Electronic Arts Business Analysis Business Essay

Electronic Arts, Inc. is a multinational company that produces various kinds of multimedia products especially video games (Wikipedia, 2011)4, and it is one of the world’s top publisher of video and computer games software (accessed, 2011)1. It was established in May 28, 1982 by three managers of Apple Computer Inc. : Trip Hawkins, a Silicon Valley American entrepreneur, founder of EA, 3DO Company, and digital chocolate; Bing Gordon, he became the company’s director of marketing; and Tom Mott. Hawkins and Gordon earned their MBAs from Stanford University. They were decided to form a company that focused in developing and marketing software games at dinner at Hawkins’ home. (Accessed, 2011)1

In the beginning, Electronic Arts was a home computing game publisher. EA later grew via acquisition of several successful developers such as Bullfrog, Maxis, DreamWorks Interactive, and Digital Illusions (Wikipedia, 2011)2. In early 2000s, EA had become one of the world’s largest third-party publishers. Today, all of Electronic Arts labels and studios are supervised by John Riccitiello as the CEO. He has held the position since 2007. (Wikipedia, 2011)3

Electronic Arts also issued a number of non-game titles. The most popular was closely related to video game industry and also used by their developers, such as Deluxe Paint, Deluxe Music Construction Set, Deluxe Paint Animation, etc. (Wikipedia,2011)3

Electronic Arts and International Business

Games software in 1980s was a very new industry, where personal computers were not yet widespread. At that time, demand for home computer, class of personal computer was increased in international market. Usually it used for education, play games, and personal productivity (Wikipedia, 2011)5. Thus, Electronic Arts began to designing software, and more focused on the entertainment business than on the software business. Electronic Arts had their own strategies to compete, for example, EA was using sales force strategy. Electronic Art’s sales directly sold to retailer, and this strategy helped Electronic Arts to follow consumer trends. Electronic Arts also creates many games to raise the chance of success.

In early 1980s, EA also began to sell products overseas. In 1986, about 5% of its $30 million revenues were from international trades. And the sales kept growing and growing with the strategic growth plans by Hawkins as the CEO. Electronic Arts market capitalization was about $84 million in September 1989. Only in a year, comparing 1988 to 1989, Electronic Arts net income increased more than 200%. It showed us that the business strategic by Trip Hawkins was succeeded.

Electronic Arts swiftly established itself as the leading independent developer of video games for 16-bit players. In 1992, EA’s sales of software for video game cartridges overtook its sales of software on floppy disks for home computers for the first time. The same year, Electronic Arts worldwide revenues were 56 percent from Sega.

By September 1992, Electronic Arts formed a joint venture with Japan’s Victor Musical Industries Inc. Then, EA’s games were translated and distributed for Japanese markets and other Asian countries. Under the establishment of EA Victor, Electronic Arts sales in Japan increased 140 percent. In the meantime, EA Europe also expanded its activities. They were do the translation up to seven languages and distributed over 30 European countries. In 1993, Electronic Arts International Sales gave for about one-third of EA’s revenues.

Electronic Arts’ ability to publish interactive software games for multiple platforms is the strength of the company. The products that are designed to play on consoles and mobile platforms are published under license from the manufacturers of these platforms and Electronic Arts pays a fee to the platform manufacturers for technology and intellectual property, which enable them to publish products on their platforms. Electronic Arts invests in the creation of software tools to more efficiently develop games for multiple platforms. The company also invests in facilities and equipment that allow them to create and edit video and audio recordings that are used in their games.

The interactive software games that they develop and publish are broken down into 3 major categories: (1) EA Studio Products, (2) co-publishing products and (3) distribution products. To date, Electronic Arts has published games for over 45 different platforms. Next we have the co-publishing and distribution products. Through the company’s EA Partners global business unit, Electronic Arts teams with other game development companies that develop their own interactive software games with EA’s assistance, which EA then publishes, markets and distributes the product.

Like most entertainment companies, their business is based on the creation, acquisition, exploitation and protection of intellectual property. Some of this intellectual property is in the form of software code, patented technology, and other technology and trade secrets that they use to develop their games and make them run properly on the platforms. EA’s products also contain content licensed from others, such as trademarks, fictional characters, storylines and software code.

Electronic Arts acquires the rights to include these kinds of intellectual property in their products through license agreements such as those with sports leagues and player associations, movie studios and performing talent, music labels, music publishers and musicians. These licenses are typically limited to use of the licensed rights in products for specific time periods. Also, their products that play on consoles include technology that is owned by the console manufacturer and licensed non-exclusively for EA to use.

Electronic Arts Across Countries

Electronic Arts Company is divided into four country and continent and the total is eighteen companies in different places cities all over the world. Every company in each places have their own function. Those also have unique facilities in working environment. Here I will explain it one by one.

United States

Los angeles (EALA, EA MOBILE)

Electronic Arts Los Angeles is working in strategy games, first person shooter like Medal of Honor, and also action-puzzle games. Electronic Arts Los Angeles studio was founded as DreamWorks Interactive in 1995. But in February 2000, EA acquisition DreamWorks Interactive and became EALA. Electronic Arts LA also home of EA TRAX.

Orlando (TIBURON)

Electronic Arts Tiburon is located in Florida. The studio is leading developer for Madden Football, Tiger Woods Golf Tour, etc.

Redwood City & Emeryville (MAXIS)

This studio is at Redwood shores, California. Its working in best selling game The Sims, Godfather, and the others. It has a large office, restaurants, large gym, sports court, and much more.

Salt Lake City

EA Salt Lake work in family-oriented team and that’s a big advantage in kid’s entertainment. Known as Headgate studios, it has created successful game especially in golf industry.

Fairfax (MYTHIC)

Fairfax, Virginia, this studio is developing MMORPG that stands for Massively Multiplayer Online Role Playing. Their successful products are Dark Age of Camelot, Warhammer Online, and Ultima Online. The team in EA Fairfax is committed to creating the best games. They has a diverse culture and all members are guided to develop their work rates.

Austin (BIOWARE)

The BioWare Austin is currently working in Star Wars, the most recent chapter from blockbuster entertainment. Austin studio is known as the most creative, educated and lovely environment.

Canada

Montreal

Electronic Arts Montreal has created several titles from Nintendo platforms such as Skate it, Boogie superstar, Spore Heroes, and NFS Nitro. Montreal is growth rapidly in games development. They have talented staff that work in good leadership and teamwork. They provide a good work environment.

Vancouver (BLACKBOX and EAC)

This studio was created when EA acquired Black Box Games. It produced one of the top ten best selling games, Need For Speed, that has been sold more than 100 million and make profits about $2.5 billion worldwide. EAC develops some of Electronic Art’s sport games including NBA Elite, NHL, and FIFA Soccer. This studio is the largest and the most successful studio by Interactive Entertainment. This studio is the place for around 1,300 employees, and has some interesting facilities such as coffee bars, soccer field, theater, and fitness room.

Edmonton (BIOWARE)

Bioware has created several titles that become the world’s best seller. Bioware also developed next-generation game Mass Effect, and fantasy RPG Dragon Age: Origins. BioWare was become one of the Canada’s top 100 employers in 2009, and recognized as a studio that best in developing story-driven games industry.

Europe

United Kingdom (CRITERION & BRIGHTLIGHT)

These studio are located in Guildford. Guildford is a cosmopolitan center and become the heart of gaming in United Kingdom. EAUK Bright Lights is the developer of Harry Potter sequences of games.

Germany (PHENOMIC)

Electronic Arts Phenomic is located in Ingelheim, Germany. This studio was established by Volker Wertich in 1997. Phenomic joined Electronic Arts family in 2006. Phenomic team focuses in RPG and strategy games. Phenomic has motivated and talented game developer

Sweden (DICE)

Electronic Arts Digital Illusions Creative Entertainment, located in Stockholm, Sweden. This studios features is glass walls through the building. Dice successful tittles is Battlefield series franchise.

 

Switzerland

Located in Geneva, this experienced team work in international publishing activities including marketing, sales and distribution. Geneva ranked as one of the world’s best cities in quality of life. The city offers varies of culture and leisure and also provides perfect environment to work.

Romania (EA MOBILE)

Electronic Arts Romania was established in 2005 in the heart of Bucharest. This studio concentrates on developing original mobile games. Staffs are friendly and talented, and have a culture that promotes innovation considering customer satisfaction and teamwork.

Asia

India

Electronic Arts Mobile’s studio in India is located in Hyderabad. The city is one of the fifth largest city in India and the heart for IT and biotechnology. India has great opportunity to be the top in gaming industry.

China

Electronic Arts China is the central part of EA’s strategy in Asia market. The office is located in Shanghai.

Korea

Based in Seoul, Korea, specialize in online games development. South Korea is one of the four largest economies in Asia. It is one of the most technologically countries.

Singapore

Singapore is Electronic Arts’ regional core for Asia Pacific. Singapore is a great country to work and live in a cosmopolitan city and varies in culture.

Electronic Arts Business Strategies

Since The beginning of the journey of Electronic Arts, Hawkins has provides a lot of strategies to build and develop Electronic Arts Inc. The Ability to publish interactive software games for multiple platforms is the strength of this company. Electronic Arts keeps making and developing a lot of games software to compete and gain success in global market.

Now the company is turning its interest to its growing digital business. The videogame maker posted a GAAP loss of $322 million, or 97 cents a share, on revenues of $1.1 billion. However, when stock-based compensation and revenue deferrals are excluded, the company recorded a 59-cent profit, jumping 33 cents from the year earlier. Those modified numbers beat expectations of analyst who forecast the company’s earnings to surge 76 percent to 58 cents a share from the year-ago period, according to Thomson Reuters. It is now the fourth quarter in a row that EA has beat consensus.

Meanwhile, the company continues to try to call attention to its digital results as it transitions its business model-from one where gamers pay $60 for an Xbox title to one where consumers pay a few bucks for an iPhone game or play Facebook games that may be free and monetized through other mechanisms, such as virtual goods. But it’s hard to convince anyone of the prospects when its packaged-goods business generated $1.1 billion in revenues and its digital games generated a paltry $211 million.

Still, its digital business is up, jumping 39 percent compared with the same period a year earlier. “We are on track to hit three-quarters of a billion in revenues this year as planned, and we were No. 1 on key platforms like iPhone and iPad,” said CFO Eric Brown in an interview. Digital revenues mainly consist of mobile games, digital downloads and social games built by its Playfish subsidiary. Mobile revenues totaled $59 million in the third quarter, up from $56 million last year. EA does not break out revenues of its Playfish subsidiary, but said it had 39 million monthly active unique visitors (MAUs) in social games, falling from 58 million in the year-ago period.

Brown explained that its monthly uniques are down, much like those of others in the industry that were hurt when Facebook changed its policies about a year ago on how much games could be promoted on the social network. “That business is performing well. We are No. 2 in the social games space. MAUs are down for the entire segment, although we are monetizing better, and our strategy is to bring more EA-branded properties to the social network space,” he said.

Yesterday, Monopoly launched on Facebook, joining FIFA soccer and Madden. The company also announced that it will repurchase up to $600 million in stock over the next 18 month, which demonstrates the company’s confidence in its digital strategy, said EA’s Chief Executive Officer John Riccitiello in the release. Brown: “We have excess cash and there’s characteristics evolving for our digital strategy, as we build our digital revenue, and it becomes more profitable and predictable.” Does that mean we won’t see any more big acquisitions-like the $400 million Playfish purchase- by the game maker? “We still would have the opportunity to do small acquisitions. For instance, we recently purchased Chillingo, so we still have capital to do small scale, but we don’t intend to do large acquisitions in the short term.”

Industry Analysis

EA competes in the entertainment industry. The software games segment is best viewed as a segment of the overall entertainment market. Currently, large software companies and media companies are increasing their focus on the software games segment of the entertainment market, and consequently, are becoming more direct competitors to EA. Sony and Microsoft have been publishing products to compete with EA for several years now. Currently, other diversified media/entertainment companies, such as Time Warner and Disney, have announced their intent to significantly expand their software game publishing efforts in the future.

The software games business is a highly competitive industry, characterized by the continuous introduction of new titles and the development of new technologies. The software games business is driven by hit titles, which require ever-increasing budgets for development and marketing. Competition is also based on product quality and features, timing of product releases, brand-name recognition, quality of in-game content, access to distribution channels, effectiveness of marketing and price.

EA currently competes with Sony, Microsoft and Nintendo, each of which develop and publish software for their respective platforms. EA also competes with numerous other companies, which are also licensed by the console manufacturers to develop and publish software games that operate on their consoles. These competitors include Activision, Atari, Capcom, Eidos, Koei, Konami, LucasArts, Midway, Namce, Sega, Take-Two Interactive, THQ, Ubisoft, and Vivendi Universal Games.

Also, the market for EA’s products is characterized by significant price competition. This has caused EA from time to time to reduce their prices on certain products. Traditionally, software game prices tend to decline once a generation of consoles has been in the market for a significant period of time. The company recently reducing prices on all current generation games evidences this. This is in anticipitation of new game consoles being released later this year and into next year.

“Electronic Arts Inc History.”

http://www.fundinguniverse.com/company-histories/Electronic-Arts-Inc-Company-History.html

http://en.wikipedia.org/wiki/List_of_acquisitions_by_Electronic_Arts

http://en.wikipedia.org/wiki/Electronic_Arts

http://id.wikipedia.org/wiki/Electronic_Arts

http://en.wikipedia.org/wiki/Home_computer