Student- Michael Hoban
Student ID – C00216709
Business Management(CW_KCZZZ) Y2
Lecturer- Dr. Agnes Maciocha
Date of Submission- 4th
Name of the Company: Electronic Arts.
About the Company: Electronic Arts (EA) is an video
game company based in in California, America. EA was founded on the 28th
of May in 1982 by Trip Hawkins, it is one of the largest publishers and
developers of video games in the industry. They have created many Well-known
games such as FIFA, Madden, Need for Speed, The Sims.
Why I chose this
company: I am very
Interested in computer games and I was interested to cover this topic with one
of the most successful and controversial gaming companies.
Incredibly varied Diversity of games on many different gaming platforms
Powerful Digital Presence
Great deal investment into R&D
Solid and stable Company Growth
Powerful position and market share
Production Costs of Games
Release dates lead to some unfinished games.
Games focused on very specific areas
Acquisition of other companies with different goals
Recent Decline in earnings
Complete online gaming Portal
Military training simulations
Maintain good relationship with Console creators
Interactive gaming products
Rise of mobile apps and games
Diversity: Electronic Arts produces more video
games per year than most other companies on all platforms (1). They have a very
broad target market, they cater to all gender and age groups with a varied list
of games every year. EA has four segments under its label: EA Games, EA Sport,
EA Interactive and EA BioWare.
Digital presence: Electronic Arts’ Digital net revenue
increased to $934 million in 2017 which represented roughly 61% of net revenue
in 2016(2). EA have their own online gaming portal, to distribution their games
online called “Origin” which allows gamers to purchase games digitally.
Global presence: Electronic Arts operates in over 35
countries. More than 200 million people worldwide play EA games regularly. They
also have a strong mobile and social presence.
Investment into R: Allows EA to launch games on multiple
platforms a lot faster and on a more consistent basis. EA’s R&D venture is
one of the reasons they are a top competitor for other companies.
Company Growth: Electronic Arts has experienced a good
growth in recent years. Only in the last couple of years has it begun to drop, with
a P/E ratio of 25.51.
Strong market position: EA is a strong brand name. It is
internationally recognised as one of the great gaming companies.
Productions costs: EA is dependent on the platforms
created by other companies which limit design capabilities, graphics and game
performance. The game hardware developers set their own payment and extra
charges for distribution on their platforms.
Specific game release dates: EA must adhere to specific game
release dates, and any miscalculation of making and distributing the game makes
their assets less profitable. Yearly releases of certain games do not allow for
the quality and polished games that customers demand.
Specific target market games: Some of EA’s major titles are more
focused on the “Hard-core gamers” than on the “Casual Gamers”.
Poor acquisition strategy: EA has been known to eliminate competition
by acquiring successful companies. While some remain successful today like DICE
and BioWare, there are many that have been shut down by EA. (3)
Recent decline in earnings: EA has Experienced a slight decline
in net profit from 2016 to in 2017 after a continuous increase from 2014-2016,
while beginning to pick up in 2017. (4)
Complete online gaming Portal: EA can leverage its gaming portal”
Origin” to gain an edge over its main competitor “Steam”. There are only a
limited number of third party games available on Origin. EA can try to add as
many third-party games as possible in addition to its own games which will add
to its customer base.
Simulation training games for the
military: With the
advancement of technology, the US army is now starting to use computer gaming
to develop simulation training. (5) EA can help the army train in a virtual
world without the need for actual hostilities.
Strengthen Relationship with console
new Wii U console promises many opportunities. EA hasn’t supported too many
games on the Wii U, and it is time that they release as many games as possible
Interactive gaming products: Use of sophisticated motion control
technology and its leverage in being one of the most successful sports video
games developers to deploy a line of interactive sports toys which would have
all of the equipment necessary to develop the skills and engagement of young
Piracy: Piracy is a major threat to any of
the entertainment industry. The gaming industry is not an exception.
Lawsuits: Many Lawsuits have been filed against
EA in the past which damaged their reputation severely. A lawsuit filed in the
year 2004 claimed that many EA employees were not paid properly for long
working hours. There was also the case of an action case lawsuit against EA
claiming that they issued misleading statements about the performance of
Battlefield 4. (6)
Competition: There is tough competition in the gaming
industry. Ubisoft, Activision, Microsoft give serious competition to EA. But
their biggest competition comes from “Steam” which has a larger customer base
than EA’s “origin”.
Apps: Mobile gaming is becoming a huge
sector of the gaming industry, EA are well aware of this, but they are facing
stiff competition from the numerous game apps such as “Angry Birds”, and “Candy
Crush”. Every time a player plays one of these other gaming apps EA run the
risk of losing players themselves.
Different Government regulations in different countries
Highly seasonal video game industry
Changing demands of gamers
Contrasting views on violent video games
to meet demands
Different Government regulations in different
regulations vary from country to country. Intellectual property rights, age
ratings and classification all must be kept in mind when gaming industries
develop their products.
Brexit: With Britain leaving the EU the
current standard and laws for gaming in Britain may change compared to the rest
of the EU, this change will force EA the revaluate the British market.
1. Household income: The dynamic and changing lifestyle of the household must be monitored,
as EA’s target market is mainly the middle or working class the price of games
must respectively match the income of homes, meaning game prices must go up and
down with the average household income.
2. Seasonal video game industry: Games are generally released as specific times of the year
such as Christmas and summer to achieve the most out of release dates Horror
games for example are best released around Halloween.
Changing demands of gamers: The demands of games vary from month
to month and year to year, gamers always want something new to excite them and
all gaming company’s must change and adapt to appease these demands even games
that are released regularly such as FIFA are updated to keep up with modern
Contrasting views on violent video
games: The argument
for and against violent video games has limited and restricted certain aspects
of violence across all games, while having some merit these restrictions force
EA and other game company’s change or remove sections of their games before
Progress of technology: As technology progress games will
appear grander, better looking and smoother to play, likewise games must take
advantage of this change to stay on top or be left behind.
appeals to many different demographics however it appeals to the smaller
“hardcore-gamer” side to increase value it would be more beneficial to appeal
to the more “casual” gamer.
the investment into R has led to quick game release on multiple
platforms, strict deadlines and trying to accommodate the variety of platforms
leaves many published games unpolished and not of very good quality, it is in
my recommendation that they either remove such strict deadlines or release
games on a select few platforms instead.
acquisition of smaller companies should be limited and used only in special
circumstances, some business can’t produce the same quality of product under
Simulation should be considered with greater detail as some aspects of these
very realistic military simulations can be incorporated into consumer based
games to improve quality.
EA is a quality business with many avenues open to it for the
future with greater care given to consumer needs, less constricting deadlines
the quality of games and future value will improve significantly, while less
thought should be put into acquiring companies to cover their short coming’s,
rather their management should consider fixing their faults internally rather
( 10 Games
alone this year)
Arts Reports Q4 FY17 and Full Year FY17 Financial Results (http://investor.ea.com/releases.cfm?ReleasesType=Earnings )