Electronic Arts PEST and Industry Analysis Kenny Erskine
Electronic Arts • Three Main Divisions • EA Sports, EA Games, EA Play • Published 158 titles in the fiscal year of 2010 across all platforms (including mobile) • Total assets remained unchanged from 2009-2010 ($217M)
Electronic Arts • No title accounted for 10% or more of total revenue • 55% of total net revenue generated in North America • Key International Markets Include: • Europe (39%) • Asia (6%)
Political Analysis • Laws being passed that limit young people’s access to mature video games • European Union continues to pass protectionism laws
Economic • The video game industry grew 10% from 2005-2009, faster than the overall economy. • The overall economy is rebounding in the US and around the world.
Social • Older gamers continue to play games • Younger people get involved in gaming every day • Consoles like the Wii, Kinect, and Playstation Move introduce older people and families • With these advances, mothers and others are now playing games
Technological • Technologies are always expanding and making more opportunities. • Upcoming advances like 3D and improvements on the Wii will bring more people. • Online gaming becoming a much more popular trend. • Mobile gaming is surging, accounting for 48 published titles in 2010.
Industry Analysis • Industry • Video Game Software Industry • Participants • Buyers are Playstation, Xbox, Wii, and PC Owners • Suppliers are the software companies that create programs EA uses in development
Industry Analysis • Participants (cont.) • Competitors are any other video game making companies. Major ones include: • 2K Sports, Blizzard Entertainment, Ubisoft • Substitutes are anything else people do for leisure, serious threat. • With the advent of Facebook games and mobile phone apps, the threat of new entrants is very high.
Threat of New Entrants • Threat of new entrants is high. • There are many established big players in the industry. • However, due to social media (Facebook) and mobile games being incredibly inexpensive, it is cheap to enter this industry.
Porter’s Five Forces • Buyer Power • Positive force for EA because buyer power is very low • Threat of new entrants • Facebook and mobile gaming make an inexpensive entry possible. • Supplier Power • Low switching costs and differentiation give EA a very positive outlook towards their suppliers.
Porter’s Five Forces • Threat of Substitute Products • An area of concern due to consumers buying used products or finding other hobbies that are not electronic. • Intensity of Rivalry • A concern for EA due to the amount and size of competitors in the industry as well as a high exit barrier.
Blue Ocean Strategy? • Currently this industry is very set in its ways. • Players are set and industry is defined. • Carving a new path would be difficult, but not impossible. • Expanding virtual reality and 3D gaming could open up market segments currently not used.
Conclusion • Industry Analysis • Industry is favorable to EA, but there are definite threats. • Many competitors surging to the industry with the ease of creating mobile and social media applications. • Very high market share of sports video games • PEST Analysis • The industry and economy overall is growing. • More families and non-traditional gamers are picking up games.
Conclusion • Porter’s Five Forces • Very favorable overall to EA • Threats do exist, however • Rivalry with 2K Sports could be an issue • Threat of substitutes is very high • The industry and forces favor EA very much to continue their path in the video game industry.
Electronic Arts Competitor and Market Analysis
Market Analysis North America
Market Analysis • EMEAA Region • Europe, Middle East, Africa, Asia • Projected to grow 10.2% in 2011 • 4.7 million consoles purchased in 2010 • Analysis • Big opportunity to keep a hold in this major market region. • EA is very strong in this region already.
Market Analysis • Mobile Gaming • One of the biggest growing markets. • EA produced 12 of the top 20 downloaded iPhone games. • $55 million mobile revenue in the first quarter of 2010 • Projected to grow $18 billion by 2014. • Apple and Android’s AppStores have made purchasing and installing games easy.
Social Media Gaming • Facebook is essentially the biggest game platform in the world. • 350 million Facebook users per month • 100 million play Facebook games • Acknowledging this, EA Purchased Playfish for $400 million • Facebook has traditional “non-gamers” playing feverishly with titles like FarmVille.
Software Sales by Region • Main focus should continue to be on the Americas. • Be wary of these figures, they do not include Mobile games and free Facebook applications
Conclusions • Mobile Gaming • EA needs to continue to increase its share of the mobile gaming market. • Facebook • EA needs to break into this market. It is the fastest growing market. • Facebook gaming is huge because of the attraction of non-gamers.
Conclusions • Must be wary of competitors. • Blizzard/Activision continue to grow daily in the major North American markets. • Konami will attempt to increase its share of the North American market. • Zynga will be very tough to knock off its Facebook throne, but the market is wide open to new entrants. • Gameloft will be a mobile threat, but EA has a strong hold in the industry currently.
Electronic Arts Internal/SWOT Analysis and Competitive Positioning
Internal Analysis • EA became incredibly successful with a brilliant business model. • Base a product on a popular sport or movie • Market the item effectively • Publish a new version of the game every year. • Ex: FIFA, NHL, NBA, Tiger Woods, James Bond series
Internal Analysis • EA has suffered setbacks along this strategy and is now adopting a new style. • EA Los Angeles Implemented a “cell system” for their developers to become more innovative. • Development staff broken up into 6-8 person “cells” to rotate on projects • Helps reward innovation and new ideas
Internal Analysis • President Peter Moore acknowledged disc-based games as a “burning platform” • Can stay on the platform and face certain death • Jump into the water and face possible/probable death • Working to innovate towards more disc-less features. • Acknowledges the likelihood of a console without a disc drive in the near future
Electronic Arts Operating Figures
Change In Distribution/Sales • Published 48 mobile game titles in 2010. This is a 60% increase from the 30 published in 2009. • Acquired Playfish Limited to gain a larger share in the free-to-play social gaming market.
Electronic Arts Strategy • Focused Differentiation • Competes by making products superior to that of their competitors. • This justifies the premium price EA charges for their products. • Why Focused Differentiation? • As an established brand with brand-loyal customers, EA can charge a higher price. • High prices allow EA to continue to create high-quality products