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WIKI ANALYSIS
Electronic Arts (EA) is the world's largest publisher of video game software. Its portfolio of games include categories such as sports, fantasy, racing, music, massively-multiplayer online role-playing, and strategy. With operations in North America, Europe, Australia, Asia, and Latin America, EA recorded revenues of $3.7 billion and net loss of $677 million in fiscal year 2010. EA continues to maintain its competitive advantage through the release of new titles. In 2010, EA led the industry with 20 titles earning a Metacritic rating of 80 or above. [1]EA's major franchises include Rock Band, Need for Speed and a number of EA Sports titles, including John Madden's NFL franchise and FIFA.
Business Overview
Headquartered in Redwood City, CA, EA was originally a home computing game publisher. Over the past few decades, EA later grew through acquiring several successful developers. By the early 2000s, EA became one of the world's largest third-party publishers.
Business Segments
EA operates under several main business segments--EA Games, EA Sports, The Sims, and EA Casual Entertainment. EA's operations are highly diversified, and it collects significant revenues from the mobility platform (cell phones, handhelds, and other mobile devices) compared with its other domestic competitors, such as Activision Blizzard and Take-Two Interactive. In addition, the "Other" segment includes licensing profits as well as internet server deals that are affiliated with the games that EA has created.
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EA Games
This label publishes the majority of EA's games that do not fit under any of the other labels.
- Rock Band - Distributed by EA following the success of rival Activision Blizzard published Guitar Hero, the game is published by MTV Games and developed by Harmonix, creators of the Guitar Hero franchise.
- Need for Speed - Series of popular arcade-style racing games.
- Command & Conquer - Historically a PC title, the series made its transition to console with the title Command and Conquer III.[2]
- Battlefield - This EA series revenue model approximates what EA hopes future titles will become - a revenue model where gamers conduct micro-transactions in the game for personalization, as well as special weapons/vehicles. The next titles in the series, Battlefield Heroes will be free-to-play, pay-for-premium content.
EA Sports
This label publishes EA's sports affiliated games, which typically have contractual agreements with major leagues for annual titles, such as the Madden NFL franchise.
- Madden NFL - Published in agreement with the NFL, Madden is the most successful American football software title.[3].
- Fifa - Fifa series have been famous since 1993 and hit many times the million units sold. Because Football is the most followed sport in the world, it has been a key market to attract for EA. However, this franchises have faced stiff competition during past few years with another franchise, Pro Evolution Soccer, of the Japanese publisher Konami.
The Sims
The success of the Maxis studio developed Sims series has led to a creation of an entire label dedicated to publishing titles for the franchise.
- Pogo.com - The Pogo website hosts EA's casual gaming effort, with card games and board games available for casual users to play
- Spore - A Massively single player online PC game where the player controls all aspects of an organism's evolution, from microbial stages to intergalactic exploration. Player's creatures and civilizations are uploaded to the internet and integrated into other players' games.
EA Casual Entertainment
The causal entertainment label handles casual titles for non-hardcore games all across the company's development platforms. Its two major groups are the mobile cell-phone business, and the internet based casual games business.[4].
Trends and Forces
Influence of preferred gaming platforms
Gamers’ platform preferences are extremely important and not completely predictable. Electronic Arts was forced to shift resources from developing games for the Sony PlayStation 3 to the Nintendo Wii after Sony’s lower-than-expected sales of the PlayStation 3 system. The underallocation of Wii games and overallocation of PS3 games hurt EA's revenues because of the Wii's blockbuster sales and the PS3's poor performance, since console sales aid in game title sales.[5] Electronic Arts and its competitors want to provide software for platforms which will garner the most users because this translates to more units sold.
Increasing demand for online-publishing
EA Mythic is a label set up under the EA Games label specifically for the purpose of developing MMORPGs (Massively Multiplayer Online Roleplaying Games). the studio was first built through the acquisition of Mythic Entertainment, creators of a popular online game Dark Age of Camelot, in 2006.[6] The company is quite aware of the revenue opportunity in MMOs, seeing the success of competitor Vivendi Games' World of Warcraft as well as EA's own equity investment and 19% stake in Chinese MMO operator The9 .[7] The subscription based model of these games allows the publisher to not only generate revenues at point-of-sale, but also through on-going subscription fees to the service. This grows revenues and socially drives more users to the service.
Capacity for mobile gaming development
EA's mobile gaming division will benefit from the trend of continued market expansion from casual gamers playing games on their phones, and increased numbers of women gamers.[8] Competitors Take-Two Interactive Software, Ubisoft Entertainment, and Activision Blizzard do not have mobile-gaming operations as extensive as EA's, but are attempting to build out studios dedicated to mobile gaming. This includes Ubisoft's purchase of Gameloft India in April of 2008[9], highlighting the importance of this platform to the competition's projections for growth.
Competition
In such a dynamic industry where "hits" are what keep the company profitable, Electronic Arts is vulnerable to any company that can take more accurately capture shifting consumer preferences. EA benefits from a wealth of developer talent and financial resources, and its competitors are relatively smaller by revenues, since they typically have smaller game portfolios. However, competitors are still flush with both of these assets, recently launching mega-hits have brought them closer to EA's revenue figures. In particular, Activision Blizzard and Take-Two Interactive have mounted the greatest threats in the past.
In the past smaller companies who pose threats to Electronic Arts have been acquired. EA has acquired smaller game developers such as Digital Illusions, Mythic Entertainment, Headgate Studios, Phenomic and SingShot in the past. EA also took a $105 Million stake in Neowiz in order to expand its presence in the online-game market.
References
- ↑ http://files.shareholder.com/downloads/ERTS/1204852577x0x373418/f2f6fb54-936c-4283-bfb9-e5bd333a36d0/ERTS_Q410_Earnings_Release_5_11_10_final_with_financial_tables_-_REVISED.pdf
- ↑ Wikipedia.org "Command and Conquer 3: Tiberium Wars"
- ↑ Wikipedia.org "Madden NFL"
- ↑ Electronic Arts FY 2008 10-K " EA Casual Entertainment Label" pg. 7
- ↑ San Jose Mercury News "EA'S FUMBLE" May 27, 2007
- ↑ Mythic Entertainment Press Release "EA TO ACQUIRE MYTHIC ENTERTAINMENT" June 20, 2006
- ↑ Gamasutra "Report: EA To Buy 19% Of Chinese MMO Firm The9" April 9, 2007
- ↑ Parks Associates Press Release June 29, 2006
- ↑ Joystiq.com "Ubisoft Buys Gameloft India Studio" April 16, 2000
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