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Video Game Industry Analysis and Recommendations for Fidelity Magellan Fund

Delve into the history, platforms versus software dynamics, current market conditions, and recommendations for success in the video game industry. Uncover key insights on market trends, major players, and strategies for sustained profitability.

michealbell
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Video Game Industry Analysis and Recommendations for Fidelity Magellan Fund

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  1. Video Game Industry Analyst Report to Fidelity Magellan Fund Manager November 20, 2001

  2. Agenda • Market History: Ainsley Quiohilag • Platform v. Software: Bei Wei Li • Current Market Conditions: Henry Steinberg • Conclusions & Recommendation: Dana Kelman

  3. Market History • Periods Defined by Two Major Platforms • Atari v. Colecovision • Nintendo v. Sega • Sony v. Nintendo • X-Box new entry • Atari, Sega, & Colecovision failures

  4. Market History • Software Maker Sustainability • Electronic Arts • Activision • Sega

  5. Platform v. Software • Platforms • Loss Leaders • MSFT expects to lose $150 per unit • Gillette business model analogy • Profits derived from software • Platform makers develop software for their consoles • Royalties from third party software developers

  6. Platform v. Software • Software Only Companies • Ability to make software for all platforms • No losses to recover • High profit margins/low marginal cost • Lower fixed costs than companies that make both consoles and software

  7. Current Market Conditions • Major Platform Makers • Sony Playstation 2 debuted last year • Microsoft Xbox and Nintendo Gamecube new introductions November 2001 • Intense competition • More platforms more players • $1 billion marketing blitz for video game industry • Increased size of market (44 million consoles today to 70 million by 2003) • New platform technology facilitates improved game quality

  8. Conclusion • Who wins battle of platforms? • Who cares? • Value added comes from games • Examples: Movie theaters, Sega Dreamcast • Real winners are software makers • Capture whole market regardless of platform

  9. Recommendation • Electronic Arts • Industry leader • Use clout to negotiate deals with celebrities & sports figures • Hedged against platform standard problem – make software for all platforms • Stability • Survived past industry shakeouts

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