Electronic_Arts Essay Example For Students

Electronic_Arts Essay Electronic Arts is a highly successful creator of video games for consoles and PCs. The company also creates content for online gaming. EAI occupies a unique place in the information processing industry. The company must have the skills of a Hollywood studio in order to create compelling content While at the same time negotiating technological change and uncertainty associated with the platforms (e. G. , consoles, PC, Internet) used to operate and distribute the games. The case gives students the opportunity to evaluate the strategic challenges associated tit operating at the nexus of information processing and entertainment industries. This case is often used in conjunction with Electronic Arts in 1995, SMS-AAA. While Electronic Arts in 2002 can be used by itself, use of the w. o cases together gives a good longitudinal perspective on the company, industry and technology. Instructors who use Electronic Arts in 2002 by itself should not use Question 1 below. (Eng: The case Electronic Arts in 1 999, SMS-BOB is largely superseded by the Electronic_ Arts in 2002. The latter case covers the same themes and issues as the 1999 case. ) In terms of the strategic dynamics framework, this case illustrates the challenges of trying to extend P-controlled changes into industries that are converging (or colliding). It also how EAI is trying to transform itself, and realign its actions with starter, as to take advantage of opportunities created by industry convergence. Preparation Questions: I. By 1995, how successful has EAI been? What has been their strategy? What strategic challenges do they face in 1995? 2. How should EAI think about the platform development decisions it faces? 3. How has the Internet affected the video game industry? Why? . In 2002, what should EASE corporate strategy be for the next 5 years? Why? How should it execute this strategy? Analysis: I _ By 19%, how successful has EAI been? What has been their strategy? What By 1395, EAI has been very successful. Between 1990 and 1995, revenue has increased to $420 million and gross profit has increased to $195 million, each growing 500 percent in the period. Net profit has increased to $45 million between 1990 and 1994, or 800 percent. In 1994, Seaside over $400 m Saga Nintendo DO Affiliated Labels EAI had 85 titles in 1994, and 100 titles in 1995 (SASS million in development sots. ) ;EAI grew to tour divisions: ; EAI Sports ; Simulation and Interactive Movies ; EAI Entertainment EAI Kids EAI developed a distinct competence at building a culture that is good at dealing with technical and market uncertainties. Key assets include: ; Product development, ; Marketing, ; Integrating creative, technical and business people into project management, ; Navigational competence, ; Salesrooms for market competence, ; Top management that is knowledgeable about technology. Instructors who also use Electronic Arts in can ask students to recall the evolution of EAI. Instructors can elicit salient points in EASE history. For example, until 1989, the companys strategy had been to develop games for the PC platform. However, by 1989 cartridge-based home video games had emerged as the dominant game platform. At that time, four million IBM PCs and compatibles had been sold creating a market of $230 million for PC-based games, This contrasted with as many as 22 million LIST households with 8-bit consoles, which generated a games market of billion. Of course, the costs of developing games tort the PC were very different trot the costs involved in developing Ames for the then dominant Nintendo platform, That company demanded large up-front royalty payments and manufacturing fees as well as advance commitment to cartridge number, All of which raised the risks associated with developing for the Nintendo platform. These risks were similar to those EAI faced when it bet on Saga during the transition to the 16-bit platform. By mid 1995, EAI faced four key strategic challenges. The company had to prepare for another platform transition, with the industry going to 32-bit processors, while at the same time maintaining leadership in the 16-bit platform. EAI was also developing and leveraging intellectual property new intellectual property by co-branding with Organizations such as the National football League (NH_) and National Hockey League (NIL). By 1995, EAI has also set its sights on international expansion. As before, the company also faced the usual strategic challenge Of attracting and retaining key creative and engineering talent. Platform transitions are very risky periods for EAI. The industry share of market goes up for grabs with each transition, For example, Nintendo dominated the 8-bit platform, while Saga dominated the 16-bit platform. By 2002, EAI is facing BOB-bit platform transition. A transition requires EAI to make a big bet on the company it thinks will win the transition. Instructors can highlight this point to asking students how much cash the company has and discussing the other cash needs the company must balance with transitions. 1. Definition of Down Syndrome EssayGame publishers attract only a minority Of this traffic, With independent sites drawing most Of the traffic. ENS most popular community site was Simplicity. Com, which attracted 1 million users per month for its first 6 months. Traffic thereafter settled to 200,000 monthly visits. 4. In 2002, what should ENS corporate strategy be for the next S years? Why? Discussion of EASE strategy going forward should take into consideration its current strengths and the forces that will shape the company in the future. By 2002, Seas scale allowed the company to leverage its intellectual properties across multiple platforms and geographies. The companys prominence in its industry gave EAI other benefits. EAI had the potential to influence the success of platform by its decisions to publish titles for it. Since the success off platform was tightly linked to the number and quality of games available on them, EAI was regularly consulted by hardware manufacturers concerning technical specifications. This enabled EAI to develop titles faster and better prepare for transitions in the platform cycles. Online gaming Will likely become more important to the company. But for this to happen, several forces exogenous to EAI must come into place. These include greater ubiquity Of broadband Internet connections in homes and continued development of Internet capabilities in consoles. Forces that EAI can influence with respect to online gaming include the development of compelling content for multilayer and massively multilayer games that are particularly well suited to the online channel and creation of an online business model that will generate sufficient revenue to the company. Metatheses: Two important themes that weave through both the 1395 and 2002 cases are the role of organization and culture to EAI. And sources of growth for the company. Indeed, the two themes relate to each other. Instructors can explore how EAI5 organizational structure (small studios with a high degree of autonomy) interrelates with the compass business management structure (e. G. , financial oversight at the center, shared intelligence from the salesrooms, etc). This model allows EAI to scale as it acquires new studios or develops them organically, while retaining financial controls at the corporate center. This is the model the company has used since the 1995 case. New growth, however, may present challenges that cannot be met by Seas current Structure. Where can EAI go next in the entertainment industry? Perhaps there is sufficient growth to be had from EASE efforts to develop online gaming s well as their Other traditional sources Of growth; but perhaps not. Instructors can explore the ways in which EAI could find growth in fast-developing areas new to the company, such as digital animation. Could EAI acquire a digital animation studio such as Paxar? (EAI had a market capitalization of $13. 2 billion compared to that of E. G billion for Paxar in September 2003. ) Would it make sense for EAI to be acquired by an entertainment company with content assets from movie and television production studios, which could lend themselves to video games? Disney is one possibility. Instructors can ask students to consider the benefits and drawbacks of such mergers, particularly in light of the difficulty Time Warner has had since its acquisition of AOL. Electronic Arts Summary by Robert A, Bargeman I _ Technology-based companies face twin uncertainties: ; Technological uncertainty associated with platform changes; ; Market uncertainty associated with changing customer demand. 2. If there is no compatibility across platform generations, then platform changes are highly hazardous because they put market share into play, for example, 8-bit:Nintendo; 16-bit:Saga,; 32-bit:Sony). Periods Of platform change pose difficult strategic challenges because companies must maintain their position on the current generation While making bets on prospective winners in the next generation. 4. To maximize their changes of correctly predicting the next generation of platform winners, companies Ned to create a culture of intense collaboration between techn ical, sales/marketing (business), and design people in the organization. Such a culture constitutes an organizational capability and can be a source of competitive advantage. 5. Creating such a culture is a top management responsibility.