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The Nanyang MBAPage 1 of 14
NANYANG TECHNOLOGICAL UNIVERSITY
ANALYSIS OF TECHNOLOGICAL CHANGEEFFECTS ON THE GAMES INDUSTRY
NANYANG BUSINESS SCHOOLTHE NANYANG MBAB6835 – Competitive StrategyGroup Written Assignment
September 7, 2009
 
Written By:
 
Chong Sheng Jiat, Corey
(Email: chongsj@gmail.com)
Jan Goh Sze Ching
(Email:
 jangohsc@gmail.com
)
Michelle Lau
(Email: laumichelle6@gmail.com)
Vic Hui Co
(Email: vic_co@hotmail.com)
Rabani Gupta
(Email: rabanigupta@gmail.com)
Course Instructor: Prof. Patrick T. Gibbons
 
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INTRODUCTION
The Games industry continuously innovates and makes use of new technologies togain market share. Players include digital entertainment & graphics design companiesthat have revolutionized the way people play games. Most recently, there are newsreports covering the beta launch of Cloud-based Online Gaming Platform calledOnLive that brings games on-demand, anytime, anywhere to gamers all over the world.Our report is a non-exhaustive commentary on the games industry. To aid us inour discussion of the prognosis for the future, we have done a strategic analysis of thetop three players by market capitalization and market segment, and two new entrantsby geographical region (China) and disruptive technology (Cloud).Through our research, we found that thevideo games industry experienced profitablegrowth. Revenue increased for the last 5 yearsat a Compound Annual Growth Rate (CAGR) of17.7% and total market capitalization isestimated to be around $49.6 billion (Figure 1).The global market growth by segment appendedin the table below:The video game industry has been plaguedby
piracy 
since the 1980s. The console and PC gaming segments are the worst-hitdue to rampant hacking. With the advent of the Internet, the video games industrycaptured the lost revenue (of traditional consoles & PC games to piracy) by capitalizingon consumers’ preferences of
collaborative play 
and the
multi-user environment 
inthe online gaming market. This accounted for the large difference in CAGR of thesesegments. Although with technology advances to deter piracy (e.g. server-side securityfirewalls, game protection technologies and password protected logins for users), it didshift the distribution control back to the game provider, pirated PC games stillcontinued to be sold.Moving forward, our report will analyze the key players in this industry andpostulates how the future will look like for the video games industry.
 
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Blizzard, 62%NCSoft, 14%Jagex, 8%Square-Enix, 3%Ankama, 3%Sony, 2%Others,8%
Figure 2: MMOG Market ShareSource : Business Insights Ltd
 KEY PLAYERS IN THE GAMES INDUSTRY
1. Activision, Inc. & Blizzard Entertainment Activision, Inc.’s Positioning & Key Strategic Moves - 
The year 2006 marks thebeginning of transition in consoles and shift in consumer demand away from thecurrent generation software to new consoles. Activision had established an earlypresence in next-generation platforms since 2004 by forging several key alliances andexpanded into new geographies. In one such move, Activision and NielsenEntertainment entered into a strategic alliance to jointly create a reliable measurementof the effectiveness of
in-game advertising 
(Activision, Inc. Annual Reports 2004-07).
Activision’s key strategy was simply to create, license and acquire a group of highly recognizable brands, and market them to a variety of consumer demographics.
Activision actively pursued game title development that is compatibleto all new console platforms (e.g. Sony PlayStation 2 and 3, Nintendo GameCube,Microsoft Xbox, Nintendo Game Boy Advance, PlayStation Portable, Nintendo DualScreen and Nintendo Wii). Given their large and growing installed base, they had aclear strategy in place to build significant presence at the launch of each new platformwhile being careful not to move away too quickly from the current generation platforms.
Blizzard Entertainment’s Positioning & Key Strategic Moves - 
BlizzardEntertainment was founded in February 1991 by three UCLA graduates. After a seriesof product launches, the company created Warcraft in 1994 and the breakthroughMMOG version World of Warcraft (WoW) in 2004. WoW boasts monthly subscribers of11 million around the globe today. Blizzard has a culture that champions bothproductive and experimental creativity which inspires devoted players. Jeff Green,editor-in-chief of the online gaming magazine 1Up.com says,
“[Blizzard people] are essentially design geniuses, making games easy enough for casual players and deep enough to attract and hook hard-core players. Simple to learn, difficult to master is the holy grail of game design, and Blizzard does this every single time.” 
Blizzard Entertainment dominated theonline gaming segment with 62% market
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