible for hit games such as Madden NFL.

Chiang arrived at Zynga first, in March 2010, as EVP of Games. But when Schappert joined Zynga in April 2011, Chiang’s responsibilities naturally decreased as less work was left to go around.

Zynga’s former chief creative officer, Mike Verdu, who worked closely with Chiang, recalled the transition. “There was certainly a period, especially as other executives came in, that the weight of influence shifted away from Steve,” he said. “All of our roles changed a bit when John was there. He had a very different way of doing things, and when he left, there was a realignment of the organization.”

Schappert stepped down in August of 2012, one of the company’s highest-profile departures.

Because Schappert was the front man in the company’s IPO, the shy Chiang is not as well-known, despite having worked there for three years. His resume at the company includes releasing CityVille, which became the biggest game at the time. He also grew the company into a worldwide organization, adding studios across the U.S. and internationally. He pushed the company into new categories, such as arcade-style gaming and hidden objects. Recent credits include the launch of FarmVille 2, the company’s most recent hit.

Chiang spoke briefly and without a lot of actual detail about his time working with Schappert at Zynga. “He’s a personal friend of mine, and he brought a lot to the company, and we made some internal changes and he decided to move on,” he said.

Now, with the reins in Chiang’s hands, he says he will focus on developing games that appeal to a wide audience. To free up talent to work on new projects, the company is sunsetting 13 of its games, including PetVille, Mafia Wars 2 and Indiana Jones Adventure World.

“We’ve had a number of great game makers who have been tied up and now they are focused on new projects,” Chiang said. “We are reducing the number of games we are making, and focusing on fewer with the highest potential in Invest and Express, player versus player, and casino.”

Whether Chiang can pull it off remains to be seen. But one of Chiang’s direct reports — who declined to be named — said: “We aren’t all driven by money or fame. A lot of people are driven by pride. Steve internalizes that. He’s a champion for the game makers, but ultimately, for the players themselves.”

For more on Chiang, click here for an exclusive Q&A interview.

David Ko, chief operations officer:

There’s a long list of reasons why David Ko, 41, earned the promotion to chief operations officer. Over the past two years as chief mobile officer, the former Yahoo exec has overseen the release of 30 mobile games and closed two of Zynga’s largest acquisitions.

The first acquisition was Newtoy, which is known for the very popular Words With Friends mobile game. The second acquisition, of OMGPOP, was less successful. Immediately after Zynga purchased the company for $180 million in cash, its hit product, Draw Something, fell dramatically in the rankings, although it still accounts for the bulk of the company’s mobile users today.

That said, if mobile is critically important to the company’s future, then having Ko as the second in command was a clear message of its importance.

Ko is now second in command, with purview over 3,000 employees, as well as being the public face for the media and Wall Street. On Tuesday, in fact, he will make his first appearance on the company’s fourth-quarter earnings call.

He has a lot to learn, which is why Ko asked everyone to stand up and introduce themselves at a recent meeting of 130 managers. “It was interesting to go around the room and hear from people who had been there for four to five years, or for two months,” he said. “It was a great diversity of talent, and they came from all different backgrounds.”

Ko’s more inclusive management style is likely to be welcomed by employees, especially since Pincus is known for valuing data over people. “Mark [Pincus] misses that stuff at times,” one former employee said. “It’s a mercenary culture; he looked at people as fungible.”

But Ko’s fast ascent to COO is not sudden as it may look, say insiders.

“In spite of the fact that he looks like he is 12, he’s the adult in the room,” said a former co-worker of Ko’s, who knew him from his days at Yahoo. “That’s the irony.”

Prior to Zynga, Ko worked at Yahoo for a decade starting in 2000. He was based initially in Asia, where he ran the Silicon Valley Internet giant’s mobile business. In 2009, Ko then returned Yahoo’s headquarters as the SVP of mobile, but was quickly promoted amid much executive turmoil to be the North American audience head.

Ko said his non-gaming background is a plus, because he has extensive experience monetizing content.

“We have lots of people with all kinds of backgrounds in social or gaming, but what the company needs is about making sure the content is available to everyone and can be monetized in different ways, whether it’s advertising or user pay.” he said. “I have a lot of experience with this. Advertising is becoming a bigger piece of monetizing, and that’s one of my core competencies.”

In his first three months as COO, Ko said, he has made three priorities at the company: To create a sense of discipline, to make the company’s strategies clear and to have fun doing it.

The reality of it all, Ko said, is that he has spent most of his time on the first two: “I have to remind myself at times, we are still a games company. We do have to do some fun things.”

One time the whole company has fun is for an hour every Wednesday when Zynga staffers drop everything they are doing to play a game under development. It was a practice that the company used to do in the early days, and Pincus asked Ko to bring back. After the employees play, they then provide feedback on what they liked and didn’t like about the game.

“Ultimately, we are a games company, and we have to make sure that people find the games fun that we are going to launch,” Ko said.

Barry Cottle, chief revenue officer:

Barry Cottle, 51, is the newest to Zynga of the three top execs, having joined the company in January 2012 as EVP of corporate and business development.

Previously, he was head of EA Interactive, where he oversaw a group the size of Zynga, including the company’s social and mobile gaming divisions and its PopCap unit. As such, his departure was a particularly big blow to EA.

As chief revenue officer at Zynga, Cottle is now responsible for securing partnerships and advertising, plus he is responsible for sales operations and the company’s real-money gaming initiatives.

And also the care and maintenance of Zynga’s most significant relationship — with Facebook.

In November, Zynga and Facebook announced that the two companies had renegotiated their contract, which will make their partnership less complicated. It also provided some benefits to Zynga, such as the ability to launch games first for mobile. Cottle worked directly with Facebook’s Dan Rose on the new terms, unlike the original contract, which was negotiated directly between the two Marks: Mark Zuckerberg and Mark Pincus.

He also moved quickly on the company’s online gambling efforts by setting up a partnership with Bwin in the U.K., which will go live early this year, and also kicked off the years-long process of getting a real-money gaming license in the U.S., starting with Nevada.

The deals are a demonstration of just how eager Cottle is to drum up new revenue wherever he can.

In Cottle’s previous jobs, he had to be equally scrappy. He joined EA in 2007 to manage the company’s roughly $700 million acquisition of Jamdat, a mobile games company. At the time, mobile gaming consisted of developers making Java and Brew games.

But when the iPhone came out, Cottle took on the job of convincing his superiors that smartphones were the future.

One of his former reports at EA recalled that as soon as Cottle made the decision to develop five games for the iPhone’s App Store, “We were in the war room the next day and were moving resources to the iPhone.”

Prior to EA, Cottle co-founded a company called Mobile Digital Media. (The company, which was later renamed Quickoffice, was acquired by Google last year.) The entrepreneurial effort was a spinoff from Cottle’s days at Palm, where he was part of the executive team that took the company public. Earlier in his career, he was a Disney executive for 10 years, working on the company’s TV and Internet services.

In many ways, Cottle’s job at Zynga is similar to the one at EA. But instead of managing the move from feature phone to smartphone, this time he’s transitioning the company from social gaming to mobile gaming.

As part of that, one of Cottle’s biggest challenges will be finding a way for Zynga’s games to be discovered on mobile.

With Facebook, Zynga leveraged virality — friends invited friends to play, or discovered games through their news feeds. But mobile does not have the same dynamics, making distribution much more challenging. Last year, Cottle inked a deal directly with T-Mobile USA, which preloads some of Zynga’s games on to smartphones, and which is actually a throwback to when games were best distributed through the carriers.

Recognizing the pace at which the business is moving, Cottle said, “You have to be able to move fast and adapt and ensure that you bring your consumers with you. They’ll move from platform to platform; we just need to bring our franchises along with them.”

To accomplish this, Cottle has one key strength in his corner: A reputation for working as hard as it takes.

Zynga’s general counsel, Reggie Davis, who has known Cottle since they both worked at Hallmark Cards in Kansas City 25 years ago, said: “He’s Midwest like me. We got taught to show up early and to clean up afterwards — and if you do, you might get asked back. That’s totally Barry.”

“The quarter was tougher than we thought,” said EA’s CFO Blake Jorgensen. “There was a big slowdown in the console business industrywide.”

In addition to a general industry slump, EA also said its Medal of Honor game performed poorly in the third quarter. “When we saw the weakness in the title, we wound back expenses in the quarter,” said Jorgensen, who cut marketing expenses and redeployed headcount to other departments as needed.

The company said console gaming revenue fell 20 percent in 2012 compared to the prior year, but that the drop has been partially offset by its digital platforms. Smartphones, tablets and additional content for existing console titles continue to perform well, unlike the console business, which is at the tail end of its lifecycle.

For the quarter, the company’s non-GAAP net revenue totaled $1.18 billion, which was below its guidance of $1.25 billion to $1.35 billion. Analysts were expecting revenue of $1.29 billion. The company’s non-GAAP profit totaled 57 cents a share to beat the midpoint of its guidance of 50 cents to 60 cents, and to beat analyst expectations of 56 cents.

Overall, the results did not surprise investors. The company’s stock is down 28 cents, or 1.9 percent, in after-hours trading, to $14.80 a share.

Some examples of digital titles that performed well during the third quarter include Battlefield 3 subscriptions, which have generated more than $108 million in sales in the first three quarters of the company’s fiscal year. FIFA 13 digital net revenue topped $100 million in the third quarter alone. On mobile, the company’s free-to-play game, The Simpsons: Tapped Out, generated $23 million on iOS.

Overall smartphone and tablet sales generated $79 million during the quarter, increasing 36 percent year over year.

In the fourth quarter, EA will be closely watching the performance of Dead Space 3, the Sci-Fi title launching next week. So far, based on pre-sales, it is outperforming last year’s release, but the soft market worries Jorgensen.

“In Q4, our caution is continuing. In the industry, no major title has shipped yet, so right now, we are staring into the unknown,” he said.

Sterne Agee analyst Arvind Bhatia downgraded the company’s shares from “buy” to “neutral,” calling the Street’s estimates “overly optimistic.”

Bhatia is concerned about the company’s performance when it came to its big console game titles of the year. But Electronic Arts is increasingly offsetting its declines in the traditional packaged goods market through the sale of digital content.

But will digital will be able to generate enough revenue this time to make up for its poor-performing console games?

In a note to investors, Bhatia said that he believes EA should have lowered full-year guidance “following disappointing early performance of Medal of Honor Warfighter and the cancellation of NBA Live in October of last year.”

This morning, EA’s shares were down 3.6 percent, or 52 cents a share, to trade at $13.93. Yesterday, after the note went out, shares fell 2.9 percent. The videogame publisher is still trading way below its 52-week high of $20.64, but is still above its low of $10.77 a share.

Electronic Arts’ guidance for third-quarter earnings per share was 50 cents to 60 cents, which at the time, was well below consensus estimates of 71 cents (excluding some items). For non-GAAP revenue, it guided $1.25 billion to $1.35 billion, which was lower than the consensus estimate of $1.38 billion. For the full year, Bhatia is now projecting revenue of $3.87 billion, which is 5 percent below consensus and 6 percent below the midpoint of management’s guidance range of $4.05 billion to $4.25 billion.

Bhatia figures that the company will have a tough time matching its 2012 performance, which saw strong sales from the first-person shooter Battlefield 3.

He estimates that Battlefield 3 sold 13 million units; in comparison, Medal of Honor Warfighter has shipped roughly three million units, creating a 10 million unit gap, which pencils out to $500 million. In addition, EA’s title slate in 2013 was smaller, with only 14 titles, compared to 2012, when it shipped 22 titles. By his estimate, that creates another $200 million hole.

However, EA continues to talk about how digital revenue is more than making up for the drop it is seeing from packaged-good sales.

In the second quarter, it reported that digital revenue was 40 percent higher year over year.

For instance, the FIFA soccer game generated more than $115 million in digital revenue in the first half of 2013, and Battlefield 3’s premium service has sold more than two million subscriptions to date (all of that revenue will be recorded in the fourth quarter). Additionally, the company’s Simpsons game on iOS, called Tapped Out, has been the top-grossing game for the past four weeks.

While digital revenue is up, the company is not as bullish on Facebook as it once was, and is scaling back its investments in the platform. In addition to developing fewer games for Facebook this year, EA also started shutting down underperformers such as World Series Superstars, EA Sports PGA Tour Golf Challenge, Monopoly Millionaires and Age of Immortals.

Similarly, social games leader Zynga recently said it would shutter 13 titles.

EA’s CFO Blake Jorgensen told AllThingsD last quarter that the company believes social will be key for games going forward, but not necessarily as an individual platform. “I would say that, overall, digital is growing the fastest, and within digital, it’s the mobile business that’s growing the fastest,” he said. “Clearly, mobile is up dramatically, and it’s no surprise — it’s driven by smartphones, tablets.”

The social games maker, which started losing ground earlier last year, had previously earmarked 13 undisclosed games for closure. Last week, TechCrunch identified 11 games which were either already shut down or close to it.

Some of the titles include PetVille, Mafia Wars 2, ForestVille, Vampire Wars and Indiana Jones Adventure World. A Zynga spokeswoman declined to comment, but when you try to visit the games on Facebook, there’s a message redirecting players to check out some of Zynga’s other games, like CastleVille, ChefVille, FarmVille 2, Mafia Wars and YoVille.

There’s a reason why these games eventually must be put to sleep.

The mechanics simply don’t work anymore if a lot of people aren’t playing them — after all, they are social games. If friends aren’t around to tend to your crops or visit your pet when you are away for too long, the games simply break down.

Having a large enough base of players to continue momentum is a problem that extends to other game publishers, too.

For instance, Electronic Arts has a Web page where it lists a running tally of games and services it has either shut down or plans to close. Some Facebook games that have already been cut include World Series Superstars, as of Dec. 31; EA Sports PGA Tour Golf Challenge, on Oct. 25; and others, like Monopoly Millionaires and Age of Immortals.

But as more games become services and are played against other people, instead of computers, other services are being shut down on game consoles, mobile phones and the PC. In January, EA said, it plans to shut down a myriad of services, like FIFA Soccer 11 Ultimate Team for PlayStation 3 and Xbox, and Madden NFL 11 for all three major consoles.

On Zynga’s chopping block, the most popular game is PetVille, which continues to attract a million users every month and 60,000 users daily.

The others are significantly less popular, such as Mafia Wars 2, which has as few as 200,000 monthly and 10,000 daily visitors, according to App Data. Compared to its top-performing titles, like FarmVille 2, which gets 43.5 million monthly and 8.1 million daily users, that’s clearly not very many well-loved pets.

At least two more games are to be discontinued, and that likely doesn’t include other titles that are flagged as underperformers. For instance, Zynga also said that it was no longer investing in The Ville, which performed poorly shortly after the game’s launch in June.

As part of the cost-cutting measures, the San Francisco company also reduced headcount by 5 percent, including some of the developers in Austin who were working on The Ville.

The company’s stock did not respond favorably to the plan, and continues to trade at $2.36 a share, down from a high of nearly $16 over the past year.

Perhaps it’s because investors don’t just want to see how it can cut costs, but how it can generate new streams of revenue. In other words, can Zynga can innovate in new areas that span beyond the ’Ville genre and Facebook? A new hit is what the company has been sorely lacking for the better part of 2012.

By freeing up resources, it at least has a chance.

About halfway through 2012, Zynga started prioritizing new game categories, like mid-core gaming and the casino genre. For instance, in mid-December, it launched Elite Slots on Facebook.

Electronic Arts is also clearly deciding where best to spend its resources, and Facebook is not a favorite. As part of its earnings call in October, it disclosed that the number of people actively playing its games on Facebook dropped by more than half in the past year. Therefore, it was reducing the number of Facebook games it was building this year.

According to Flurry, which gives developers tools to track consumer behavior, the most prolific business model is the free-to-play scenario, where consumers download the game for free and then pay for virtual goods or currency inside the application.

It says the most successful companies that understand this include Electronics Arts, Zynga, Mobage and Supercell.

In the report, Flurry’s Senior Director of Business Development Dan Laughlin examines consumer behavior, retention and demographics for the top nine most popular gaming genres. For this analysis, Flurry looked at more than 300 million consumers using iOS and Android games over a 90-day period. It only studied free titles, and then lumped them into four main categories based on their earning characteristics.

“The free-to-play business model (a.k.a. freemium), where consumers download and play the ‘core loop’ of a game for free, but then pay for virtual goods and currency through micro-transactions, is the most prolific business model in the new era of digital distribution,” he concludes.

For developers, the more important thing to know is what kinds of games are better at retaining customers and monetizing over the long-term. Here are the four profiles that Flurry says exist in gaming:

1. These games are used frequently for a long time, including slots, turn-based games that are passed between two people and simulation games. From a revenue perspective, the most successful companies maximize revenue through in-app purchases and by displaying ads to those who are not willing to pay.
2. Strategy games are the only genre that are played intensely for a short period of time. Game life cycles are short, and Flurry says the game’s live services must be executed flawlessly. Companies that monetize well encourage players to spend money on continuing their progress through the game.
3. The third profile is defined by infrequent game play for a short period of time, meaning that developers have fewer opportunities every week to monetize the user. The kind of gaming that falls into this bucket is defined as the “Card-Battle genre,” which is mostly popular in Asia, and has now started showing up in the U.S.
4. The final category are games that are easy to pick up and play, and may be enjoyed for years, such as solitaire. However, according to Flurry, the evergreen titles “may lack the depth required to generate sizable in-app purchases.” Instead, it’s better to focus on advertising impressions. The games can also be good for keeping a strong core audience that can be used to promote more apps to.

Last week, Facebook let its longtime dominant gaming partner Zynga out of a long-term contract that will allow the game developer more freedom to create games for other platforms. In turn, it levels the playing field for other developers, and should go a long way toward eliminating the fears of anyone on the platform getting special treatment.

That wooing has apparently included a dinner that Mark Zuckerberg recently hosted for the top brass in social gaming. Also present was Facebook games boss Sean Ryan.

The gathering included some of the top five to 10 social game companies on the platform, such as King.com, Kixeye, Disney’s Playdom, Electronic Arts and Kabam, and was held at the Fuki Sushi restaurant at Facebook’s new Silicon Valley headquarters. Facebook’s largest partner, Zynga, was not present, which is not particularly surprising for a partner it meets with essentially every week. Bloomberg also reported some details about the dinner last week.

A wide range of subjects was on the menu, sources said, with a lot of proposals and ideas floated. Developers did much of the talking, attendees said, with Zuckerberg and Ryan listening but making no promises.

One of the highlights was a discussion about new ways of monetizing games, including different revenue shares. Currently, Facebook charges 30 percent for virtual goods sold inside of games, just like Apple and Google. One idea was to have a sliding scale, so that developers just getting started on the platform would pay a lower rate, while the Zyngas of the world would continue to pay full price.

In other words, game developers would be taxed based on volume versus a flat fee, no matter how popular the game was. Likewise, the game execs argued that the rate structure would provide additional incentive to Facebook to market up-and-coming games.

A Facebook spokesperson was not immediately available for comment, but sources close to the company said that Facebook has no immediate plans to change the revenue share agreement for payments.

But the idea is not so far-fetched, given that most of Facebook’s payment revenue today is coming from a small percentage of large players. Specifically, Zynga contributed seven percent of the company’s Q3 payments revenue, down from 10 percent in Q2. Following that earnings report, Zuckerberg acknowledged: “Gaming on Facebook isn’t doing as well as I’d like.”

One thing Facebook could potentially do is build its own social games, which is now allowed, according to the contract it just signed with Zynga.

However, that idea was immediately shot down by a Facebook spokesperson: “We’re not in the business of building games, and we have no plans to do so. We’re focused on being the platform where games and apps are built.”

If Facebook is truly worried that a lot of its developers are ditching the social network for greener fields on Apple’s iOS or Google Play — and a lot of them are — then the dinner meeting was likely just the beginning.

Today, AllThingsD has learned of another appointment: Zynga has promoted Tim LeTourneau to the position of Chief Creative Officer, replacing Mike Verdu, who left the company in August to start his own game company.

Previously, LeTourneau was Zynga’s VP of games in charge of FarmVille 2, the company’s most successful game launch over the past few months. As part of his new role, he’ll be stepping away from the day-to-day job operations of FarmVille 2 to spend more time on game design across the board. LeTourneau will report to Steve Chiang, president of games, and Maureen Fan will become FarmVille 2’s new general manager.

Zynga confirmed the two appointments took place earlier this month at a quarterly all-hands meeting.

The company is essentially playing a game of musical chairs, plugging each hole with talent from another part of the company. At the same all-hands meeting, for instance, 680 people were recognized for taking on bigger roles within the roughly 3,000-employee organization. Additionally, David Ko and Barry Cottle were recently promoted to chief operations officer and chief revenue officer, respectively. They are filling vacancies created when other managers stepped down over the summer, including John Schappert and Jeff Karp.

LeTourneau joined Zynga almost two years ago after working at Electronic Arts since 1990. During his two decades at EA, he spent most of his time working on the longstanding and popular Sims franchise.

That would be Activision Blizzard, which is expected to blow away expectations for the third quarter when its results come out later this afternoon.

That also happens to be Robert Downey Jr.’s line in Activision’s new commercial for Call of Duty: Black Ops II, which will likely play a large role in contributing to the company’s bottom line.

Activision is forecasting to report a third-quarter profit of seven cents a share on revenue of $690 million. Analysts are even more bullish, projecting that the company will report a profit of eight cents a share on revenue of $708 million, representing a 13 percent increase compared to the same quarter a year earlier.

Wedbush analyst Michael Pachter says the company is also likely to raise full-year expectations — the second time this year. Pachter says the performance will be driven by strong subscriptions of Blizzard’s World of Warcraft: Mists of Pandaria, and healthy sales of Call of Duty, which he calls “the King of first-person shooters.” Activision is also expected to talk about strong digital sales that it generates through downloadable content, while it has also largely missed the downturn in social games by not exposing itself to the Facebook platform.

Arvind Bhatia, an analyst at Sterne Agee, also expects the company to beat third-quarter expectations and to affirm its full-year guidance. In a note to investors, he wrote: “We believe Activision is a defensive stock play within the interactive entertainment industry as at least half of its profits (i.e., Blizzard) are PC-based and not dependent on the ongoing console transition. That said, Activision’s console presence is very strong with titles such as Call of Duty and Skylanders.”

Bhatia noted that GameStop has said that Call of Duty: Black Ops II is shaping up to be “the biggest Call of Duty game ever.” That’s impressive, given that its last release, Modern Warfare 3, surpassed $1 billion in sales faster than the blockbuster movie “Avatar.” The new game, which is currently being presold for $60, will hit store shelves in six days.

The only reason to hesitate in naming the winner of the first-person shooter battle is that, after a five-year hiatus, Microsoft is releasing Halo 4, the latest installment in the Xbox blockbuster. Over its life, the franchise has generated $3 billion in revenue, and Microsoft is pulling out all the stops to ensure a big launch. The game went on sale yesterday for $60.

In the second quarter, the games company said, digital revenue increased 40 percent year over year, but social gaming had slowed significantly. It clocked only 42 million monthly active users, down from 101 million in the same period a year earlier.

“It’s slow versus the hype, but it’s not dead,” said EA’s John Riccitiello during the company’s conference call. Accordingly, Riccitiello said, EA has reduced its social gaming slate for the year, but maintained that it’s still an important part of the mix. “It continues to be very useful and positive for us,” he said.

EA’s comments come at a time when social gaming is clearly in a lull. Zynga, the largest social gaming company, is struggling to produce a new hit. Facebook has also recently acknowledged the slowdown, saying that payment revenue is declining as fewer people spend money on virtual goods inside of social games. But Riccitiello says that no one should have ever expected the platform to continue such a rapid growth — logically, it was going to plateau.

The company’s next social game is Madden NFL 13 Social, set to launch soon across both Facebook and iOS. In the game, players take turns in an offense-only shootout. The Facebook version of the game offers a 2-D game simulation experience, while the mobile version is 3-D and offers live game play. The two games are fully synced so players can play the Facebook version at their desk and continue on the go from the phone.

EA’s approach to social has been to leverage the franchises that have been very popular on other platforms and adding the ability to play with friends — on Facebook or on other platforms. In the company’s earnings release, it said Madden NFL 13 for the console was one of the top-selling titles in September, so extending the brand to mobile and social makes a lot of sense, especially since players are already tapping into the game’s digital experiences. Madden NFL 13 on the console logged record fan engagement, with a nearly 30 percent year-over-year increase in online game sessions.

In the second quarter, the company said digital revenue totaled $324 million, up from $234 million in the year-ago period. The increase was fueled by downloadable content for consoles and mobile games, but probably not Facebook games.

EA doesn’t break out revenue from Facebook, but you can guess they didn’t do so well given that it reported 42 million monthly active users during the period, down from 101 million in the second quarter last year. Meanwhile, it says mobile revenue has increased 60 percent since the same period last year; full-game downloads were up more than 40 percent.

Overall, the company reported non-GAAP revenue of $1.08 billion during the quarter, which was in line with its guidance of up to $1.05 billion. Non-GAAP diluted earnings per share of 15 cents a share was above its guidance of up to 12 cents a share.

The company attributed the higher than expected revenue was primarily due to digital growth. Specifically, it said record numbers of players are engaging in online features and content downloads for its Battlefield and FIFA soccer games. FIFA generated more than $115 million in the first half of 2013 in digital revenue; and Battlefield 3’s premium service has sold more than two million subscriptions to date. Additionally, the company’s Simpsons game called Tapped Out on iOS has been the top grossing game for the past four weeks.

EA’s CFO Blake Jorgensen said the company believes social will be key for games going forward, but not necessarily as an individual platform. “I would say that overall, digital is growing the fastest, and within digital, it’s the mobile business that’s growing the fastest,” he said. “Clearly, mobile is up dramatically, and it’s no surprise — it’s driven by smartphones, tablets.”

The digital revenue more than offset the drop EA is seeing from packaged good sales. However, its guidance for the current quarter, which includes the holidays, is missing analyst expectations. It expects earnings per share of 50 cents to 60 cents, well below consensus estimates of 71 cents (excluding some items). For non-GAAP revenue, it guided $1.25 billion to $1.35 billion, which was lower than the consensus estimate of $1.38 billion.

Game maker Electronic Arts says that social gaming is evolving, not dying.

Speaking at a conference Friday, CEO John Riccitiello said that the boom of social gaming was overhyped, but its decline is being overplayed, as well. Companies such as Zynga weren’t as brilliant as they were made out to be a few months ago, but things aren’t as bad as current headlines would have one believe.

“The companies that are now suffering will have another day,” Riccitiello said.

There are some lessons that all game makers can take away from the current challenges of social gaming. First and foremost, Riccitiello said, “consumers won’t pay for crap.”

Great gaming, he said, starts with truly good entertainment, not viral marketing involving spamming your friends to get a shovel.

Riccitiello said that there are some truly great free-to-play social games out there, including some from rivals. He pointed to a competitor’s game — Dragonvale — as well as to EA’s own Simpsons-themed Tapped Out game.

To highlight his point, he called on a truly unbiased reviewer, showing a video clip of Homer Simpson tapping away on a tablet.

“This game is life-ruiningly fun,” Homer says.

DreamWorks Animation, the Hollywood studio that has made such movies as “Shrek,” has promoted Lincoln Wallen to be its new CTO.

“Lincoln is an exceptional executive and brilliant technologist whose contributions to DreamWorks Animation have already been monumental,” said DreamWorks Animation’s CEO Jeffrey Katzenberg in a statement.

Wallen had been DreamWorks’ head of animation technology, having joined the company in 2008 as head of research and development. Previously, he was CTO at Electronic Arts.

Wallen replaces former CTO Ed Leonard, who is now running a mobile app effort called Ptch, incubated at DreamWorks.

Long-time gaming executive Bing Gordon offers one plausible reason: Facebook is suffering from a cyclical process currently found in the games industry, with peaks and valleys driven by new hardware releases.

“The Facebook platform right now feels like it has a life cycle,” Gordon said. “Right now, it feels like PlayStation.”

About every six years, a new Xbox, PlayStation or Nintendo comes out, driving new sales for the entire industry. At first, he says, there’s a feeding frenzy, but as the systems age, the frenzy slows down. Near the end, prices drop to keep the platform going.

While Facebook can’t relate to the hardware comparison, it still finds itself at a similar point, where its novelty factor is fading and the number of people playing games on its network is leveling off. The first to really notice this trend was Zynga, the largest game maker on the platform, which missed second-quarter expectations by a long shot. “Right now, it’s kind of flat, and whether it takes another jump up or goes down remains to be seen,” Gordon said. “Is there something else to be done? Sure, maybe it’s mobile.”

As an investment partner at Kleiner Perkins Caulfield & Byers, Gordon is focused on consumer and gaming technologies; he has a good vantage point of the market from sitting on the boards of both Amazon and Zynga. Before joining Kleiner, he was a longtime executive at Electronic Arts. And since he’s dabbled in theater, including a stint on Broadway, he eagerly agreed to appear in a video (posted below).

Despite what some may consider a dire situation — Zynga and Facebook trading so far below their IPO prices — Gordon takes a longer view of the market. He remembers working at EA when its stock fell more than 70 percent in one week, and points to the way Amazon has recovered after once trading at $2 a share.

Gordon wouldn’t go into specifics on either company’s strategy, but before the camera started rolling, he chatted about Facebook’s ability to maintain its growth as a social games platform — and how it closely affects Zynga, the creator of some of the biggest social games, like FarmVille, CityVille and, more recently, ChefVille.

Gordon said that, thanks to Facebook, gaming is more social today than it has ever been, and he expects that trend to continue. But he does question whether the dominant access point will always be Facebook — or if it will eventually shift to mobile.

If that’s the case, can Zynga succeed somewhere other than Facebook?

“I think so, but it’s not provable,” he said. “Zynga has more talent than any company I’ve ever seen — way more talent than EA had at its peak.” But that, too, is changing. Over the past few months, Zynga has seen a half-dozen high-level departures. So, can that still be true? Gordon confidently and simply responded: “Oh, yeah.”

More from Gordon in the video: