Only focuses on teenage segment: EA only focuses on teenage games and not producing games for mature audience. Unlike some of EA’s rivals – like Take-Two Interactive, whose best-selling Grand Theft Auto is targeted for the mature audience. EA doesn’t have it’s own console: Although EA produces games for the consoles of other companies, it doesn’t have it’s own console. In fiscal 2004, EA planned to introduce games for six platforms: PlayStation 2, GameCube, Xbox, Game Boy Advance, PlayStation, and PCs. Over the past 20 years, EA had published games for 42 different platforms.
All these companies like Sony, Microsoft and Nintendo are in both hardware (consoles) and software (games) business, enjoying their chunk in both markets. No online functionality for Xbox games: Microsoft’s policy of not allowing EA (or any other game developer) to earn any revenues from online play of Xbox games had prompted EA management, after months of back-and-forth negotiations, to refuse to program online functionality into its Xbox games. This really has made a bad impact on the sales of its games of Xbox. Faulty Games: Electronic Arts has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time.
Electronic Arts faced much criticism after releasing the title NASCAR SimRacing, a much anticipated auto racing simulation. Upon its release, it was found to be extremely “buggy,” with numerous software issues requiring a patch. After substantial delay, a patch was released, but it still did not resolve issues.
Opportunities Video Game Consumer Growth: There has been a strong sales increase in the video game market over the past few years and there is still plenty of room for growth. Household penetration of console game systems has not substantially increased in recent years. It seems clear that much of industry growth has come from increased usage with existing customers. There are still plenty of new customers waiting in the wings.
The Interactive Family: Sales figures indicate that there is clearly increased usage of game systems within households. Interactive entertainment is no longer just for the kids, it is now for the teenagers, and increasingly the parents, many of whom grew up with Atari and Nintendo systems. This means more households have several users, own multiple systems and have a tendency to purchase more software per system (higher tie rates).
Worldwide Market Growth: For a company to be successful in the interactive entertainment business it must operate on a worldwide basis. Five years ago this was not the case, and some companies could do well focusing on a single market such as the U.S. or Japan. In recent years, the importance of the Japanese market has declined and much of the market growth has come from North America, Europe and emerging worldwide markets. In the next few years, the console manufacturers are likely to make a major push to enter markets like China and Russia.
Mobile Gaming: The mobile gaming market may have started with Nokia, but it is currently dominated by publisher Jamdat, which was founded in 2000. Market share is quite lopsided to say the least, with Jamdat claiming a stake in nearly one-third of the market at 31 percent and total 2005 revenues expected to hit $80 million. EA is hoping that its sizable acquisition of Jamdat will put it on top of the mobile gaming food chain.
“This is an important strategic acquisition for Electronic Arts,” said EA CEO Larry Probst. “Together we intend to build a leading global position in the rapidly growing business of providing games on mobile phones.”? Online Gaming: Another growth driver for EA is in online gaming. Online game segment growing by leap and bounds. The major factor driving online game playing is increased broadband penetration. Broad band capability in households began to rise sharply in 2002.
Threats Soaring Development and Marketing Costs: Today’s games have entire teams of programmers, graphic artists, game designers, producers and audio technicians. Many games have expensive licenses, utilize Hollywood talent and have high-quality soundtracks. Consumers now expect non-interactive introductions and cut scenes that feature movie-quality computer-generated graphics and/or video with live actors. To get consumers to notice these high-end titles usually requires a marketing budget that equals or exceeds the development budget. As an average game reaches development costs of $5 million and approximately the breakeven point is reaching 500,000 units.
Competition: The software segment of the video game industry is highly competitive, characterized by the continuous introduction of new games and updated game titles and the development of new technologies for creating and playing games. EA has been facing competition from small companies with limited resources to large corporations with significantly greater resources for developing, publishing, and marketing video game software.
Low sales for the new released consoles: Initially, the sales for the new released consoles are slow; as buyers are waiting for the more compelling and sophisticated games. That was happened when Sony launched PlayStation2 and Microsoft launched Xbox Live. And this is the threat for EA again, as all console manufacturers are ready to launch their new 128 bit consoles. (Currently 64 bits) Seasonal Sales: EA’s business is highly seasonal. Sales are highest in the calendar year-end holiday season (about 40-50 percent of the annual total) and lowest in the April-May-June period. Access to distribution channel: Now a days, in video game industry, competition is not only in making state of the art games but also in getting for shelf space for their games. With more than 500 titles for PlayStation, 200 titles for Xbox, and 150 titles for Game Cube, retailers struggled to find shelf space for even the most popular titles.
SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors.