EA’s No. 2 executive leaves for Zynga

Electronic Arts‘ No. 2 executive, John Schappert, has resigned from the company and will reportedly join Zynga.

Reuters said that Schappert, who joined EA as president and chief operating officer in 2009, is leaving EA to head Zynga’s game division. That says a lot about the evolution of the video game business, with new companies like Zynga posing greater and greater threats to stalwarts such as EA. Schappert, who once talked about a “social gaming bubble” in 2009, has now become part of it.

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Reuters cited a regulatory filing that said Schappert had resigned on Monday. A source close to the matter confirmed to VentureBeat that Schappert is joining Zynga.

Zynga has seen huge growth on Facebook in the past few years and reportedly generated $400 million in profits on $850 million in revenue in 2010. Zynga doesn’t disclose its financials, and, if correct, those revenues are about a quarter of EA’s. But that performance was reportedly enough to generate huge investor interest in Zynga. Zynga is reportedly raising a new round of $500 million in funding valued at $10 billion, far above EA’s value of $6 billion.

Given that overall state of affairs, it’s not surprising that Zynga would be able to poach a top executive from one of the most venerable video game companies, EA, which was founded in 1982. Zynga has lured other EA talent such as game designer Mark Skaggs and game studio executive Steve Chen. And Zynga’s top advisor is Bing Gordon, a partner at the venture capital firm Kleiner Perkins Caufield & Byers and a major investor in Zynga. Gordon was the former chief creative officer at EA.

EA also lost its previous No. 2 executive, John Pleasants, to Playdom in 2009. (EA said he was let go). But Pleasants had a nice outcome as Disney bought the company for $760 million last summer. Now Pleasants is running all of the game business for Disney.

Schappert will join Zynga’s senior management team alongside chief executive Mark Pincus, chief operating officer Owen Van Natta and chief financial officer Dave Wehner. Zynga’s hot games include FarmVille and CityVille, which are simple social games on Facebook. Zynga has 259.7 million monthly active users on Facebook. Those users play Zynga’s games for free, but they pay real money for virtual goods such as more tractor fuel in the game FarmVille. EA paid $400 million for its acquisition of social gaming firm Playfish in 2009, and it has 35 million monthly active users on Facebook, according to AppData.

At EA, Schappert helped engineer the company’s expansion into digital game businesses such as free-to-play games, mobile games, and Facebook games. EA says that it is on track to generate $750 million in digital game revenue in the current fiscal year ended March 31.

Schappert has a long history at EA. He started programming games in 1991 and founded Tiburon in 1994. There, his team made the Madden NFL sports games for EA. Then EA bought Tiburon in 1994 and Schappert rose through the ranks to take the No. 2 job. He left in 2007 to join Microsoft to head its Xbox Live online gaming service. Then he rejoined EA in 2009, replacing Pleasants. He reported to chief executive John Riccitiello until he left on Monday. An EA spokesman said that EA has no plans to replace Schappert and it has four experienced division chiefs now who will report to Riccitiello.

Michael Pachter, an analyst at Wedbush Morgan, said the move is good for Zynga and “mildly negative” for EA.

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“Zynga gets a quite capable exec with a ton of public company experience and a technical background,” Pachter said. “EA loses the same, but has decent bench strength, and a ton of good people. They don’t compete in most areas, and Zynga is probably not looking for share gains, so much as looking to grow the overall market. Schappert has been very critical of Zynga, and brings a fresh perspective with a ton of street cred.”