Electronic Arts

Introduction:-The key characteristics of the video game industry till 1995 has gone through 4 phases The rise and fall of Atari: - Atari was one of the early players in the video game industry, who developed a home version of the popular arcade game Pong .First generation machines --individuals to play interactive games on the family TV or stand alone machines. Second generation machine --a programmable video game console with removable cartridges to play different games on a single platform. Soon, the industry was booming with large no. of players entering the market with an intention of getting early profit. This led to introduction of newer platforms and consumers are apparently confused by the number of incompatible platforms and sales dropped drastically. Many consumers started buying software compatible on Atari’s hardware and this led to Atari’s bankruptcy. Nintendo Emerges:- The aftermath of the “crash of 1984” created a favorable environment, which helped the entrance of players like Nintendo .NES also followed “razors and blades” strategy of accepting smaller hardware margins in exchange for larger margins on software. Nintendo was in both hardware and software and maintained its control over number of games produced, underlying hardware, distribution channels and third party software development for its systems .It followed closed architecture platform. SEGA:-A Japanese arcade manufacturer and it introduced 16 bit system called Genesis; it captured the 16-bit system market through improving graphics, color, sound and interactivity. It also quickly established distribution channels in United States. Initially the software was slow to play, but its Sonic was an instant success. Convergence:-Software sales had increased driven industry profits. while competition drove hardware prices down, software remained expenive.By 1993,number of platform manufacturers launched next generation machines based on 32,64 bit processors. And are also designing hardware based on CD-Rom technology. The growth in online services, over which video games could be downloaded directly over the wire, these technological changes had the potential to dramatically upset the structure of the video game industry. The video game industry represented convergence of computer, communication and entertainment industries. Powerful companies started forming alliances to supersede standalone game consoles.

ELETCRONIC ARTS:-Formed in 1982 by Trip Hawkins.EA’s business model was based on that of the Hollywood movie studios. Electronic Arts (EA) is a leading provider of interactive software games across multiple platforms. The company also produces downloadable and online games. The company operates in North America, Europe and Asia. The balance between marketing, product development and senior management was held in place largely through cultural mechanisms and that balance provided EA with a substantial advantage in recognizing and responding to technological change in the industry.

Technological strategy (until 1995):-EA designed software only for PC market. To avoid dependence on any one hardware platform, EA produced applications for a no. of PC systems. EA outsourced all manufacturing and assembly of its software, producing in house only the set of master diskettes, documentation and packaging.

Basis of EA’s competitive advantage until 1995:-Achieved economies of scale and scope in distribution by establishing EA Affiliated labels, acts as distribution arm for products from other entertainment software firms. The usage of direct sales force helped EA in all directions. EA invested in leading edge computer technology, developing hardware tools to help software artists design their products. Usage of celebrities to help design and market EA studio products is part of an overall branding strategy.

EA had developed as a sound reputation for innovative, high quality games and was credited with clever marketing and excellent public relations. EA had developed many hits, no one game had accounted for more than 6% of revenues at any time, which is different from the industry as a whole.

The advantages/disadvantages of developing hardware and software as opposed to software only in the video game industry:-Home entertainment software for floppy disk based computers had experienced steady growth in 1980’s; by 1989 cartridge based home video game systems had emerged as the dominant game platform. The software market for a hardware platform depended not only on the installed base, but also on the tie ratio, the number of software titles sold for each new unit sale of hardware, and the ratios for dedicated game machines were much higher than for PC’s. EA suffered losses in 1989 and