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FUTURE OF VIDEO GAMES Case Analysis on Electronic Arts (EA) Games Industry

Marketing Management (MTKG 524)

Introduction Electronic Arts Inc is a video gaming company and a leading publishers of video and computer games software, which was founded in 1982 by William M. (Trip) Hawkins III ( a former marketing director at Apple), William (Bing) Gordon (who became the company’s director of marketing) and Tom Mott[ CITATION Inc20 \l 1033 ].

Background The CEO of Electronic Arts (EA) Andrew Wilson in late October, 2013 invited his executive team members to a meeting with an ultimate goal of brainstorming the best course of action to regain EA’s position as the premiere game software developer in an increasingly turbulent environment [ CITATION Gup16 \l 1033 ]. The team focus on the impending launches, managing increase in mobile market, growth of the free-to-play (F2P) market, increasing PC market, console market as well as possible emerging markets. Their core focus is on marketing research for their products as a Business to Consumer (B2C) firm. Problem Identification. The anxiety of the CEO is the impending changes to video game market as game publishing companies continue to expand their market based[ CITATION Gup16 \l 1033 ]. The stock price of EA have slipped down and the company had to decide which market base to focus their new product launch. Another pressing questions management need to answer is which emerging market to explore and to what extent since resources have to be diverted [ CITATION Gup16 \l 1033 ]. The video game industry is experiencing a decline is sales compare to previous year despite the continued expansion of the gaming markets[ CITATION LeB19 \l 1033 ]. PESTLE Analysis A PESTLE analysis of EA shows a video gaming company with many opportunities based on political, economic, social, technological, legal and environmental factors that impact Electronic Arts Inc. The PESTLE analysis determines how these external factors create opportunities and threats significant in the consumer electronics, gaming, entertainment, and financial services markets. The company must effectively consider these factors in its strategic decision-making[ CITATION Rob17 \l 1033 ]. Table 1 is the construct of PESTLE. Detail SWOT Analysis One of the strength of EA is the global presence of the company with over 300 million registered game players worldwide[ CITATION EAnd \l 1033 ]. It has a strong mobile and digital presence in over 35 countries of the world[ CITATION swo20 \l 1033 ]. The availability of diverse games for video gamers to enjoy across multiple platform, its digital platform allows certain free to play games that requires customers to make purchases before they could continue within a game[ CITATION Gup16 \l 1033 ]. Millennials also known as generation Y provide important market segment for EA, the consumers of leisure interests and are technologically savvy[ CITATION Val13 \l 1033 ]. As with every business, the weakness EA team have to watch out for include the fluctuation of sales, cost of video game production, product segments targeting emerging markets will decline due to output growth in emerging and

developing economies as pandemic is impacting emerging markets through an unprecedented mix of domestic and external shocks[ CITATION IMF20 \l 1033 ]. The opportunities abound for EA to generate revenue from potential sales of the PlayStation, with main focus on emerging markets expansion. The threat to market shares in the video gaming industry is from competitors and mobile games developers with the advancement in technology, ease of game development using latest technology. Table 2 shows a construct of the SWOT analysis. Table 1: PESTLE Analysis of Electronic Arts Inc construct. Political  Political Stability and trade tariffs.  Regulation in consumer protection service.  Pricing regulations.  Industrial laws in different countries.  Government regulations

Economical  Gamers disposable Income.  New Platform affects game purchases.  High growth in emerging markets.  Stability of developed markets.  Efficiency of financial markets.

Social  Video gamers change in demand  Contrasting view on violent in video games  Psychology and attitude of gamers  Demographics of video gamers  Leisure interest.  Increasing adoption of online gaming

Technological  Impact of technology on product offered.  Advance tech development of games.  Tech upgrades to meet market demand.  High rate of R&D activity.  Increase dependence on digital tech.  High rate of mobile technology adoption.

Legal    

Environmental  Energy efficient products.  Digital transformation.  Increase demand of environmentally friendly games.  Business sustainability.

Increase product regulations and copyright. Improve patent protection. Privacy and data protection of gamers. Licensing, lawsuits and software piracy

Table 2: SWOT Analysis of Electronic Arts Inc. Strength  Strong presence globally  Diverse games on multiple platform  Investment in Research and Development  Company growth and digital platform.  Strategic positioning in video game market Opportunity  Interactive gaming products  Online gaming portals  High potential sales in emerging market  Potential revenue from PlayStation sales  Market expansion and relationship with console makers

Weakness  Video game product cost is high.  Products are segment focused  Specific video games release dates  Sales fluctuation Threat  Legal lawsuits, data breach and privacy of games  Mobile phone platform and app deployment  Competitors and other gaming developers catching up with EA

Video Game Industry Key Success factors Electronic Arts is part of the video game industry, an economic sector that deals with the development, publishing, marketing and sales of online, consoles, titles and free to play games. EA is a game software developer and their economic importance have seen the gaming company rise to be among the leading industry giant. The console is the largest segment of this industry with Microsoft, Nintendo and Sony as the three major competitors. Although the video games industry is steadily growing, the competition is very fierce; the key success factors are price, branding, cost, innovation, exclusive games, online features, reliability, technology (audio, video, graphics), third party support and timing[CITATION SJL17 \l 1033 ]. Marketing in the video game industry was previous carried out through word of mouth and through advertising in major video game magazine. This methods does not reach the totality of the consumers. In the video game industry as a whole, key success factors include clear advertising which the industry changed from its previous marketing strategy to promoting new video game release through television advertising, direct mail in to the generation Y whose media habit and psychographic segmentation provides more insight into their consumption behavior [ CITATION Val13 \l 1033 ] and promoting tiesin. The technology aspect of the video game industry have been successful due to its proven ability to improve production process, since consumers have the tenacity to upgrade to a newer version with little consideration for price if the technology is better than the alternative. Each major company in the video gaming industry have expertise technology in hardware (Sony makes the PlayStation hardware) or software (EA supplies the software that runs on Sony’s hardware). Product distribution via internet, direct marketing, and television advert improves strong sales capabilities[ CITATION Vin17 \l 1033 ]. The video gaming industry experienced rapid development of innovative product within a short span of time since company within the industry imitates each other in their continued bid to be the leader and maintained their competitive advantage leading to the overall success of the video game industry. A key success factor is building a marketing campaign using the 4Ps marketing strategy that allows the EA to cut the noise in the video gaming industry. The price in the 4Ps should focus on middle income earners and be consumer centric with pricing. The product should be branded and merchandise is comfortable design with ergonomics of users as priority. Promote in the 4Ps should be a long term advertising based on humanity for enhancing image and select best timing for sell[ CITATION SJL17 \l 1033 ]. The place should be at a marketing positioning with diversification channel utilized. Value Chain Analysis. Value chain is a way of conceptualizing the activities that are needed in order to provide a product or service to a customer. It depicts the way a product gains value (and costs) as it moves along the path of design, production, marketing, delivery, and service to the customer [CITATION Pre01 \l 1033 ]. When a company have outgrown its current structure, the need then arise to invest additional resources to develop a more complex structure, one that allows it to implement its multibusiness model and strategic successfully[CITATION Cha12 \l 1033 ]. To create value, a company must move into a multidivisional structure. Value chain analysis can be used to formulate competitive strategies, understand the source(s) of competitive advantage, and identify and/or develop the linkages and interrelationships between activities that create value.[ CITATION Pre01 \l 1033 ]. The VCA focus on analyzing internal business activities in a bid to understand cost, identify business activities that create or add the most value, and also help

differentiate the competitors. The main objective is to identify areas and activities of the business that will benefit from change in production process in order to maximize business or firm’s profit as well as improve product efficiency. The video gaming industry can create value through partnership, develop loyalty through the emergence of new demographic cohorts that are potential new consumers emerging into prime game playing age[ CITATION Robnd \l 1033 ]. As a standard based industry, non-interoperability and network effects continue to play a key role in preserving competition in a field with shrinking number of firms[ CITATION Wil02 \l 1033 ]. For a firm to compete in the varied smaller market, the companies are able to compete in a world market by utilizing continuous innovation and highly skilled/educated workers, they must be on top of innovation, imagination, knowledge of the video gaming industry and a continuously changing market[ CITATION Kev17 \l 1033 ]. Solution and Recommendation. Price as one of the 4Ps in marketing mix [ CITATION Kub15 \l 1033 ] is a major factor in video game marketing, EA traditionally sells a copy of their game at $60 average price. To increase revenue, the marketing team must come up with market research that will target different gamers across different platform at different budgets. A further research into various monetization models from new consumers of their product will have to be promoted in different places where their new consumers will find useful product information. The task assigned to the marketing team should include identifying new marketing opportunities with emphasis on segmentation-targeting-positioning (STP)[ CITATION Joh201 \l 1033 ]. Market segment are the video gamers who consumes and purchases the video games. Effective market segmentation should be driven as a mission if EA intends to continue to build a strong brands and better positioned to handle competitiveness. EA marketing department should direct their attention to product and promotion in the ad sections since gamers are downing free ad supported games[ CITATION Gup16 \l 1033 ]. For the company to make a decision concerning market expansion strategy, major questions including pricing and costs structures in the emerging market have to be addressed. Conclusion. The video game industry will continue to evolve as new and advance technology continue to create a market for it. The marketing management tools definitely improves the sales of video games industry with a clear advertising, promoting ties to current media, and online features. EA teams need to implement value chain analysis for sales to improve as well as invest in aggressive marketing of their product to surpass previous year sales. As a business to consumer market, making the video gamers as king with loyalty programs will drive sales up.

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