Professional Documents
Culture Documents
AGENDA
Video Industry
Key Characteristics
Electronic Arts
Business Model
The Dilemma
Industry Trends Platform Analysis
Core Competencies
Technological Strategy
Way Forward
VIDEO INDUSTRY
KEY CHARACTERISTICS
A. PRODUCTS:
o Capital Intensive Highly Engineered Hi-Tech Expensive :to produce :to distribute :to buy o Low Unit Volume Not mass produced and revenue contribution of each unit was low o Dynamic The products had very limited life and consumers demanded frequent changes/upgrades
(contd)
KEY CHARACTERISTICS
B. GEOGRAPHIC SCOPE:
o North America, Europe & Japan
(contd)
D. STRATEGIC GROUPS
o Different periods saw different industry leaders o Nintendo having the largest market share o No collaboration among the leading players
(contd)
KEY CHARACTERISTICS
F. DRIVING FORCES
o Changing/improving technology o Demand for stand alone/portable gaming devices o Consumer entertainment needs
(contd)
G. MARKET SEGMENTS
o Initially targeted children (08 - 15 yrs.), products positioned as toys o Later older children & young adults were also targeted
H. SUCCESS FACTORS
o Managing inventory & software development
Agents
Studios
Other Distributions
DVD Distribution
Advertise rs
Media Agencies
Theater Distribution
CONSUMERS
MOVIE
Driven by Producers/Directors
Similar scripts review process Team includes actors, directors, editors, technicians, etc. The writers, recording starts are the creative artists A host of background/backstage operations make the movie possible
MOVIE
Very large costs are associated with movies
Technology dependence is relatively less Everyone is a potential consumer for movies Seasonality is relatively less Distribution systems need not be that elaborate or responsive Hit Rule: most profit comes from a tiny part of output
3 Major decisions Design s/w for PCs Applications across h/w platforms Outsource manufacturing & s/w assembly
1989: Crisis
Expanded overseas
Invested in state-of-the-art distribution systems
BUSINESS MODEL
Game Scripts, Future royalties Advances, Periodic payments GAME DESIGNERS
EA
STUDIO PERMANENT STAFF
FINANCE
DISTRIBUTION
SCRIPT
PostApproval
MARKETING
PRODUCTION TEAM
CORE COMPETENCY
CORE COMPETENCY
Ability to assess market changes and new technologies Flexibility to adapt to the new market needs
CAPABILITIES
Market intelligence, hardware objectivity, frugal system of distribution through economies of scale and scope,
RESOURCES
Tangible Licenses, Techno savvy management teams, Intangible Capacity to innovate, Reputation with customers and distributors, Organizational culture
TECHNOLOGY STRATEGY
TECHNOLOGY CHOICE
Invested in leading-edge computer technology Developed Artist Workstation Compatible across variety of hardware platforms
TECHNOLOGY LEADERSHIP
Pioneering role in 16 bit products Ability to assess new platforms Focus on next generation hardware 3DO
TECHNOLOGY LICENSING
Licensing of EA Studios products 3DO designs given away at nominal fees Licensing for 3DO software
studio & script model Importance to creative functions Unique entrepreneurial culture
OPERATIONAL EXCELLENCE
EA Affiliated Labels Economies of scale & scope in distribution Broad product line Integration in value chain Artist workstation
INDUSTRY TRENDS
CAPITAL REQUIREMENTS Increasing development cost
Longer product development Higher animation costs Larger teams
New channels (specialty software stores , electronic stores) Pre-launch marketing blitzes
(contd)
INDUSTRY TRENDS
PC MARKET Strong Growth
Upgrade kits
(contd)
Feasibility of owning a PC
PC relatively expensive
Installation difficulties
(contd)
INDUSTRY TRENDS
INTERACTIVE MEDIA
(contd)
Convergence of communications, entertainment and computing industries Increased role of video game applications in determining success
Possibility of Hollywood studios and other content providers entering the market
ONLINE Rapidly increasing world wide web users New distribution channels
Exploding growth in online services industry Launch of Segas first online video game service
PLATFORMS
Skipped 32 bit generation
NINTENDO
SEGA
Saturn console (480 $) 32 bit, CD ROM based player Adapter for further enhancements Access to content through Columbia pictures
SONY
Playstation (480 $)
32 bit CD ROM player with superior graphics, video and sound quality High performance subsystems Jaguar (250 $)
ATARI
Platform Nintendo Super NES Sega Genesis Sega Saturn Sony PlayStation 3D0
Tie Ratio 12 10 10 15 15 15 1 2
3DO Backward compatible unlike Genesis, Super NES, etc. Sound and video quality unmatched Expected tie ratio of 15
PC
PC-Floppy PC CD-ROM
1996 (E) 42 % 26 % 67 % 40 % 84 % 18 % 62 %
1997 (E) 41 % 25 % 65 % 40 % 80 % 17 % 62 %
Super Nintendo PC/MAC Other Platforms License/OEM Affiliated Labels 3DO, Saturn, Playstation
WAY FORWARD
Development for 32 bit technologies
o Sony PlayStation, 3DO and Saturn
CD-ROMS
o Continue production of cartridges (for Nintendo and Sega) Focus on selling in other countries , in sync with target of 40 % sales outside the US Translation of EA titles into up to seven languages and their distribution in 31 European and Mediterranean countries
Edutainment
o High growth category o Recent acquisitions
WAY FORWARD
Continue to push 3DO development
Should wait for the online way of distribution to develop before venturing
o Fast follower approach rather than first mover