P. 1
Electronic Arts in the Gaming Industry

Electronic Arts in the Gaming Industry

|Views: 449|Likes:
Bachelor Thesis for Business Administration & Service Management at Copenhagen Business School, 2012
Written by Christian Haulrich and Michael Soelberg
Awarded as "Best Bachelor Project 2012" (BSc SEM)
Bachelor Thesis for Business Administration & Service Management at Copenhagen Business School, 2012
Written by Christian Haulrich and Michael Soelberg
Awarded as "Best Bachelor Project 2012" (BSc SEM)

More info:

Published by: Michael Dimitri Soelberg on Oct 09, 2012
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
See more
See less

05/10/2013

Sections

Bachelor Thesis May 2012 Copenhage n Bus iness School Business Administration and Service Management

ELECTRONIC ARTS IN THE GAMING INDUSTRY

by

Christian László Mrázik Haulrich Michael Dimitri Soelberg Characters (w. spaces), excl. TBC, REF and APP: 144.104

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Table of Contents
Prologue Project Statement Project Framework 1. Methodology 1.1 Theory of Science 1.2 Choice of Theory 1.3 Quantitative and Qualitative Empiricism 1.4 Limitations 1.5 Definition of the Gaming Industry 2. The Gaming Industry 2.1 Overview of Industry Growth Trends 2.2 Game Development 2.2.1 Concept and Business Models 2.2.2 Developing the Game 2.2.3 Post-development 2.2.4 Feature Creep 2.2.5 Crowdfunding 3. Electronic Arts 3.1 Reaching for a Market Leader Position 3.1.2 The Initial Vision 3.1.3 Changing Course 3.1.4 Rethinking the Strategy 3.2 The Current Situation of EA 3.2.1 The Current Strategy and Structure 3.2.2 The Value Network of EA 3.3 EA and Industry Attractiveness 3.3.1 Bargaining Power 3.3.2 The Three Threats 3.3.3 Alliances and Rivalry 3.4 Origin 3.4.1 Aspect of e-Customer Relationship Management 3.4.2 Increasing Reach and Richness 3.4.3 “Catching-up” on Competitiveness 4. Research Analysis 4.1 Quantitative Survey Results 4.2 Qualitative Insights from an EA Representative 5. Discussion 6. Conclusion 7. Epilogue and Perspectives References
Appendices are found in the accompanying compilation: (p. 72)

p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p. p.

2 3 3 4 4 5 7 8 9 9 10 14 15 16 17 18 18 20 20 21 21 24 25 25 27 30 30 33 36 38 40 42 45 47 48 49 50 61 63 65

Electronic Arts in the Gaming Industry | Table of Contents

1

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Prologue
Steadily, people are starting to realize what a colossal magnitude and complexity the gaming industry encompasses, along with the vast potential and significance it reflects on the global spheres of economy, entertainment, and virtual social interactions. The conventional media has long been harboring disdain towards the gaming industry, repeatedly stressing that the industry is primarily capable of creating time-wasting products and titles suited solely for children. However, this viewpoint has consequently forgotten to shine a light upon the older contingent of gamers who, first of all, have been forced into a demographic in which they did not belong, and second, were the people that actually contributed the most to the industry in both terms of revenue and engagement. In reality, gaming is not a variety of entertainment far off the traditional practices spending time on enjoying a television show or going to the movies. However, video games take in the unique trait of interactivity, which often can cause a higher degree of commitment offered by any other entertainment type. However, this specific attribute has in countless cases led to certain extends of addiction amongst the consumers of video games, which again has put the industry in a bad light. This may also have a relation to why many people even generate certain mental pictures and stereotypical ideas when confronted with someone who admittedly enjoys the virtual world of video games. Ultimately, this could explain why the industry has been taken for granted for such a long time, with only a few people actually comprehending its gravity in terms of economic and business potential. Yet, highly driven by the creativity of a large number of video game publishers and developers, the gaming industry has experienced a frequent and sturdy growth throughout the past many years and is progressively attracting awareness. At the same time, however, this has gradually induced a dynamic industry driven by competition and a constant necessity for developing innovative approaches towards novel strategies and business models, while rightfully addressing the demands of the increasingly empowered consumer-base and ensuring company profitability. These contemporary events and issues constitute the fundamental point of interest of this thesis.

Electronic Arts in the Gaming Industry | Prologue

2

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Problem Statement
The problem of this thesis is found in the industry of digital games, more specifically oriented around the company Electronic Arts (EA). The basis of the problem is that EA experienced a string of bad bottom lines throughout most of the past decade, supplemented by a generally bad reputation among industry experts and consumers alike. The company came under new leadership in 2007, with the new CEO more or less immediately initializing a cost reduction plan and an extensive restructuring of the organization. These measures were officially recognized, by EA, to be an effort to survive in the industry, in light of having failed to keep up with recent industry trends. Seeing a general performance improvement, EA finally achieved a positive bottom line in 2011. The core of the problem is consequently, whether or not this improvement is sustainable in relation to remaining competitive and continuously keeping up with current trends of the dynamic gaming industry. A preliminary assumption is that the digital transformation of the industry is a primary factor, to which follows that the launch of EA's own digital distribution service "Origin" will be the potential solution-oriented focal point of the thesis, in relation to assessing its importance for the continued functioning of EA as a major player in the gaming industry.

Project Framework
Problem formulation "How does, and should, digital game developer and publisher, Electronic Arts, go about meeting current trends within the dynamic gaming industry, in relation to remaining competitive, and can their new digital distribution system 'Origin' be considered the primary initiative in this respect?"     
 Porter's Seven Empiricism Forces, e-Customer Relationship Management, Marketing mix (4Ps), Economies of Network, Value Conversion Network Financial industry reports, Internet-based quantitative survey, Correspondence with Nordic Marketing Director of EA - Morten Nielsen

How has the gaming industry evolved in the recent years and what are the current major trends and features? Which kind of corporate structuring, value embedding, business models and growth strategies do EA utilize? How does EA stand, in terms of potential for competitive edge, and in relation to industry attractiveness? What is the significance and possibilities of EA's new digital distribution system, 'Origin'? How important is the gaming culture's perception, in relation to current and future challenges for EA?

Analysis of EA with an ongoing focus on the gaming industry Discussion → Conclusion → Perspectives Electronic Arts in the Gaming Industry | Problem Statement 3

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

1.

Methodology

This preliminary paragraph will be focused around explaining the methodological foundation of the thesis, through definitions of the employed theory of science, chosen theory, and generated empiricism. These are all chosen with the ambitioned purpose of developing the required knowledge for competent approach of the thesis' problem statement. Yet, it is of importance to mention that the methodological decisions made throughout the thesis, have followed an emergent and partly implicit progress. Thus, a substantial weight has been put on the theoretical and empirical analysis while, however, still avoiding employment of contradictory assumptions within the same analytical framework (Olsen, 2006).

1.1

Theory of Science

The primary research analysis employs hermeneutics in context to achieving a coherent understanding of the various components and issues presented within the thesis, through interpretation of the chosen literature, theories and the generated empiricism. This is partly done through the more traditional ideals of hermeneutic interpretation model, where the acting elements are understood on their own premises and in their own historical context. However, the existential ideal of hermeneutics by Hans-Georg Gadamer will additionally be employed in order to simultaneously interpret the contemporary meanings and outcomes of the theoretical literature (Andersen, 2007). In this context, it is also noteworthy to mention that all the presented aspects within this thesis are selected, understood, and highly influenced by the authors' legitimate interest towards the elements of the gaming industry. Having followed the industry for many years and personally experienced the progressive development within games and game-related services, the conclusions drawn in this thesis will be widely affected by knowledge that is constituted by both truths and the authors' own beliefs and understandings. This reflects the presence of an ontological aspect of subjectivism, or specifically the term of social constructionism, in the research of the thesis. At the same time, the analytic-synthetic method is deployed as a methodological approach to objectively interpret the employed theory and empiricism. This is done through the process of fragmenting the problem statement into manageable sub-elements. Thus, each

Electronic Arts in the Gaming Industry | 1.

Methodology

4

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

central component and particular issue that can influence the main research problem is structurally assessed in detail, before being merged back into a proposal for problem solving of the thesis (Ingebrigtsen, 1993). The use of the analytic-synthetic method is relevant for understanding how the various features, of EA and the fairly complex gaming industry, function as separate entities, before eventually discussing how these influence each other. The thesis adapts a combination of deductive and inductive reasoning. Primarily, inductive reasoning is applied as a "bottom up" approach to the observations made in the thesis' research process. Individual instances of the gaming industry and EA have shaped tentative hypotheses, which have led to the creation of broader generalizations and theories, drawn upon in the closing stages of the thesis (Thúren, 2012). Deductive reasoning, on the other hand, serves a "top-down" approach in showing that a novel theory must follow the phases of testing hypotheses and addressing results with observations, in order to confirm and plausibly draw certain conclusions (Trochim, 2006). This approach is relevant for the thesis' assessment and utilization of the chosen theories and empirical findings. It is essential to mention that while the primary purpose of the thesis is not to validate the employed theories, these will eventually be approached critically in order to generate a more comprehensive understanding of the various acting elements.

1.2

Choice of Theory

The value chain is a theoretical framework concept which explains how value is added as a products passes through various stages and activities of production or development. In the world of game development the value chain is constructed by the principles of value-adding, although with a slight diversity presented through distinctive and unique cross-activity integration. This also signifies the importance of the value conversion network framework which is the theory of how value exchange and conversion between different roles of development are essential to the final product. As a major developer, marketer, publisher and distributor of video games, these factors play a significant importance in regards to EA's strategic approaches.

Electronic Arts in the Gaming Industry | 1.

Methodology

5

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

The concept of e-Customer Relationship Management (e-CRM) encompasses the four elements of; customer selection, acquisition, retention, and extension, while presenting a framework for increasing activity richness, through electronic consumer interaction (Jelassi, 2008). With the Internet permeating all activities within a company's value chain, the importance of e-CRM is undeniably emerging in the creation of viable strategies which are able to generate value on the global digital market. The theoretic implementation of e-CRM will be in context to EA's digital distribution platform, "Origin", and will primarily address its current development stage and the strategic approaches for increasing market share, consumer value-perception, and lock-in effects. In addition, a theoretical approach of postmodern style of management discipline will be included in relation to e-CRM, as it touches upon the controversial idea, that consumer identity is no longer structured in specific patterns, thus, shifting the conventional utility of market segmentation. In development of strategies and market manufactured goods, marketers usually employ the four strategic elements of: product, price, place, and promotion. These are referred to as the "4Ps" or the marketing mix and represent part of the necessary ingredients in order to fashion viable strategies for profitably meeting customer needs and demands in a competitive marketplace (Lovelock, 2011). These elements will be included in the analysis of the Origin platform with the purpose of determining the competitive strengths of the current and future strategic implementations of products and services. Although the framework of the marketing mix has been commonly expanded by three additional elements of people, physical evidence, and process, these will not be directly highlighted in the analysis of Origin. Instead they will passively be included in the overall analysis of both EA and Origin. Porter's Five Forces framework for industrial analysis and strategy development derives five forces used as a platform for determining market attractiveness based on competitive intensity. The attractiveness is referred to as the general profitability of an industry. In the original framework this is affected by forces of supplier and customer bargaining power, threat of new entrants and substitute products, and competitive rivalry. The sixth and seven forces have since been added to the framework, as a form of constructive criticism of the

Electronic Arts in the Gaming Industry | 1.

Methodology

6

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

original design, being respectively complementary products and services facilitated by strategic alliances, and the threat of public regulation. In the context of the gaming industry, this model will be used for assessing the different forces affecting the current markets in which EA has a presence, in relation to the company's current struggle for market share. Economies of network, relate to the concept of network externality, explaining that each user of a product or service has an effect on the value accumulation for the rest of the user network. These three concepts will be used to describe some production-oriented decisions of EA, while the economies of network will primarily be applied to Origin and the specific approaches towards cross-platform integration and the registration system, "Nucleus".

1.3

Quantitative and Qualitative Empiricism

This thesis features a quantitative, web-based survey (presented in appendix section C), prepared using a student license to the “Enalyzer” survey software (enalyzer.com) and conducted with a purpose of gaining an insight on people’s relations to-, knowledge off- and experiences with digital distribution platforms. The main part of the survey includes 32 spreadsheet questions (show in appendix section C) surrounding the growing trend of online distribution platforms, while also taking digital rights management, piracy, and other contemporary issues within the gaming industry into consideration. The survey link was posted electronically as an open event invitation on our personal Facebook accounts and on the gaming-community websites: gaming.dk, gaming.fo, and invicemsensus.shivtr.com. The choice of communities signifies our wish to examine perception within the gaming subculture. Upon the survey’s closure after approximately 6 days, a total number of 233 participants had replied to the questionnaire, which can be considered a fair amount in relation to the specific purpose of the thesis. However, as it is a quantitative survey conducted via the Internet there are several reliability issues needed mentioned. Generally, surveys of this nature have a moderately high statistical uncertainty due to misinterpretations of the questions, error acts (such as miss-clicking), non-respondent percentage, and biased answers which can be influenced by different factors and do not reflect the genuine view of the participant. Using the commonly used confidence level of 95%, which also seems appropriate in light of our personal expectations, the computed
Electronic Arts in the Gaming Industry | 1. Methodology 7

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

margin of error, with 233 participants, is slightly above +/- 7 percentage points. This of course means that some of our results, in which opposing statements have relatively even dispersion, a possible trend in true values may go unnoticed. The questionnaire has however been constructed to mitigate the drawbacks of a small sample size, as best as possible, by including both multi-facet questions and the possibility for open answers, in supplement to traditional multiple-choice-questions. All these will be used to support arguments made in relation to ongoing and future gaming industry trends, in the discussion part of the thesis. The search for a professional and qualitative insight on EA resulted in a correspondence with Nordic Marketing Director and Marketing Manager of EA Denmark, Morten Nielsen. The initial goal was to perform a qualitative interview however this approach was not a possibility for Morten Nielsen, who instead offered to answer the prepared questions by email. The questions were divided in two major parts, the first one concerning EA's digital distribution platform Origin, while the second half focused on EA's organizational structure and strategies. The answers are presented in appendix section D, and will be implemented as qualitative reference points throughout the thesis' concluding parts.

1.4

Limitations

To keep the thesis in line with the intended focus of exploring EA, it is naturally important to uphold to certain restraint of inclusions. One such limitation is the rather broad aspect of non-entertainment use of games. An example of this could be research into any possible behavioral or psychological side-effects, which according to some sources, are caused by certain types of games. Such issues are tied to both the psychological aspect of human susceptibility to media, especially that of interactive nature, and the legislative aspect of censorship. Only the latter of these will be briefly touched upon. In other words the thesis will be prepared under the assumption that games are made for the purposes of profit and entertainment, for developer and customer respectively, with a limitation from the purpose of games as social experiments. It should however be noted that the thesis will not contain a comprehensive financial analysis of EA, but rather utilization of key figures to the extent which is relevant for the problem statement. Another limitation is the threat of hackers and security breaches, which we consider to be a near-unmanageable issue.
Electronic Arts in the Gaming Industry | 1. Methodology 8

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

1.5

Defining the Gaming Industry

The lack of a standardized and formal definition of the gaming industry results in the term being used in a variety of different ways with inconsistent classifications of the acting elements. Thus, this thesis will continuously and consistently utilize the term for an industry supplied by publishing and development ventures that create and distribute electronic video games through both physical and digital distribution channels. These games are played on various enabling hardware – PC’s, consoles, mobile phones, and wireless devises - which however have to be excluded when assessing the total revenue stream of the industry. In terms of referring to the actual game products, a variety of denotations will be used, including, but not limited to; video games, digital games, electronic games etc.

2.

The Gaming Industry

In 2008, the world's largest professional services firm, PricewaterhouseCoopers, published a comprehensive report on 'Global Entertainment and Media Outlook', which offered an indepth global analysis and a five-year growth projection of the future of gaming (shown in appendix 1A). The statistics indicated that the global video game revenues grew from $21,88billion in 2002 to $41,9billion in 2007 - a total revenue increase of $20,02billion over a 5 year period. Headlining the report, was an estimated compound annual growth rate for the global gaming industry in the timeframe from 2007 to 2012, where sales were expected to rise from $41,9billion to $68,4billion. Interestingly, the report study also underlined several predictions in context to how different sectors of the industry would develop in the future. Console and online games were expected to grow massively and thus lead the way in terms of sales through to 2012, while PC gaming in general was expected to experience a small downturn in revenue percentage due to fewer quality game releases. Nevertheless, digital distribution channels were expected to enjoy continuous growth, just like the influx of video game advertising ventures would create a profitable and growing business for in-game advertising. Lastly, the formerly oft-ignored mobile gaming market could expect an substantial increase, with predicted sales rising from $5,6 billion in 2007 to $13,5 billion in 2012 (ARS, 2008).

Electronic Arts in the Gaming Industry | 2. The Gaming Industry

9

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Now, the big question is whether these predictions were credible and to what degree these estimates made in 2008, align with the current industry position of 2012. A research report conducted for RW Baird (international financial services) by industry analyst Colin Sebastian indicate that the games industry revenues for 2011 exceed $60 billion, with an incessant growth rate of 10% annually, hitting an overall industry revenue of $80 billion by 2014 (Industrygamers, 2011). Moreover, the research show that while some areas of the games business, such as PC and handheld game sales (for PSP, Nintendo DS etc.) will either remain flat or even decline, these will be offset largely by the growth of the market for downloadable content, mobile and social networking-based games. The integration and transition to digital distribution models is also seen as a major and essential trend within the industry, however, the research stresses that many video game companies will struggle through this transition (Industrygamers, 2011). Overall, the research report conducted for RW Baird is coherently reflecting the anticipated growth figures made by PWC in 2008, which indicates that the gaming industry is dynamically evolving. However, the lack of standardized industry definitions and techniques for measurement of global industry revenues and growth-rates has made it difficult to pinpoint exact statistics, and both reports are highly influenced by estimates and forecasts. To exemplify, a report from technology advisory firm Gartner Inc projected that the gaming industry revenues would pull in $74 billion in 2011, and a staggering $115 billion a year by 2015 (Joysitq, 2011). Thus, while these estimates may provide a useful, however accurate, view on the magnitude of the gaming industry, they also serve the equally important purpose of specifying some of the most important ongoing industry growth trends.

2.1

Overview of Industry Growth Trends

This section of the thesis will present a non-prioritized list of the ten most prominent trends affecting the development of the current gaming industry. The design derives from the authors' personal experiences and knowledge, in combination with historical and present interpretations of the gaming industry.

Electronic Arts in the Gaming Industry | 2. The Gaming Industry

10

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

1) Growth of broadband and cheapness of computing power: The network infrastructure has drastically improved in line with the ongoing demographic increases of households' access to broadband traffic, due to the technological progress of creating better and cheaper Internet experiences through enhanced bandwidth. In addition, the fast-passed technological evolution has enabled cheaper access to potent hardware, such as PC's, gaming consoles, and mobile devices. Thus, as the technological necessities of the gaming industry become more accessible to a wider demographic segment, the industry attracts more clientele.

2) Adaptation of more robust wireless networks and Smartphones In addition to the first trend, the technological progress has enabled capabilities of quality, high-speed wireless networks, which has increased deployment of wireless handheld devices and Smartphones. Thus, a progressively growing number of people are always connected to the Internet, which produces a potential consumer base that is possible to reach independent of place and time. This has opened the opportunity for the gaming industry to take part in the valuable delivery of data services, primarily in the field of mobile-platform games. 3) Increased reach through maturing of the consumer base Historically, video games were primarily developed for entertainment purposes of children. However, the maturing of a tech-savvy generation raised with computer and video games along with a general attraction for entertainment that allows users to direct, control and interact with virtual environments, has had its effect on the gaming industry. According to the most recent studies made in 2011 by ESA i , the current industry age distribution of video game players consists of: 18% under 18 years, 53% between 18-49 years, and 29% over 50 years. This makes the average game player 37 years old (ESA, 2011), meaning that the present consumer segment has more disposable income than previously assumed. Additionally, the lifespan of the targeted demographic increases as more adults are playing games, which in turns leads to market expansion (Shah, 2005).

Electronic Arts in the Gaming Industry | 2. The Gaming Industry

11

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

4) Industry consolidation The growth in the gaming industry has led to a significant trend of consolidation, as leading companies striving to gain control of a larger market share and generate more revenues. Historically, publishers and developers were two separate and independent entities of the game development process. However, many large publishers have engaged in acquisition sprees, taking over developers in order to gain competitive advantages through development expertise, proprietary technology, and intellectual property, while effectively blocking out other publishers (Shah, 2005). Consequently, the gaming industry can now be characterized as a dynamic oligopoly, as it is a continuously growing industry, vastly dominated by a small number of large companies, each one responsive to the action of the others. This has shaped industry features of extensively high entry and exit barriers, maintaining interdependence between the existing firms, while new competitors can hardly enter the market at the same scale and scope (Page, 2009).
5) Increased developer autonomy and larger-scale productions

When the industry began to consolidate, there was a trend of many formerly independent developing studios being caught up in corporate cultures foreign to them, and put under management which ended up inhibiting their creative processes. However this was of course realized to be counterproductive, resulting in the bigger game developing and publishing houses resetting their strategies towards allowing a higher degree of independence and autonomy for new studios, post merger or acquisition. This creative freedom has been an enabler for games reaching new heights in terms of production value, as games are becoming more story-driven, which signifies the need for more emphasis on development aspects such as the writing side of production, and voice-acting, both highly labor intensive and costly activities. 6) Infrastructural development and increase in complexity of piracy counter-measures The first and second industry trends have significantly influenced the underlying support mechanisms to distribute or play digital content. Video game distribution and sales was traditionally an exclusively physical practice where games were solely produced on physical

Electronic Arts in the Gaming Industry | 2. The Gaming Industry

12

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

media (CD's, DVD's etc.) and sold through brick-and-mortar retailers. However, the quality and speed advances of bandwidths has opened up possibilities for distributing digital content through online channels, which has created a whole new market within the industry. The progress of software capabilities has made the Internet experience smoother, more convenient, and easier to use especially in relation to content publishing (Jelassi, 2008). Many companies have already grasped these impending advantages and developed digital distribution platforms, which not only act as mediums to publish content and cut distribution costs, but also serve the purpose of creating complex piracy counter-measures through e.g. requirements of constant online connectivity to authenticating servers. 7) Creation of new business models The recent years of the gaming industry are characterized by the intense inventiveness in development and implementation new business models. Commonly games were either sold as finalized and fully contended products at standardized prices or given free trial products. Today, however, digital content is released through a widespread variety of latent monetization methods. Some of the leading business model trends within the industry relate to: subscription models ii, micro-transactionsiii, in- and around-game advertisements, and downloadable content iv (Wordpress, 2008). Thus, through utilization of these methods, developers and publishers can break free of the need to charge premium prices for products in order to offset production costs. In particular, the rise of social networking sites (primarily Facebook) has constituted a new industry market for free-to-play, social networking site games that can easily attract an enormous user segment while generating profit through e.g. micro-transactional models. 8) Focus on cross-platform integration As many of the previous trends indicate, digital games are no longer restricted to PC or console platforms. Mobile devices and Internet browsers are becoming an equally viable and attractive source for spreading digital game content. In turns, industry publishers and developers have seen a potential in creating franchised digital content that can be integrated across every single platform. Moreover, several ventures have also realized that incorporating a social aspect into the cross-platform integration could enhanced perceived
Electronic Arts in the Gaming Industry | 2. The Gaming Industry 13

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

value by letting users interact with one another regardless of hardware devices and location. Purposely, most developers and publishers are now reacting to the social networking trend and incorporating this feature into their products as a means of creating socially interactive networks, enabling possibilities cooperative and competitive game-play. 9) Increased focus on customer relationship management and the empowered consumer Game companies are extensively employing a large amount of resources in order to attract new customers while simultaneously retaining existing ones. Both games and the surrounding gaming services are continuously enhanced through extensive feature flows, aiming at infusing customers with perceptions of value and loyalty. However, in order for these to fulfill their primary purposes, a major and ongoing focus on amplifying the richness of interactions and relationships between customers and game companies is required. Due to its creative characteristics, the gaming industry can also be regarded as dealing with 'symbolic goods', meaning that the value of product and services is primarily determined by the interpretations of each individual consumer (Bilton, 2011). This has in turns triggered the trend of the empowered consumer. Thus, decisions made within development of games and supplementing digital content are no longer uniquely bound to game companies, as consumers express increasing requests to influence these processes in order to shape the most fitting and optimal products. 10) The rise of crowdfunding and independent developers Lastly, it is essential to mention the trend of crowdfunding, which primarily functions as a financial support mechanism that allows small and independent game publishers and developers to take a step beyond the vast entry barriers of the gaming industry.

2.2

Game Development

Gaining an understanding of factors pertaining to conceptualizing and developing a game, helps set the premise for the later analysis of the current activities of Electronic Arts.

Electronic Arts in the Gaming Industry | 2.2 Game Development

14

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

2.2.1

Concept and Business Models

Conceptualizing the idea for the game is the first step which the developers have to take. The initial idea can for example be based on original work, or an established intellectual property. Moving on from the base idea, early contemplations must include which genre the game will be and which core features are intended. The features of the game, the genre and the idea must somehow make sense aligned, in order for the game to be marketable. Another early decision, which has only become more relevant with time, is the scope of the game, e.g. a single-, multi, or massively-multi-player game (Fields, 2010). This also signifies how business models have to be deliberated in this phase, seeing as the different scope have different levels of post-launch developer commitment associated with them, with MMOs requiring the most maintenance which is often sustained by monthly subscriptions. Other business models include games with micro-transactions and downloadable content, with the first being more oriented around minor content elements which are purchasable in-game, while the latter are major content updates which expand the scope of the game. The traditional model of a premium priced game, released in its entirety, still exists, however it is becoming less common. Another related aspect is advertising in games, which can be found in the form of games with a partially or fully ad-supported business model. Although it took some time for marketers to realize it, games are becoming a highly viable advertising medium. In fact, the simpler assortment of game-based marketing can be directly related to the commonly utilized advertisement techniques, such as commercials and product placements, in traditional media channels. These same techniques have been developed and researched for decades, and with the major growth and consumer interest towards the gaming industry, it is of no surprise that marketers are applying them to games. However, games possess the exquisite characteristics of being interactive mediums, which provides great opportunities for innovative twists to prior marketing methods (Edery, 2009). Simply put, while in-game advertising defines the process of serving ads into game environments, the nuances can vary considerably.

Electronic Arts in the Gaming Industry | 2.2 Game Development

15

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

In-game advertising can be divided into two forms, namely around-game and in-game. Around the game, advertisement experiencing occur exterior to the context of actual gameplay. Examples of these are illustrated by ads placed as banners in web-browser games or appearing as videos during the startup phase of a game (Edery, 2009). The opportunities of these techniques are primarily determined by the growth of the free game market, which in turns reveals their effectiveness. The fast passed, massive, and constant release of new games following the free-to-play model has proved the receptiveness of consumers towards these ad-supported versions. A perfect example can be given through WildTangent - a game network that created the "Brandboost" platform, specifically designed for exterior game advertisements (appendix B1). In-game advertisement, on the other hand, is especially interesting considering that the time spent on a video game can reach tens or even hundreds of hours, being a level of exposure which no single film or television show can match. Thus, integrating advertisement directly into games provides a variety of opportunities in relation to product placements and brand exposure as part of actual gameplay. Yet, there are certain requirements for effective and functional realization of such ads (Edery, 2009). The best in-game advertisement is consistent with the entire virtual environment and can even make gameplay experience seem more realistic. At the same time mismatching in-game advertisement can result in severe negative impacts, especially if the ad implementation contributes to immersion breaking, inconsistency, and does not obey the same laws of physics as the rest of the virtual environment.

2.2.2

Developing a Game

The essentials of developing a game, in the context of this thesis, can best explained through reflection on the value-embedding activities of a game studio. Considering the traditional Porter value chain framework, as seen in appendix A2, the value of a game relies heavily on operations, in the form of a layered process of conceptualizing, coding v and testing. The supporting activity of human resources management is consequently essential, seeing as value-embedding within before mentioned operations, is both highly labor-intensive creativity-driven. In other words it is key to put together and maintain a functioning team.
Electronic Arts in the Gaming Industry | 2.2 Game Development 16

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

This has become quite similar to putting together a crew for a movie production, especially within bigger game developers, with job titles such as lead designer and lead writer, having the same media-attention and fan-responsibility as a director and script-writer respectively in movie-making. Having the right development team has really come into significance due to the increased transparency of the development process, which in large parts can be attributed to the advent of the internet. Before the internet, insight into games was confined to monthly magazines, while the film-industry enjoyed marketing-channels such as movie trailers and on-set interview broadcasted on television. However the internet has opened the possibility for the game-industry not only to showcase games, but also to communicate directly with consumers. Many game development teams consider connectivity with the fan communities so important that a community manager is assigned, who is responsible for presence on the various social networking sites, and the game's official discussion forum.

2.2.3

Post-development

Eventually the game is released, however this has become quite more complex than simply shipping out a product. With the advent of the internet, and especially in recent years where fast internet connections have become a standard in households, it has become common to release an unfinished game, with known errors still unfixed. The reasoning behind this is that the game developers can update the game, and then make these so called "patches" available for download. All in all, the distribution of games has truly seen a paradigm change in recent years, with companies focusing more and more on digital distribution. This is also signified by the before mentioned business models of releasing purchasable downloadable content. Sometimes these DLC, as they are known, can contain major updates to game features, or important parts of the game story, a fact which has fostered much controversy within gaming media. Another aspect of the digital transformation of game releases and distribution is the aspect of piracy, meaning illegal downloading of games off the internet. To mitigate this issue most games are released with some sort of protection, with the simplest form being a serial code received upon purchase which should then be entered upon installation. Lately however the
Electronic Arts in the Gaming Industry | 2.2 Game Development 17

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

concept of digital rights management, also known as DRM, has become prevalent security again piracy (EuroGamer, 2011). DRM basically refers to management of the end-users access to the game, which for example can be done by making a game playable only while the player is online and verified as a legitimate customer by the servers of the developer. This trend has also sparked controversy, causing inconveniences, annoyance, and potentially the loss of a sense of ownership over the product.

2.2.4

Feature Creep

Feature creep or creeping featurism describes an ongoing tendency for expanding or adding a number of additional features in a product. In video games this process can occur during the initial development stages or as a part of after-release downloadable content packages or updates. The general logic behind the desire to implement a continuous flow of new features is that value and competitive advantages can be achieved by adding extra content to a product. Thus, when a product has reached a point of finalization able to provide the expected and initially desired functionality, the manufacturer is left with a duality of choices. Keeping to the original version may cause the final product to suffer from an apparent lack of improvement due to decisions of not implementing additional features. Therefore, most common causes of feature creep are related to an objective of increasing sales or distribution by offering consumers more attractive and functional products. However, the aim towards over-complication may just as well result in unnecessary features saturating or 'creeping' into the development phases, eventually slowing and complicating the whole process. Thus, while adding complexity to a product may satisfy a small segment of expert consumers, the majority user base will possibly not value - or even dislike - the features. Especially within the gaming industry, feature creep can therefore prove to inflict fairly crucial consequences to game and service platform development (SearchCIO, 2005).

2.2.5

Crowdfunding

Considering the increased role of the consumer community upon the development process, design, and content of games and other digital products, it is interesting to mention the phenomenon of crowdfunding. The actual term "crowdfunding" stems from the broader

Electronic Arts in the Gaming Industry | 2.2 Game Development

18

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

concept of "crowdsourcing", which describes the process of using a crowd of people, often anonymous individuals, drawing on their assets in order to obtain ideas, feedback, resource knowledge and expertise, helping the development of corporate activities (Hemer, 2011). Particularly for the case of crowdfunding, the objective is to generate a sufficient amount of financial assets (money) to cover the investment costs of a specific project. Thus, instead of raising investment funds from a small group of sophisticated investors, the general idea of crowdfunding is to engage a very large audience, where each individual will contribute a very modest amount in the form of equity purchases, loans, donations or pre-ordering of the product to be produced (Lambert, 2012). In reality, the mode of "crowd" financing is not really a novelty. The innovativeness in crowdfunding is essentially the ability to exploit the Internet and the associated capabilities of both social networking and viral marketing, allowing for an incredibly fast and numerous mobilizations of users within the online community, who are interested in supporting specific efforts initiated by people or organizations (Hemer, 2011). In context to the gaming industry, several crowdfunding platforms with support for game development projects have emerged during the recent years (see appendix B2 for the example of "Kickstarter"). These platforms play the roles of intermediates between entrepreneurs and potential crowdfunders vi, providing each other with various network benefits through the created two-sided market. Capital seeking ventures can benefit from exploring several information motivations going beyond the primary goal of raising money, using crowdfunding as a promotion device, a means to support mass customization or userbased innovation, or simply for gaining more knowledge of the consumer preferences. Crowdfunders (also called: backers), on the other hand, may benefit from the platforms solving asymmetric information issues by facilitating interactivity between the user network, such as the ability to post comments on forums and observe contributions of other crowdfunders (Lambert, 2012). This may effectively optimize learning of product quality, create attention and determine market potential. Thus, crowdfunding can be utilized as an implication to reach beyond the mere financial sphere of the venture and be seen as flow of information that can create a relationship between customer and supplier, while constructively developing corporate activities.
Electronic Arts in the Gaming Industry | 2.2 Game Development 19

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

3.

Electronic Arts

Electronic Arts, Inc. is an American gaming company, partaking in development, marketing, publishing, and distribution of digital games. The company is made up of several separate studios and brands organized around different operating labels, specializing in various game types and platforms (Reuters, 2012). The four main labels are EA Games, EA Sports, EA Play and EA Interactive. EA Interactive, and its subdivision EA Mobile, deal with interactive internet games and mobile content for devices such as smartphones and tablets. The business models surrounding these types of games are frequently micro-transaction or advertisement based. EA Play is the label directed towards so called casual and nontraditional gamers. Examples are various simulation games and digitalized board games, which are targeted at customers not traditionally associated with video games. EA Sports, as the name reveals, publishes all games related to sports. The last label, EA Games, represents the majority of development studios under the EA brand, responsible for genres, including but not limited to, role-playing, action-adventure and combat. An important sub-division of EA Games is BioWare, a studio which focuses on high quality, story-driven games, and which has recently reintroduced the MMO-oriented subscription-based business model to EA's portfolio. Many of the studios under EA Games are in fact former independent companies having become a part of EA through a dedicated acquisitions strategy. EA, currently employs nearly 8 thousand individuals and has had a reported annual revenue ranging from 3,5 to 4 billion US$ in recent years (GNAS, 2012). The main competitor of EA is generally considered to be AB, Inc., which is currently running with a higher operating income and total revenue (GNAS2, 2012). On a similarly off-putting note EA has recently been voted "worst company in America" by readers of consumer affairs blog, "The Consumerist" (MCV, 2012). EA officials have however reportedly responded to this dubious honor, rather dismissively.

3.1

Reaching for a Market Leader Position

EA is generally considered one of, if not the, biggest companies within the gaming industry. To better understand the current company structure and strategies of EA, it is relevant to

Electronic Arts in the Gaming Industry | 3.

Electronic Arts

20

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

shed light on some of the main milestones and turning points in the history of the company, which have paved the way for EA to become the game developing and publishing powerhouse that it is today.

3.1.1

The Initial Vision

Electronic Arts was founded in 1982 by a man called Trip Hawkins, having left his position as Director of Product Marketing at Apple Inc. in order to pursue his own vision of publishing games with a focus on scouting and promoting talent among developers and programmers, but with no internal studios and game development. The company was originally incorporated as "Amazin' Software", a name disliked by the early employees, many of which were Hawkins' former coworkers at Apple, and was thus changed within the initial year to Electronic Arts, in tribute to the vision of promoting developers as artists and games as an art form. This was further signified by an interesting idea pioneered by EA, namely making the physical game packaging look more like a music album, complete with an artistic cover and pictures featuring the developers depicted as stars (Gamasutra, 2009). In terms of a business plan, EA was also quite the pioneer from early on, seeing as they sold directly to retailers, instead of the traditional way of working through a third party. This was done in order to ensure high profit margins and penetration of the market, seeking both market insights for EA and awareness among developers (Businessweek, 2006). As a result, EA were able to share profit plentifully with developers making them quite popular within the industry. During the eighties EA established itself as a publisher, with many successful titles, soon also moving into license- and sports-based games which would eventually become a main cause of success. In 1987 EA published its first own development, the game "Skate or Die!", despite the original premise of no in-house developing. However as the game proved to be a success, this marked a turning point for EA, resulting in a move towards more internal studio game development (Businessweek, 2006).

3.1.2

Changing Course

Throughout the eighties EA had undergone an organic growth, developing new products and its capabilities as a publisher. Around the beginning of the nineties it was however evident
Electronic Arts in the Gaming Industry | 3. Electronic Arts 21

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

that the future expansion and growth of EA was somewhat confined by the visionary, but restrictive, principles on which the company had been founded. In 1991 founder Trip Hawkins went on to fulfill another vision of his, founding a new company centered around the creation of a new video game console, instead leaving EA in the hands of the former VP of sales, Larry Probst (Businessweek, 2006). The advent of Probst's leadership signified some significant developments for EA. One such important new trend which would prove immensely successful for EA was, as briefly mentioned beforehand, sports-based game series. EA became a pioneer of a new business model for game publishing with its "Madden Football" series, with the first game being released in 1988, followed by at least one new game in the series every year since 1990. The brilliant aspect of the Madden series, which also translates into the numerous other sports series EA would later introduce, is that, due to the seasonal nature of sports, it is basically the same game, repackaged every year, with an updated sports player roster, and a few adjustments to the gameplay features and graphics to stay in touch with the game standards of each year (Businessweek, 2006). The new course of EA was however primarily highlighted by changing course towards inorganic growth, through a very aggressive new acquisition strategy. Throughout the nineties, EA would buy out at least one new studio each year. nearly always following the pattern of seeking out minor studios that had made a successful game pre-acquisition, and then making them produce sequels post-acquisition (Businessweek, 2006). The ultimate goal for going in this direction was of course to secure more market share and increase revenue. However the key objective in this respect was obviously to do this by acquiring human resources, meaning talented developers, and intangible assets such as intellectual property, through the acquisition of studios which had either, or both, of those things (Sherman, 2010,). Besides the obvious acquisition-strategy-effect of fast increases in production volume and sales, EA likely also sought to enhance their brand through association with successful titles. Furthermore the motivation for acquisition of the mentioned successful smaller studios could also be linked to enabling economies of scope (Salvatore, 2007). By gaining control of established development teams and applying their practices, and in some

Electronic Arts in the Gaming Industry | 3.

Electronic Arts

22

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

cases, already created intellectual property, to new game development projects, EA could cut time and costs considerably. In a way, the acquisition strategy was the same general idea as EA had always had, namely discovering talent. The execution was of course quite different however, as EA completely took over management of said studios as opposed to simply publishing the game. As already mentioned it became a prevalent trend, that EA would have its studios capitalize on its established intellectual properties by pushing the development of sequels. However, as it often is with sequels, not all were received as favorably as the original game, sometimes rightfully so, consequently hurting the common perception of EA brand quality, somewhat ironically considering the dedicated acquisition strategy having the exact opposite motive. These failures have commonly been attributed to being a consequence of EA's control. In spite of the clear advantages sustaining the established development teams, on more than one occasion key individuals of said teams would the leave the company, reportedly due to excessive management pressure, scrutiny and interference. Ultimately, many of the acquired studios would end up closing (Businessweek, 2006). In 2004 EA reached a peak in terms of controversy surrounding its acquisition strategy. Through a transaction with a European investment firm Talpa Beheer BV, EA acquired a 19,9 percent of shares in Ubisoft Entertainment, a French game developer and publisher, and a big competitor to EA. This move made EA the second largest shareholder of the company. The following official statements were somewhat contradictory as to the nature of the acquisition, with EA VP Jeff Brown claiming good intentions and stating that it was merely a financially oriented transaction without EA entering creative-process-decision-making, while an unnamed Ubisoft spokesperson labeled it as a hostile operation aimed at securing competencies of Ubisoft studios (Gamespot, 2004). Despite this controversy, Friedman, Billings, Ramseyvii analyst Shawn Milne went on to state that the move "fits EA's global growth strategy", in terms of growing both revenue and game-development-capabilities through an acquisition strategy (Gamespot, 2004).

Electronic Arts in the Gaming Industry | 3.

Electronic Arts

23

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

3.1.3

Rethinking the Strategy

In 2007 EA, for the second time in its history, came under new leadership, when John Riccitiello, a former EA employee, became the new CEO. This leadership change was quickly followed by wide-ranging changes within company. In February 2008 at a conference headlined "Design, Innovate, Create, Entertain", John Riccitiello shared his views on what he saw as the failures of EA in respect to the former structure and acquisition strategy, with quotes such as "We at EA blew it, and to a degree I was involved in these things, so I blew it.", highlighting the brutally honest nature of this speech (Wired, 2004). One of the main points which Riccitiello made was that their previous strategy of acquiring numerous talented development studios and applying the same management to each of these had been key in inhibiting the creative freedom among the developers. He admitted that the idea of buying out developers and simply putting the EA name on the label was a bad idea (Wired, 2004). He elaborated on this thought in a telephone interview around the same time, saying that top-down processes and centralized tools are not useful in building a common brand when dealing with creativity heavy processes as in game development (NYTimes, 2008). The company had simply used business logic of other industries and tried to homogenize the creative processes inherent to game development, reducing their business practices to a numbers game of fast revenue growth through acquisitions, and easily applicable centralized management (NYTimes, 2008). This had of course been the reason behind a lot of talent leaving the various studios, after EA had acquired them. In the conference speech, he even stated that he had talked to some developers when the acquisition frenzy was at its highest, and they had told him they felt "buried and stifled" (Wired, 2004). In a meeting with financial analysts, also in February of the same year, Riccitiello further admitted that the lack of creative independence, as a consequence of the centralized corporate structure, had been the main reason, so many studios were run into the ground, concluding, in reference to the developers of those studios: "They weren't listened to." (NYTimes, 2008).

Electronic Arts in the Gaming Industry | 3.

Electronic Arts

24

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

3.2

The Current Situation of EA

Before the arrival of Riccitiello as CEO, EA was generally considered to have stagnated both in terms of creativity and financial results (NYTimes, 2008). This had of course left the gaming industry waiting in suspense on the next moves of Electronic Arts.
Graph 1: The EA revenue and net income from 2005-2011 in US$

$ million
5000 4000 3000 2000 1000 0 -1000

EA, Revenue & Net Income
2005 2006 2007 2008 2009 2010 2011

Revenue Net Income
source: google.com/finance

-2000

As seen in the graph above EA experienced decreasing net incomes throughout the larger part of the last decade. However with accession of John Riccitiello there has been an improvement in the bottom line.

3.2.1

The Current Strategy and Structure

Riccitiello's admittance of prior bad management and organizational structure was of course not confined to words. In fact a new course was rather quickly pursued, in the form of a complete organizational restructuring, accompanied by a cost reduction plan and a new set of objectives. The cost reduction plan was closely tied to the restructuring by being mainly focused around consolidation or closure of development studios and publishing facilities. This of course also meant a reduction of the workforce by 10%, globally (BusinessWire, 2008). The restructuring led to the current label-structure, with EA having separate divisions for each general style of game, further divided in various development studios. Riccitiello has

Electronic Arts in the Gaming Industry | 3.2The Current Situation of EA

25

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

referred to this as the "city-state" model, in light of the independent corporate cultures, development processes and goals, which are allowed without centralized interference (Wired, 2004). In terms of objectives, Riccitiello introduced a "less is more" concept, meaning essentially that EA would downgrade the number of games released each year, and instead attempt to increase quality and production value (MarketWatch, 2012). Furthermore he initiated the approaches towards a digital transformation focus, in the form of mobile device gaming, and of course EA's own digital distribution platform Origin. In terms of business models the main new venture was introducing free-to-play games, primarily focused around the mobile gaming, which is a market that competitor Activision Blizzard (AB) has next to no presence in. An interesting comment in this respect, has come from CEO Riccitiello, saying "As the head of our Playfish division likes to say, 'There's no such thing as free to play... it's play first, pay later', and that's a very compelling mode." (Softpedia, 2011). The recent acquisition of the highly successful role-playing game developer BioWare, was particularly interesting in the light of the new course (1UP, 2007). BioWare turned out to be an excellent example of the changes done within EA, concerning organizational structure and management. In his above mentioned conference speech, Riccitiello in fact mentioned BioWare as a case of having let an acquired developer retain its corporate culture with successful results (Wired, 2004). In terms of an expansion strategy EA are still sticking to inorganic growth, however it would seem that the frequency of acquisitions has quieted down considerably. According to Riccitiello acquisitions is inevitable, and as such sees the restructuring of EA as a solution to the issues associated with consolidation (Wired, 2004). Interestingly enough, again using BioWare as an example, this new structure and mentality allows for organic growth to happen within the individual divisions, but of course for the benefit of the corporation. BioWare has been highly successful for its innovative gameplay and story-driven games, even before the buyout. However with the capital backing of a powerhouse publisher such as EA, BioWare has been able to initiate some truly extensive and ambitious projects, which have enabled the building of new competences and the sustenance of competitive advantage. See appendix B3 for insight into a recent venture of BioWare.

Electronic Arts in the Gaming Industry | 3.2The Current Situation of EA

26

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

3.2.2

The Value Network of EA

It seems that, with the new corporate structure and culture that the value creation within EA's activities is once again true to the original vision of focusing on the creative processes of developers. This of course steers thoughts towards considering how intangible resources are converted, transferred and exchanged in the value network associated with developing games under the EA name. The significance of illustrating EA’s value creation in a network is that each distinct division of the organization is working towards a common goal. In other words, the new structure of specialized sub-labels, shows that each studio, even the smaller ones, are no longer simply considered tools with which to capitalize on past success, but rather individual cells of the EA organism, with their own unique human resources and capabilities for innovation and development. To better understand how this new structure enables value creation from creative thinking it is relevant to introduce the value conversion strategy model:
Figure 1: The value conversion strategy mode (Allee, 2008)

The designation role, can be used both in the context of thinking of a single development studio or team as an entity, or as a specific individual developer within a team or studio. Using an example of an employee or developer of one of EA's studios, such as BioWare, the value conversion model shows how that particular individual takes on a role within operations with the purpose of create a deliverable, which can either tangible or intangible in nature. This process is enabled by the tangible and intangible assets as seen in the model. In the case of a BioWare developer, the individual could for example take on the role of pursuing the creation of a new gameplay feature in a game. In this the particular developer
Electronic Arts in the Gaming Industry | 3.2The Current Situation of EA 27

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

will utilize the intangible asset of human competence, in the form of both know-how and the capability for creative thinking, and the intangible asset of internal structure, namely the freedom of creative processes enabled by EA's new approach to the organization. The developer then creates a deliverable in the form of an innovative new gameplay feature, which is the realized as value through making the game better and strengthening the perceived quality associated with the brand of the given development studio, for example BioWare. Naturally however there is more than just one developer, adding value to the game, introducing the network-aspect, in the form of the value network strategy model: Figure 2: The value strategy network model (Allee, 2008)

This model illustrates how there are multiple nodes of individuals in assumed roles, within a development team or studio. Now the idea is of course that transactions take place between these nodes, or developers, in this case especially in the form of their individual and unique human competences for creative thinking and game development. It is this exchange of deliverables which signifies the shared purpose and values. This can be exemplified by introducing another theoretical BioWare developer, one who perhaps has created a deliverable in the form of an improvement for the game's physics engine viii . This improvement might make the gameplay feature of the other developers deliverable more
Electronic Arts in the Gaming Industry | 3.2The Current Situation of EA 28

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

fun, in other words enhancing it, and vice versa. Thus the deliverables will be exchanged between the two roles. Each deliverable must however of course have a purpose and value, which is why each deliverable must be inherently negotiated to be of importance to the project, seeing as the final value conversion happens upon the exchange, strengthening the overall value of the game towards achieving the shared goal (Allee, 2008). As mentioned before this value network model functions on several levels, and as such also illustrates how EA in its entirety builds towards its goal of capturing market share. The nodes are the individual development studios which create deliverables in the form of either valueenhanced games, or intangible assets gained through innovative development, which then strengthen the overall brand, all enabled by the network-oriented exchange of creative capabilities. On a related note it is however relevant to point out that, while creative freedom and division autonomy is certainly a positive development for EA, it is also important to not let the free thinkers fly too free, so to speak. This comes to show in the denotation that the value network has to have shared purpose and values, but can also be further expressed through the theory of paradoxes associated with managing creativity (Andriopoulos, 2003). Specifically, experience shows that there is an inherent paradox in the creativity-enhanced workplace, surrounding the desire to encourage personal initiative, but at the same time maintaining a shared vision. While creative freedom can be very valueenhancing it can just as well be deconstructive for the work process. Taking again the example of a developer, if an individual has totally free reins one possible negative outcome is, that nothing is accomplished as management is too loose, which has an added effect of being a bad influence over less creative people who will also be inclined to slack off. Another scenario is that the developer succeeds in accomplishing something however it serves little or no purpose for the end product. As mentioned this is also show through the value network model, since it only works under the assumption that exchanges are negotiated to be of value for the common goal. In other words creative freedom can, and should, be a systematic process, in the sense that management must ensure that all free process and creative thinking, not just for the sake of being creative, but for the common purpose of the team or company. One way of doing this is by introducing a sense of ownership to the employees so there is a collective feeling of achievement when a product or project is

Electronic Arts in the Gaming Industry | 3.2The Current Situation of EA

29

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

successful (Andriopoulos, 2003). To some extent this is an inherent trait in the gaming industry, first of all due to the fact that as an art form, game development is highly passiondriven, and secondly since games are highly subjected to both praise and criticism from reviewers and gamers alike. It is however important for EA to reinforce this continually.

3.3

EA and Industry Attractiveness

In his previously mentioned conference speech, EA CEO Riccitiello, had also commented on the future of the gaming industry, saying that he expected the coming trend to continuous industry consolidation and fewer major publishers (Wired, 2004). In relation to this, and the situation of having lost the market leader position, it is relevant to consider the industry attractiveness and competitive environment which EA is faced with. Using Porter's 7 forces it is possible to gain an understanding of which factors establish the ability of EA to capture created value, against the threats of competition and bargaining power (Jelassi, 2008).
Figure 3: Porter's Seven Forces (Sondhi, 2008)

3.3.1

Bargaining Power

Considering first the bargaining power of buyers, the first factor which comes to mind is that EA provides to an extremely high concentration of buyers. At its core, a game is usually not location specific in its content, and as such games can speak to essentially millions of people around the globe, of different background, age and social status, much like other entertainment products such as movies and music. To name an example Battlefield 3, a popular shooting game developed and published by EA, sold 5 million copies worldwide in its
Electronic Arts in the Gaming Industry | 3.3EA and Industry Attractiveness 30

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

first week of release alone (PCMag, 2011). A high amount of fragmented buyers, such as is the case here, usually equates to low bargaining power. However this does not completely hold true for EA and the gaming industry in general, mainly due to a smaller concentration of buyers, namely reviewers, which indirectly accounts for a significant market share, not because they themselves purchase more games, but because of their influence over other consumers. Especially following the advent of the internet, game reviewers hold a quite a substantial amount of power over which games people buy, in comparison to other entertainment industries, likely due to the direct and opportunity costs of making an uninformed purchase of a game, being quite a lot higher than for example watching a movie at the cinema or buying a music album. It is not necessarily a particular review score that is significant, but more so the fact that, enabled by the internet, review sites provide footage of the game including videos and pictures, helping consumers make an informed choice. This of course directly relates to the aspect of market transparency which signifies high bargaining power of buyers (Jelassi, 2008). In terms of switching costs there are some opposing aspects at play. First of all there is the concern of game platforms, in this context meaning the different devices which games are played on. Some games may be available for both PC and one or more of the different consoles, while other games can be exclusive to a specific platform. Furthermore in the case of PC games, there will always be certain requirements of hardware, or computer specifications, which must be met for the game to run properly. This presents the possibility that a consumer must purchase a particular console, or computer upgrade, to be able to play a certain game, which of course equates to very high switching costs associated with such a choice. While this is obviously primarily relevant for game console manufacturers, that have an interest in people buying games for their particular platform, it is also a quite important concern for a third-party game publisher such as EA. To mitigate these high switching costs, which in this specific context have a negative significance for EA, they have an interest in making their games available for as many platforms as possible, in order to reach a larger crowd. On the other hand, in theory, considering games as a homogenous entertainment product, the switching costs between two shooting games from competing developers for example, will be next to none. In fact, games between the two competitors, to a non-gamer,
Electronic Arts in the Gaming Industry | 3.3EA and Industry Attractiveness 31

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

may seem to have low differentiation, arguably being almost identical in terms of gameplay and sometimes even setting. In practice however, even in cases such as with these games, consumers will for the most part make a deliberate choice of choosing one over the other due to some specific game feature exclusive to one of the games. In other words switching costs are very high, or rather inapplicable, in the sense that you simply do not get to experience the features of the game you deselect. This signifies the consideration that EA can decrease buyer bargaining power by emphasizing on making games with innovative and unique features. This is of course from the perspective of EA in relation to end-users. If instead considering the bargaining power of the end users in relation to intermediary retail stores selling games, switching costs are very low, and market transparency very high, due to for example the ease of access to price comparisons on the internet. But ultimately the consumer choice of retail store has little to no effect for EA. An aspect which however does matter is the choice between retail store, and buying a game through an online distribution platform, which is an increasing trend. An issue which has previously been troublesome is that some game retail store chains would demand lower prices from EA, in order to achieve higher profit, in exchange for stocking their games. It has of course been necessary for EA to mitigate this problem. In this respect, EA's recently launched platform Origin, becomes interesting, in light of the possibility for relationship management, brand loyalty, service and other factors which decrease buyer bargaining power, through increasing switching costs (Porter, 1993). The intricacies of Origin will be touched upon further on. As mentioned previously the gaming industry is highly labor intensive with more or less the entire value creation happening in the actual game development process. The primary physical resource is perhaps storage media such as CDs, which however offers no value in itself, and in all actuality is slowly becoming redundant due to increase in online distribution. In broad strokes, all that is needed to develop a game, is the starting equipment, such as computers and coding software, with no further physical inputs influencing the quality of the product. Therefore regarding bargaining power of suppliers within the gaming industry, the biggest concern is actually the supply of human resources, in the form of the workforce of developers (Porter, 1993). This has especially been evident in the history of EA, when key development team employees left various studios, which would result in unsuccessful
Electronic Arts in the Gaming Industry | 3.3EA and Industry Attractiveness 32

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

games, and ultimately closing of those studios. In other words supplier bargaining power is very high, when it comes to supply of human resources. This is also signified by the increase in creative independence which EA currently allows its various studios. A counter argument against high supplier bargaining power is of course the fact that the industry is becoming more consolidated, meaning that an unsatisfactory EA employee has limited alternatives of changing firm.

3.3.2

The Three Threats

Moving on to the threat of new entrants, the threat of new multi-label development and publishing powerhouses, rivaling EA and AB in size, is quite low. The main reasons for this are the high necessary starting capital, and high fixed costs, especially location and labor costs, associated with running multiple divisions of development, supplemented by the logistics needed for the, still existing, distribution of physical products (Jelassi, 2008). There is however another kind of possible new entrant, specifically independent smaller studios, often made up of passion-driven developers, seeking to follow through on a personal vision, without any corporate interference whatsoever. Their entrance into the market has become increasingly easier due to the internet and online distribution, since, as mentioned before, smaller game projects really don't require much starting capital or resources other than the development talent and/or experience. Another aspect pertaining to this situation is the use of crowd-funding which has been explained in detail already. These independents, range anywhere between minor annoyances, to serious threats, within one or more genres of games. Another force is the threat of substitute products, which is also relatable to the advent of internet and online distribution. A threat of substitute is signified by a change in demand of a product, due to a change in price in the substitute (Jelassi, 2008). Using the example of EA this means that a possible threat of substitute would be if a competing publisher would lower game prices through online distribution, which would then decrease demand of the physical games which EA has in stock. Another important issue regarding the matter of substitutes is of course pirated games, which are freely available for download on the internet. Although not quite as easy as downloading pirated music, due to the installation
Electronic Arts in the Gaming Industry | 3.3EA and Industry Attractiveness 33

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

process, the availability and ease of access of pirated games are still at a level which makes it a genuine threat as a free, and mostly consequence-free, alternative to purchasing a game legally. Obviously this has implication for sales, and thus revenues and profit, within the gaming industry however the exact effect is unknown and more or less impossible to calculate precisely. The general consensus among various game company officials, seems to be that piracy rates per title are somewhere between 40 and 90 %, meaning that even in the best case scenario estimate, for every 3 copies of game sold, 2 copies will be downloaded, while the worst case scenario estimate is considerably more grim, with 9 downloaded copies for every 1 sold (EuroGamer, 2011). Even if an exact statistic existed on the amount of piracy, the measurement of exact piracy effects on sales would still be mostly postulation. For example it would likely be assumed that every single downloaded copy is a lost sale, which of course is doubtful, seeing as the ease of access to pirated games attracts players who only play the games because they are free, and otherwise would not care to purchase and play them. Similarly piracy can arguably help create extra attention for the game and function as a sort of demonstration platform for potential buyers. The obvious harmful effects of piracy should however by no means be taken lightly, considering the fact that the gaming industry has exceed $60 billion in global revenue, making it the largest entertainment industry (IndustryGamers, 2011). Even in the case of the lowest estimated piracy rate, and taking into consideration that not all pirates are potential buyers, the loss in sales due to piracy are still of immense financial significance. To mitigate this issue game these days are released with some manner of DRM, which however is associated with a fair amount of controversy as mentioned previously. The last threat is the threat of public regulation, which within the gaming industry is often associated with policies regarding labeling and rating games in terms of the content, in relation to factors such as violence and depiction of sexual themes. The effectiveness of such policy is however disputable, as is its consequence for game sales. Although laws on this differ from country to country, generally retail stores are not imposed by law to reject minors wanting to purchase a mature rated game. A more substantial risk is the possibility of having a game completely banned in one or more countries, however such occurrences are relatively rare. While both violence and sexually suggestive themes are popular and frequent
Electronic Arts in the Gaming Industry | 3.3EA and Industry Attractiveness 34

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

in games, it is of course in the interest of game developers and publishers to moderate such content, in order to circumvent the risk of censorship. Furthermore, in the case of console games, the given console manufacturer also has to authorize every game published, serving as an extra insurance (Chandler, 2009). While EA has escaped this threat for the most part there have been some hitches. One excellent example of such public regulation was the game EA Sports MMA being banned in Denmark due to a law prohibiting all energy drink marketing, which happens to be featured quite predominantly in that particular game (Joystiq, 2010). Another example, which gained widespread attention, was the banning of some top selling EA titles, in several Muslim countries, due to the fact that the games featured depictions of homosexual relationships (MEGamers, 2010). Another, and arguably more financially significant, issue pertaining to the threat of public regulation is the concern of excessive eagerness to lessen piracy of games. As mentioned above, piracy is a threat to the industry and EA, however recently there have been some legislative attempts at fighting piracy which has had, and could potential have further, negative consequences for the gaming industry. One such instance is an interesting example from the UK where the High Court ruled that British internet service providers must block the possibility of entering a Swedish site called "The Pirate Bay", which is one of the most used and well known torrent ix tracker sites in the world. Ironically this ruling was resulted in massive online traffic to the site, followed by a The Pirate Bay insider calling it "free advertising" (GamePolitics, 2012). Another example, which garnered widespread attention from media around the world, was the Stop Online Piracy Act, or simply "SOPA". In very broad strokes this legislation was to target sites enabling copyright infringement, such as The Pirate Bay (CNNMoney, 2012). In practice this would equate to public control and criminalization of all imaginable forms of copyrighted content on the internet. This would have consequences for the gaming industry in a number of ways. One example is that uploading of player screenshots and game footage for the purpose of walkthroughs, guides or plain fun, would effectively end. Besides hurting the play communities, of which such activity is inherent, it would also be harmful for awareness and attention creation surrounding games, ultimately resulting in a more opaque market. Another example is usergenerated content which would also end, and potential become punishable, even in games
Electronic Arts in the Gaming Industry | 3.3EA and Industry Attractiveness 35

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

which allow such activity. However perhaps the most important consequence, which was monumental in sparking a collective opposition to this legislation among many developers, is the fact that it would potentially cut the revenue streams to many websites, functioning as channels for digital distribution of games by independent developers (GameCareerGuide, 2012). Under SOPA, even one instance of a copyright dispute, be it a genuine concern or not, could effectively shut down such a site, on which many developers rely for revenue. EA, along with a few other major developers and publishers, initially openly supported SOPA, but later withdrew this stance. However being a member of the Entertainment Software Associationx, which continued its support, EA was practically still for the legislation. This sparked a petition from gamers, pressuring EA to openly and publically oppose SOPA with the threat of business losses in case of continued legislation support (Forbes, 2012). While the legislation would obviously have the most consequences for independent and smaller developers, this petition exemplifies an important aspect of the gaming industry, namely that the end-consumers effectively form a community, which has the collective power to threaten and pressure market leaders such as EA, to take a stand for the benefit of the combined industry. The matter has been temporarily resolved, with SOPA being postponed, due for an extensive revision (ZDNet, 2012).

3.3.3

Alliances and Rivalry

The case of combined opposition to SOPA showed that in times of trouble, the gaming developers and publisher can stand together for a cause, which as a case of joint-lobbying signifies co-opetition within the industry (Jelassi, 2008) In fact strategic alliances is an inherent enabler of value creation in the gaming industry. This particular force denotes the concept of complementary products and services, which are facilitated by strategic alliances (Sondhi, 2008). The obvious complementary products to games are the devices on which they are played, and as such alliances within the gaming industry can be divided up between the different platforms. Considering first console gaming, the importance of strategic cooperation is made evident by the fact that a console is of little use without games. While the major console manufacturers such as Sony, Nintendo and Microsoft, also develop and publish their own games, these are not nearly enough to support a game system. These

Electronic Arts in the Gaming Industry | 3.3EA and Industry Attractiveness

36

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

manufacturers thus need to establish good relationships with third-party developers such as EA. This relationship is however equally important for the third-party companies as they need to target the segments of "couch gamers", families and children, which are traditionally associated with playing console gamers. Considering PC gaming, while the computer in its entirety is the device used, there is a trend of viewing individual hardware pieces as separate complementary products to gaming. One such example is strategic alliances between peripheral manufacturers and game publishers, manifested in packaging of games alongside computer mice and keyboards. Another predominant example is manufacturers of graphic processing units, which is a key component influencing the graphics of games on a computer. These are also often sold, packaged with games, however even more interestingly some game developers choose to optimize their games to a particular GPU model, further signifying the complementary nature of the two products. Unfortunately this sometimes results in games being more or less unplayable using other GPU's, an issue which EA faced with its game "Saboteur" which did not work with GPU's made by ATI Technologies (EuroGamer, 2009). The last main platform is handheld gaming, in which EA has had an interesting venture. In 2006, they entered a partnership with Finnish mobile phone giant Nokia, in which EA became the main supplier of mobile games to Nokia devices. At that time the market of phone games had just begun a roaring development in terms of quality and extent of the games (Gameguru, 2006). This signified a valuable strategic alliance both due to the growing trend of mobile games and the fact that Nokia, at that point, was one of the most popular mobile phone manufacturers. At the center of the framework of industry attractiveness is the force of competitive rivalry. A higher number of competitors signify more intense rivalry (Jelassi, 2008). From the perspective of EA there are only a few competitors, and as mentioned before the most important of these is AB. These hybrid developing and publishing powerhouses may be subject to competition from smaller companies, in certain niche markets within the industry, however generally speaking they are only really competing amongst themselves. However despite being few, it is important to consider the nature of this competition among these
Electronic Arts in the Gaming Industry | 3.3EA and Industry Attractiveness 37

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

few major corporations. First of all EA and Activision have a similar market share and are following the same general growth strategy and organizational structure, aspects which inherently intensify rivalry. On the other hand the growth of the gaming industry, in general, is so substantial that it likely can sustain two majors growing at a similar rate. The next factor pertaining to assessment of rivalry is the presence of high fixed costs (Jelassi, 2008). As explained in relation to supplier bargaining power, the gaming industry is characterized by high fixed costs, in large part due to it being very labor intensive, and the fact that making an additional game copy is associated with a very low degree of variable resources. This stand especially true for a big company such as EA, which provides a high volume of game copies, being subject to the effects of economies of scale (Salvatore, 2007). High fixed costs lead to companies filling capacity, so as to have as low average costs per unit as possible. Having to sell this large volume of game copies intensifies rivalry. This is of course concerning physical distribution of games. Generally speaking the high fixed costs increases the struggle for market share, seeing as the game has to prove profitable. EA's move towards more focus on integration of online distribution means even less variable costs associated with distribution. However seeing as it of course isn't a complete shift, in part due to demand for physical games still existing, it is still necessary to sell stored game copies. A related consideration is that the launch of Origin signifies differentiation from AB and an entry into a new market and as such decreases the intensity of rivalry.

3.4

Origin

"Origin" is a digital distribution and DRM software client developed by EA and initially released on June 3th, 2011xi. The main idea and purpose behind Origin is the creation of a single, convenient and secure platform for content delivery through the Internet, allowing users to purchase games for both PC and mobile platforms. This is realized through the Origin client, which is a self-updating software that can be easily downloaded from www.origin.com and installed on the compatible devises. The client offers a vast variety of downloadable games, expansion packs, digital content and patches from EA, which in most cases require purchases. EA has emphasized five main benefits of the Origin client and digital downloading in general, opposed to traditional physical distribution (Origin, 2012):
Electronic Arts in the Gaming Industry | 3.4 Origin 38

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

No More Discs: By distributing games digitally, the user is not obligated to acquire and stock any kind of physical media formats. The users can thus solely rely on the library feature, which stores all games and content purchased from Origin in one single and convenient platform.

Play on Any PC: The availability of purchased games and content is not restricted to any specific devise or location. Personal library content is available - anytime, anywhere - through simply downloading and installing the Origin client on the desired setting.

Shopping Made Easy: The digital characteristics of Origin eliminate the necessity for visiting physical or online retailers with known hassles, such as waiting in lines or paying extra shipping costs. In addition, certain customer outlays in the form of travelling expenses and time expenditures are substituted with an instant gratification when purchasing new games.

Pre-Load New Games: In order to ensure immediate game access on the official launch date, games can be purchased and downloaded days before actual release. This again tackles certain risks of physical and online retailers, such as late deliveries or sold out game copies.

Auto-Patching: This feature allows new game patches to download and install automatically.

Furthermore, Origin focuses on various social features like networking with friends and other users through chat and direct in-game cooperation. Game libraries can be shared (for comparative purposes) and there are possibilities for community integration with social networks like Facebook, Twitter, and the Xbox Live and PlayStation Network (Origin, 2012). Since the launch of the initial phase in mid 2011, Origin has followed an aggressive roadmap (see appendix A4) with the ambition of becoming more than a digital storefront. According to EA COO Peter Moore, the ultimate goal lies in developing a "...full and robust portal to the consumer on a global basis, regardless of platform or geographical location" (Shack, 2012). This is gradually realized through a continuity of efficient updates including more social features and enhanced accessibility to Origin. A good example is the "Cloud Storage" service which enhances the Origin platform through a "personal hard drive" feature. This allows an automatic back up of game saves with 100MB of storage space per game. Thus, users can enter and continue their gameplay independent on location, device switch, or data loss (OriginFAQ, 2012). Moreover, integration of the 'Nucleus' cross-platform community gaming/registration system into Origin was announced on July 14th, 2011. By March 2012, the Nucleus was reported to have a database of over 188 million users (EAShareholder, 2012). Basically the system serves as a social games service that tracks gamer preferences,

Electronic Arts in the Gaming Industry | 3.4

Origin

39

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

scores and contacts while allowing users to set various game-related challenge across EA games on a cross-platform basis (Eurogamer, 2008).

3.4.1

Aspect of e-Customer Relationship Management

According to CFO Eric Brown, EA is uniquely positioned for success when utilizing certain company assets and competences jointly with the Origin platform (E3Investor, 2011). In relation to assets, the obvious potency lays in the strong portfolio of leading and wellestablished brands, such as EA SPORTS, BioWare, DICE, Playfish etc., which can deliver extensive content through over US$100 million worth of franchises. In regards to company experience, core advantages are mostly related to successful extension and establishment of IP's across digital platforms, industry-leading capabilities on mobile platforms, and the rapid user aggregation across the various platforms (E3Investor, 2011). However, while EA obviously has numerous competencies within the field, attention must also be drawn towards the necessities for certain relationship marketing interactions. The development, implementation and expansion of the Origin platform noticeably reflects EA's strategic focus on increasing the reach and richness of interactions - towards, with, and amongst both users and other businesses. Being an online digital distribution platform, Origin serves the purpose of infusing the Internet and its network connectivity into all the activities of EA's value chain. This strategic approach can be linked to the vast capabilities opened up by the trend of technological and information-based advances in recent times. According to Shaprio & Varian (1998) the current information age has abandoned the traditional 'economies of scale' of the industrial age, and is now driven by 'economies of network', where success of ventures mainly rely on the size of technology adapters and network users. Essentially value is offered through the establishment in a network, while gradually increasing in correlation with user-base size (Shaprio, 1998). This aligns with theories surrounding relationship marketing, which emphasize the importance of having active interactions between the parties of the established networks (Gummesson, 2008). Essentially, Origin can be defined as an active enabler of a multi-party relationship network where business-to-business, business-to-customer, and customer-to-

Electronic Arts in the Gaming Industry | 3.4

Origin

40

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

customer interactions occur. Through this network Origin is enabling an online marketplace where users can purchase digital content delivered from external game developers, while at the same engaging in social interactions. Focusing on the relationship between customer and supplier, Origin can ultimately be viewed as a supplementing e-Customer Relationship Management tool to the four main elements of customer selection, acquisition, retention, and extension (see figure 4 below).
Figure 4: The customer relationship management cycle (Jelassi, 2008):

The reason why e-CRM is important to consider in the context of Origin, is because it encompasses the values and strategies of relationship marketing through a balanced dependency on both human action and information technology (Gummesson, 2008). Gaining profit from the cycle of e-CRM (figure 4) requires an ongoing and consistent process of information swapping between the network provider and the network users. Origin, as the provider, should understand and respond correctly to the wants and demands expressed by the entire user community, while simultaneously aiming at (Jelassi, 2008):
     Creating long-term relationships with customers Reducing customer defection rate Increasing the 'share of wallet' through cross-selling and up-selling Increasing profitability of lower-profit customers Focusing on high-value customers and a larger degree of user-generated customization

Electronic Arts in the Gaming Industry | 3.4

Origin

41

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

3.4.2

Increasing Reach and Richness

In context to the e-CRM cycle, its four elements, and the mentioned aims, Origin indicates various points of interesting approaches towards managing the relationship to network users. Functioning mainly as a distribution platform, Origin cannot be defined as sharing traditional market segmentation techniques with EA. The difference lies in that EA projects market segmentations based on game productions, which - regardless of their symbolic value - are still bound by certain demographic assumptions of target segments. On the other hand, if customer selection can be discussed in context to Origin by any means, it would reflect a more postmodern style of management discipline, suggesting that consumer identity is no longer structured in solid attachments to place, ethnicity, gender, class and work. Thus, demographics are essentially turned into unreliable bases for market segmentation (Bilton, 2011). These statements can be justified by the overall strategic approach of EA to make Origin an accessible, convenient and social digital distribution platform, unbound from locational or individual characteristics. Yet, the only obligatory requirement of Internet access is in reality still affected by certain segmentation variables. Also, as required product purchases are present, consumer income is still an acting factor. The major attention on cross-platform integration of the Origin digital distribution channel is without a doubt EA's approach to addressing the primary drivers of the before-mentioned economies of network whilst boosting reach through customer acquisition. Offering crossplatform compatibility and social interactivity between the users of the network not only pools and enlarges overall user-base size, but also provides additional network potential. Instead of comprising individual networks for each gaming platform, be it PlayStation, X-box, mobile or PC, all users are drawn to one universal contact pool where they can engage in various social interactions, play games together, and purchase or promote digital content. This can boost customer acquisition further by creating various intrinsic and extrinsic consumer incentives leading to growth through the means of viral marketing (Jelassi, 2008). Especially in context to the multiplayer-game aspect, incentives for viral information sharing are intrinsic, as users know that inviting other players to the platform will in turns enrich their personal gaming and social networking experiences. Extrinsic incentives are

Electronic Arts in the Gaming Industry | 3.4

Origin

42

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

exemplified by Origin's "Recruitment programs" where rewards, such as exclusive digital content or early game access are granted to users who on their own initiative promote a target product - or the Origin platform - to friends and other players with a result of successful enrollment. Together, these processes will likely contribute to utilization of a wider potential of the online networking by substantially increasing consumer value through a more numerous and frequent user-base (Gummesson, 2008). The digital characteristics of Origin also have an essential involvement in adding richness to the reaching operations of the online distribution platform. The element of customer retention can be accentuated through the 'long tail' concept of digital content. Digital content is different from physical products in the sense that it can be stored, replicated and distributed at extremely marginal costs. Having (theoretically) infinite storage and products allows digital distribution platforms to offer a much wider variety of digital content portfolio than any given physical, or even online, retail store (Jelassi, 2008). As digital products require no shelf space and can be offered at virtually no additional cost, it is even a viable strategy for distribution platforms, such as Origin, to "sell less of more". Thus, the excessive amount of offered content surpassing traditional retail methods represents the "long tail" concept, which is illustrated theoretically in the graph below (see graph 2).
Graph 2: The 'long tail' representing the large addition to product range of traditional retailers (Jelassi, 2008)

Through this strategy, one-time customers may be turned into repeat-purchase customers, while being kept for as long as possible within the online network (Jelassi, 2008). In relation, the integrated cross-platform community system, Nucleus, provides an incentive for users of
Electronic Arts in the Gaming Industry | 3.4 Origin 43

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

the different platforms to connect to Origin in order to obtain maximized value through contact networking. This system not only helps the before-mentioned increase of reach, but also supports a richness factor by offering extended user personalization, thus enabling the feature of "stickiness". Stickiness is characterized by the creation of lock-in effects, resulting in incurred switching costs to customers who wish to change or leave the service provider. Appendix A5 illustrates how Nucleus combines the cross-platform utility with elements of security and user personalization, such as unique user identity, history and entitlements. These features let the individual user customize his/her virtual identity in the networking profile surrounding the digital products offered by Origin. The implementation of achievement titles that lets players show the surrounding virtual community how good they were at different in-game tasks on their user profile is an effective strategic decision in order to generate stickiness. If players accumulate a vast number of such achievements, this will most likely reduce the rate of customer defection, as users will incur switching costs because of the loss of customized offerings. Nonetheless, will the planned future implementation of loyalty programs to the Origin platform (see appendix A4) help retain high-value customers by offering incentives in the form of accumulation of loyalty-points spendable on various digital content, reduced product prices, early-game access etc. Lastly, it is necessary to mention lifetime value maximization of existing users, done primarily by expanding their scope through cross- and up-selling. Closely related to the long tail concept of digital distribution platforms, Origin has an increasingly vast portfolio of differently priced and sized digital content, which can be promoted and sold to the entire customer base. Origin utilizes cross-selling by offering additional products to existing customers in the form of payable micro-transactions for unlocking extra game-content, ingame character appearance customization kits etc. Up-selling, on the other hand, is practiced by encouraging and tempting customers to purchase premium priced deluxe game-editions, containing exclusive upgrades, add-ons or content. These two salestechniques help increasing the profitability of both low- and high-profit customers by allowing them to purchase content suiting individual needs (Jelassi, 2008).

Electronic Arts in the Gaming Industry | 3.4

Origin

44

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

3.4.3

"Catching-up" on Competitiveness

Benefitting from strong assets of talented developers, financial resources, and large game portfolios, EA has a reasonably solid competitive stand in the dynamic gaming industry. Having previously licensed distribution rights to third-party services, EA decided to make an entrance of their own on the digital distribution platform market with Origin. However, in this field, Origin can still be classified as a newcomer and a late-entrant initiative compared to the relatively large number of already-established competitors. Companies like Direct2Drive, GamersGate, Gamefly, and Impulse are just a few of the many trying to gain a favorable market share of the online digital distribution. Nonetheless, during the last seven years, one single company has managed to dominate the vast majority of the market share in the digital game distribution sector. Releasing its own pitch in 2003 by the name of "Steam" (see appendix 4B), the well-know game developer, Valve, was an early-mover in creating a digital distribution software client. Today, through a successful establishment on the market, Steam has accumulated certain competitive advantages throughout the 9 years of operation within the industry. Apart from having established a well-know brand and solid reputation, Steam has utilized experience gained from their learning curve in order to develop various value-increasing service features. In turns, this has helped creating switching costs and network effects, retaining and increasing the user-base of the platform (Futurelooks, 2011). Consequently, the success of Steam and the increased industry attention towards digital products and distribution has resulted in more and more companies trying to develop new and innovative distribution platform services - EA being one of them. There is no question about EA's intention to rival the major competitors - especially Steam with the entry and implementation of Origin. Likewise it is also obvious that Origin is constructively using the latecomer "free-rider" effect to imitate some of the most significant and effectively tested features of earlier digital distribution platforms. An analysis of Origin's different marketing propositions using the traditional marketing mix (4Ps) of price, product, promotion, and place, reveals some of the key strengths and weaknesses of the platform in a competitive context. The product delivered by Origin consists of both core and
Electronic Arts in the Gaming Industry | 3.4 Origin 45

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

supplementary elements. The core element is represented through the software based service, ultimately trying to respond to the customers' primary demand for an easy, prompt, and issue-free game distribution channel. However, the core elements alone would not present valid competitive strengths. Thus, Origin has set out to develop an array of supplementary service elements, serving the purpose of mutually reinforcing value-added enhancements that can aid customers to utilize the core product more effectively (Lovelock, 2011). Figure 6 shows a map of the degree to which Origin strives on implementing and expanding platform features until the end of financial year 2012, compared to features already in use by a leading competitor (obviously Steam). This table acknowledges the present start-up phase of the Origin platform, while simultaneously emphasizing the areas in which it lags behind and to what extend it will “catch-up”, in terms of feature content. Once again, these goals emphasize EA’s strong focus on mastering the cross-platform feature.
Table 6: The current and future expansion of Origin features compared to Steam (E3Investor, 2011).

The price and place propositions are tightly connected in terms of online distribution channels as the digital nature of the products substitute any means of physical delivery. Both core and supplementary products are delivered in a digital state, enabling EA to distribute content at almost no cost while effectively evading various revenue losses incurred in traditional distribution methods xii. Thus, this gives Origin a competitive edge in terms of price, as the developed content can be sold directly to the customers. Moreover, this

Electronic Arts in the Gaming Industry | 3.4

Origin

46

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

presents a crucial factor because of the immense game portfolio of first-party productions a portfolio to which Steam has no comparison. In further relation, EA's game portfolio can be regarded as one of the company's core competitive advantages in the marketing element of promotion. Theoretically, the promotional component plays three essential roles: communicating needed information and advice, convincing target customers of the benefits of the specific brand or service product, and stimulating actions of trial purchases or increasing consumption when demand is low (Lovelock, 2011). The creation of Origin marked EA's step into new territory which required a strong user-base core to build on. A core, that competitors had already established (Futurelooks, 2011). In order to generate this customer core, EA has strategically employed its vast first-party production portfolio in order to attract already existing users of EA games and community accounts to the Origin platform. Since launch, EA has been pulling its own titles from competing third-party digital distribution channels and placing them exclusively on Origin (GamingVault, 2011), while offering a variety of incentives in the form of content discounts, such as the "Origin Loves Action" sales spree, cutting up to 70% off prices for several major action titles (HUKD, 2012). Moreover, free games, "preorder-and-get-onepremium-game-for-free" deals, and exclusive releases have been pushed to raise customer awareness and attraction. Particularly, the Origin-exclusive release of BioWare's longawaited MMO "Star Wars: The Old Republic" during December 2011, was seen as a exceedingly strategic decision in order to promote the growing distribution platform (Futurelooks, 2011). The permutation of these marketing schemes has enabled and strengthened Origins competitive positioning on the digital distribution market.

4.

Research analysis

This paragraph is the last analytical section of the thesis, and will be used to present the empiric findings of the conducted quantitative survey and the correspondence with Nordic Marketing Director and Marketing Manager of EA, Morten Nielsen.

Electronic Arts in the Gaming Industry | 4.

Research analysis

47

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

4.1

Quantitative Survey Results

The purpose of our survey-oriented research is to gain a better understanding of how gamers of varying levels of commitment, view certain aspects of the current trends within the gaming industry. A primary focus point is also to investigate people opinion towards, and experiences with, Origin. Graphs containing all our research results can be found in the appendix section C. Demographics were limited to gender and age, for the purpose of showing that gaming has become a more common leisure activity. However of the, less than, one third of participants who were female, a majority 77% answered that they do not play games at all. This may however be attributed to the fact that participants were largely from gaming community sites, where female gamers are generally considered to be sparsely presented and less vocal than their male counterparts. In terms of age however our sample proved to be appropriate to the trend-based assumption, seeing most age groups represented within each degree of gaming commitment, with the funniest observation being that 40+ gamers seemingly either play only a little, or very much. In total only 7% answered that they never play games, and this segment was immediately sent to the last page, meaning they are not represented in the results from there on. Investigating online distribution platforms we found that Origin is generally perceived to be both less familiar and worse in customer support, than other systems. The other distribution platforms, were pooled for the purposed of providing a uniform benchmark to Origin. Not surprisingly 80% stated that they think digitally delivered games should be lower priced than retail, while 62% wishes for digital distribution to become the main channel for purchasing games in the future. Moving on, we made it optional for participants to answer some slightly more complex trend-focused question, to which 80% decided to participate. Here we found that roughly half of the sample considers a premium priced game, with no additional purchasable content to be preferable. Interestingly however in terms of in-game advertisement we found that participant find it undisrupted immersion and gameplay more important, than a potential price cut due to ad-support. In relation to game communities we found that participants’ perception of the importance of these, was fairly evenly spread out,
Electronic Arts in the Gaming Industry | 4. Research analysis 48

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

ranging from "not at all", to "very". Also in terms of community influence, there was nearly a 50/50 relation between opinions, if coupling 'little' with 'some' influence, and 'extensive' with "always". On piracy, the most interesting find was that more than 50% find it acceptable to illegally download a game, if it is not available for purchase in your geographical region. In terms of digital distribution mitigating piracy, nearly 4 out of 5 answered some variation of "yes", with nearly half however calling for some optimization of systems. Interestingly however, in relation DRM, only 20% chose that this manner of measures is a necessary solution to piracy, while nearly half stated it is annoying, one fourth stated it has no use whatsoever, and one third stated that DRM makes them question the ownership of their product. Crossing this question with the one on the future of digital distribution, we interestingly found that those who answered that they would like digital distribution to become prevalent actually had a higher tendency towards considering DRM annoying, privacy invasive, and useless.
'DRM continued' Crossed with 'Would you like for online distribution platforms to become the main channel for purchasing games and content in 15% the future?' 23% 51% 29% 26% 29% 30% 30% 14% 0% 10% 20% 24% 30%

Y es

N o

35%

41%

40%

50%

60%

DRM is a necessary solution to piracy DRM should not be a problem if you have nothing to hide DRM is annoying DRM makes me question my ownership of a product I've paid for DRM is an invasion of privacy DRM has no use whatsoever

4.2

Qualitative Insights from an EA Representative

The inability to meet up in person and perform an interview with the Nordic marketing manager of EA, Morten Nielsen (MN), has resulted in several shortcomings in terms of the overall research quality. The quantitative feedback gathered through the email correspondence (presented fully in appendix section D) did not quite reflect the initial
Electronic Arts in the Gaming Industry | 4. Research analysis 49

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

expectancy of an in-depth insight into the specific areas of Origin, EA's organizational structure, and the prospect of strategic approaches. Especially the answers related to the last two subjects did not provide any novel knowledge, useful in further context to this thesis. This is somewhat understandable, as the email correspondence limited the possibilities of elaboration requests. Moreover, MN made it clear that the company confidentiality would restrict the response to a considerable extent. Nevertheless, the outcomes of this correspondence proved particularly useful in regards to the subject of Origin and will mainly be implemented into the concluding parts of the thesis. According to MN's professional insights, Origin represents a successful attempt to create a fast and easily accessible digital distribution platform that offers a variety of quality games and content, developed by both EA and cooperative third party companies. Furthermore, Origin is to be seen as a service created with the purpose of providing not only an entry to the highest quality digital content, but a social hub for gamers of the same interests to meet up, communicate, and play together. Now to highlight the most relevant and interesting insights. MN notes, that Origin actually utilizes segmentation techniques based on individual user interests. Although not explaining the mechanics behind the segmentation method, MN points out that these function as a mean to provide user-specific newsfeeds etc. Moreover, MN sees it important to observe consumer trends, spending, and acquire consumer feedback in some project-specific cases, while continuously innovating and investing in the future. However, when asked whether or not EA would shift focus away from production and distribution of physical good (question 7, appendix D), MN acknowledges that while it is important to optimize the return on investment in relation to distribution, physical retailers still hold a crucial asset through established consumer-bases and consumer flows.

5.

Discussion

Considering our analysis of the industry in general, as well as the featured insights into the current activities of Electronic Arts, it is evident that the playing field of the gaming industry is changing. Online distribution is progressively being established as the inevitable future primary channel for cost cutting content delivery and efficient transactions. The significance

Electronic Arts in the Gaming Industry | 5.

Discussion

50

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

of this is of course that the launch of the digital distribution platform, Origin, is easily one of the most momentous and noteworthy developments in relation to EA achieving and maintaining a state of profitability. In light of the above consideration, the initiatory approach to the discussion will be focused on the matter of maturity level of the gaming industry. This is of significance for the aspect of innovative developments, a circumstance pertaining to the assessment of constant changes within dynamic environments. The analytical parts of the thesis has somewhat defined that the gaming industry is presently in a growth stage, indicated by the continuously high sales volumes, increased public awareness, and cost reductions due to economies of scale, scope, and network. However, a rise in sales is in itself not necessarily an evidence of industry growth thus the presence of numerous underlying factors, such as the ongoing focus on differentiation and decline in some markets of the gaming industry, reflect characteristics of industry maturity and even market saturation. The first three industry trends, mentioned in the first paragraph of the thesis, have increased reach and technological availability that has resulted in a wide enlargement of the global concentration of buyers eligible for obtaining and accessing gaming products on various platforms. In turns, this has opened up for possibilities of exploiting novel markets within the gaming industry, such as the highly emphasized and fast-growing markets of game applications for mobile devices and the online market for digital game distribution. On one hand, these developments alone can be seen as plausible arguments for defining the present stage of the gaming industry as growing. On the other hand, however, assessment of the undertone and overall impacts of these industry tendencies may reveal that the gaming industry is entering a considerably more mature state, driven by emphasis on competitive advantages and differentiation. An example can be given by the high bargaining power of buyers within the gaming industry. Arguably, this has stressed the necessity for instituting and sustaining a value-embedded stream of electronic interactivity between empowered customers on one side, and the game publishers and developers on the other. In order to enable the e-CRM cycle and its elements of customer acquisition, retention, and expansion, companies within the gaming industry are
Electronic Arts in the Gaming Industry | 5. Discussion 51

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

obligated to constantly innovate and build upon effective incentive, lock-in, and loyalty processes. This is also said in perspective to co-creation as a growing number of consumers value high product personalization and even feel entitled to partake in the development process of games and game-related services. Furthermore, infrastructural developments, creation of new business models, and cross-platform integration, relate to companies seeking a even a higher degree of differentiation and feature diversification. At the same time, the trends of consolidation and large-scale productions have gradually fostered a dynamic and competitive acceleration in the gaming industry. In the light of the gradually establishing oligopoly, the entry barriers to the market have risen in a substantial manner, essentially blocking out the threat of new entrants through requirements of high starting capital and high fixed costs. Consequently, all these progresses trigger the need for innovative developments as the gaming industry is no longer restricted by narrow market-possibilities. The dynamic forces and technological innovations have pushed companies into constantly developing new products, suiting the needs of the extended consumer demand. Moreover, it can be argued that the gaming industry is no longer driven by one single and complete market which can either grow, break-even, or decline. While the market for products tied to one specific technology is booming, another market can concurrently be in decline, even though the overall quality of the game productions on both devices is quite comparable. Thus, these dynamic industry tendencies require game publishers and developers to spread equal focus on as many markets as possible in order to acquire the largest revenue share needed for advancement on the intense competition. Most importantly however, the companies must perform under constant focus on innovation and long-term future outlooks. This is supported by a professional insight from the Nordic Marketing Director of EA, Morten Nielsen, who says that; "It is obvious that one should always observe trends, consumer spending etc.. conversely however one is also situated in a business that is required to be forefront and innovative so it is important to continuously invest in the future" (translation from question 3, appendix D). This is best illustrated by the "second curve" concept shown in

Electronic Arts in the Gaming Industry | 5.

Discussion

52

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

graph 3, as capability, a function of experience, increases in time before eventually reaching a peak and then declining.
Graph 3: “The Second Curve”

Maintaining capability and long-term survivability within the dynamic environment, requires companies within the gaming industry to initiate innovative developments as early as point 'a' on the curve, in order to effectively address a future market growth in time (point 'c'), while substituting the previous market as it passes maturity and starts suffering a decline (point 'b'). As discussed and established, new developments are essential in the gaming industry, which of course also shows that Origin indeed is a very important step for EA in continuation of their effort to meet with current trends of the industry in order to remain a major competitive force. Before discussing the significance of the development and introduction of Origin, it is however first and foremost relevant to sum up on some of the key points which have been established throughout the analysis, regarding the current situation of EA in the market of games. Having been the market leader, EA has in recent years lost this position to AB, experiencing a trend of falling revenues, in the last few years of the now past decade. More importantly however the company had decreasing net income since 2003, which ultimately led to operating at a loss. EA was clearly in a bad state in those years, with the newly appointed EA CEO initiating an emergency restructuring and course change, in 2007, indicating that the company was indeed faced with the struggle of survival. Starting from 2008 the loss was gradually reduced. With year 2011, EA managed an increase in total revenue, supplemented by reaching a positive net income. In direct contrast to the positive

Electronic Arts in the Gaming Industry | 5.

Discussion

53

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

development of this last year, it is worth noting the fact that EA was recently voted to be the worst company in America. Taking first into consideration, EA’s recent financial results, it is obvious that the recent turning of a loss shows a positive progress. It stands without doubt that the restructuring under Riccitiello, and the subsequent cost reduction plan of EA, has been the main driver for this development. While the company incurred high restructuring expenses, in the recent year or so, the positive results have started showing. As explained in the analysis the cost reduction plan was in part made up of employee layoffs, and consolidation of smaller divisions. While these actions has of course been considerable factors, seeing as the game industry is so labor intensive, it is by no means the only interesting aspect of the new course of EA. Instead it is more significant to point out the "less is more" initiative, which at its inception basically meant less game titles published yearly, with a higher emphasis on the quality of the games, in other words higher production value. It is of course in relation to this, that the specialized brand label restructuring and the application of a value conversion network becomes relevant. As explained in the analysis the value conversion, between the various nodes of development, enabled by the new network structure of studios and division, facilitates the value enhancement of games. Coupled with a higher capital backing for each game, due to the fewer total projects taken on by EA, equates to a higher frequency of AAA titles. For now the noteworthy consideration is that AAA titles, despite any shortcomings, will arguably always sell relatively well and be profitable. This assumption is really a key aspect concerning the relation between sales results and consumer perception of the product and company. Using a recent example, a reported EA estimate was that the Star Wars MMORPG, SWTOR, one of the most expensive game productions to date, would only need around half a million subscribers in the first quarter of 2012 to prove profitable, whereas upon release the game hit a milestone 1 million subscribers within 3 days of launch. In other words this game has likely been a highly profitable venture for EA. The generally speaking main factor which has played into the improved financial results of the last year is the efforts to approach the digital transformation of the industry. This mainly includes the launch of Origin as a means to provide digital offerings and content delivery. EA has a basically approached a new market, signifying the struggle to remain competitive in the
Electronic Arts in the Gaming Industry | 5. Discussion 54

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

industry. In terms of a direct effect on results, Origin has a number of aspects to it which are of importance. The first, and perhaps most obvious is of course that digital distribution signifies a considerable cost cut for EA seeing as storage, packaging and the logistics of physical delivery become irrelevant. From the perspective of the consumer, in theory, Origin has the potential to make the process of buying a game easier and faster, which to the extent that this has been successful, of course also has a positive effect on sales. However the question of whether or not Origin actually functions as intended is obviously a primary concern. Another deliberation, in relation to the factual evidence of EA's performance, which might spring to mind, is the significance of the loss of the market leader position to AB. In itself, being the market leader, in this case, arguably isn’t all that essential. The argumentation behind this relates to the analysis of EA’s competitive power in relation to industry attractiveness. As mentioned in the 7 forces analysis, the assessment of competitive rivalry in the gaming industry is a bit peculiar in being affected by some opposing aspects. On one hand, seeing as AB and EA have very large and similar market shares, theory states competition should be intensified in a struggle for the market leader position. On the other hand however the gaming industry has quite a considerable growth which can potentially sustain equal relative growth for both companies. In layman's terms AB isn't necessarily pushing EA out of the market; they have just become a more potent competitor. In terms of total revenue, the massive increase of AB around 2007-2008 was of course due to the major merger between Activision and media conglomerate, Vivendi, who already owned Blizzard. In other words this development was essentially out of the hands of EA. Looking instead at net results, which are more important in respect to surviving in the industry; EA's bad streak was seemingly a case of bad management or organization culture, seeing as results have improved after the restructuring. An interesting consideration is that despite being "only" the second biggest game publisher and developer, from personal observation, EA is still considered, for lack of a better term, "the big evil empire" of the gaming industry, by the gaming sub-culture. For example, referring to the open questions of our research, one individual stated a sense of distrust towards EA, elaborating that it "seems like a company only interested in making a lot of money." However this moniker is arguably more of an idle
Electronic Arts in the Gaming Industry | 5. Discussion 55

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

threat than an actual expression of the community proscribing EA, with the latter possibility of course posing a risk to hurt sales. This of course again relates to EA's new focus on AAA titles. AAA titles, and hyped games in general, have proven to perform well in sales regardless of “bad mouthing” of game communities. Keeping in mind the above mentioned example of SWTOR, that particular game has been subject to much criticism of certain game features both before and after release, and some may even consider it to be failure in terms of the likeliness of the continued survival of its player base, yet the game has without a doubt been highly profitable for EA in spite of this. Our analysis showed that EA's new objectives of approaching industry trends, has indeed set them on the right course, with an increased focus on AAA titles, and targeting of genres and platforms which enable utilization of specific business models which are currently popular and highly lucrative. Especially EA's venture into mobile-device games comes to mind, with Riccitiello's "no such thing as free to play..." comment, as referenced in the analysis, especially resounding true. Of course he is right, as it can be fairly certainly assumed that most gamers participating in free-to-play games, will have the sense of playing for free, but highly likely be tempted and swayed towards some degree of game-enhancing microtransactions. In this relation it is also relevant to remember in-game advertising, which similarly, if done right, can result in either a price cut of the game, leading to a pricecompetitive edge, or alternatively direct supplementary revenue for EA. This can of course again be referenced appendix C23, where survey participants who found in-game advertising acceptable, found it more important that ads do not break immersion or gameplay, rather than getting the game cheaper, signifying the importance of well-integrated advertisement. To sum up, following the path of well applied business models should secure a fairly advantageous market share. The question of course is then how EA can further secure its position and possibly even achieve a competitive edge. This is of course leads us directly to Origin. EA is obviously focusing heavily on transforming Origin into a highly established and viable medium for cross-platform integration with an extensive variety of supporting features.
Electronic Arts in the Gaming Industry | 5. Discussion 56

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

According to the underlines in Morten Nielsen's viewpoints of Origin, the platform represents a successful example of a fast and easily accessible hub where gamers of similar interests can meet up and engage in virtual activities, unrestricted by time, place or enabling hardware. The strategic approach of Origin need to be seen in the light of EA's desire to advance rapidly within the newly entered market of digital distribution by utilizing strong, and already present, company assets. Ultimately, the already established broad and multimillion dollar game franchises constitute the key reasons to why the Origin platform has managed to establish itself so fast, and that it is even planning on taking on the leading competitor, Steam, by the end of the 2012. Origin is however by no means perfect in its current state. To gain a better understanding of where some of the current faults lie, and how the system has potential to enable a competitive edge for EA, it is necessary to consider how potential users view the Origin, signifying the reasoning behind our survey-oriented research. First and foremost, Origin has not yet managed to gain widespread attention. As seen in appendix C32, nearly 60% of participants, having already stated that they play PC games, answered that they have either never heard of, or never considered using, Origin. For Origin to be successful it naturally needs user, and the lack of knowledge of the system, in our sample, is interesting considering that the vast majority of consumers within the gaming industry are expectedly already familiar with, or own, a variety of EA's game titles, which makes them suitable targets for an easy incorporation into the Origin platform. Moreover, the Nucleus account system with its 100+ million registered users and the upcoming social integration with Facebook, offers a highly suitable promotional approach, as the user base can easily be reached by viral marketing initiations. This also signifies certain capabilities of implementing novel consumer-segmentation techniques in Origin that move beyond the restrictions and classifications of the traditional methods. Instead, segmentation methods can be applied to individual purchase patterns, platform search history, and even crossreferenced with games owned by friend contacts, in order to promote the most suiting game titles and genres to each user. Another related aspect is of course the social aspect, and the aspect of gaming sub-culture, as mentioned a number of times already. Appendix C33 shows that the PC gamers from our sample generally find the gamer community aspect more
Electronic Arts in the Gaming Industry | 5. Discussion 57

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

important than others, signifying the importance features which enable online socializing within and surrounding Origin. Considering that an essential aspect of digital transformation of distribution is the possibility for making the experience of transaction and delivery as easy and pleasant an experience as possible, for the customer, it is of course necessary to reflect on how Origin performs as a service offering of EA. As seen in appendix C6 a concerning 41% of individuals from our research sample, having used Origin, experienced problems during the process. Of the 52% who contacted customer support only 36% has their problem solved. Those with a problem rated the service aspect of Origin to be very bad, as seen in appendix C9. This of course shows that as a service Origin is lacking. Perhaps Origin simply does not yet have the optimal level of expertise to its processes. Undeniably, Steam is the leading competitor in the market of digital distribution - a title established through the experience accumulated by innovative developments in the eight concurrent years of operation. Origin, on the other hand, has only been operational for less than a two year period, nevertheless, strongly marching forward with the immense ambition of reaching feature equilibrium with Steam by the end of this financial year. On top of that, Origin is even planning to top Steam with a higher and more persistent degree of crossplatform integration. In our survey, Steam was coupled with the various other distribution platforms, forming a benchmarking reference point in relation to the perception of Origin. As seen in appendix C29 the other distribution systems collectively, were rated considerably higher than Origin, and furthermore problems seem to be less frequent, with a higher rate of problem solving. While Steam was purposefully not singled out, some of the open questions in which participants could elaborate on their choices, reveal instances of people comparing, and favoring, Steam over Origin. Now the big question would be, whether Origin's capabilities can be characterized as viable enough to take on an experienced and already established market veteran, especially within such a short timeframe. Regardless of EA's corporate strengths that enhance the value of

Electronic Arts in the Gaming Industry | 5.

Discussion

58

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Origin's operations, Steam offers robust and largely optimized features with a widely established user-base, locked-in by various CRM related incentive systems of platform specific achievements and rewards. Obviously, Origin has to provide a similar range of quality features and incentives, if not more, in order to motivate consumers to go through various outlay hassles and adapt a new digital distribution platform. This raises a number of issues. First, a competitive struggle on which platform can deliver the largest variety of features can be fostered, most likely, resulting in a negative impact of the before-mentioned tendency of feature creep. Logically, the flow of new quality features can contribute to competitiveness and value-creation. However, competition on feature delivery can very well result in fast passed and unstable development of extra content. This will have a devastating effect on digital distribution software, as these are designed with a purpose of fast and simple accessibility, which can be slowed and complicated as an effect of the saturation of features. The second issue is related to content releases and special discounts available exclusively through certain specific digital distribution platforms. There have been various examples of EA pulling their own products from other competitors' digital distribution channels and placing them as exclusive releases on Origin. This strategic approach leads to people buying form Origin, ensuring a flow of new users to the platform. However this business practice does not go unnoticed, seeing as a participant in our survey stated that it was both "unnecessary...” and "annoying...” Discounts really are a key aspect in attracting attention to digital distribution. As seen in appendix C19, 4 out of 5, in our survey, things that digitally distributed games should be priced lower than retail games. This is however generally not the case, sometimes even being the opposite. But obviously the low cost nature of a digital offering, from the perspective of EA, theoretically enables price cuts, a circumstance which is instead utilized in the form of occasionally discount offerings and online product bundling. For the informed, and low-price seeking consumer this of course leads to hassle of being forced to use multiple distribution systems platforms at the same time, with the associated applications stacking up and taking space on computers.

Electronic Arts in the Gaming Industry | 5.

Discussion

59

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Another related topic to the hassle of distribution platforms is of course the aspect of DRM. As explained in the analysis DRM is naturally a countermeasure against piracy, and as seen in appendix C27, nearly 4 out of 5 in our research sample actually considers it to be a solution to some degree. At the same time however, as seen in appendix C28, nearly half of participants consider DRM annoying, and one fourth see it as an invasion of privacy. In other words DRM generally is accepted to some extent, however not in its current form. Seeing as companies continuously come up with new complex types of DRM, the playing experience is arguably at a risk of suffering from excessive control over player behavior. Seeing as an online distribution platform such as Origin, enables utilization of DRM linked to the Originapplication, it is essential for EA to make this feel as little inhibiting for the game experience as possible, so as to not scare away potential users. As seen in the research analysis part, we in fact found that those participants who stated they would like digital distribution to be prevalent in the future, had a higher tendency to considering DRM annoying and useless. In other words those who are most likely to be current or future Origin users, are the ones who have the lowest opinion on DRM, an issue which EA needs to approach in order to maintain or increase the Origin user base. Ultimate the digital transformation offers poses both risks and possibilities and at the end of the day the key is to make countermeasures against the risks near unnoticeable. Furthermore there is the aspect of decreased ownership as a result of buying a digital game copy, with one of our survey participants commenting on the concern that a purchased game may become unavailable if the distribution platform closes. On the other hand, in terms of percentages, our survey sample does not seem overly concerned with ownership issues, however as evident from some of the open question comments, there are still gamers who enjoy the feeling of going to a retail store and buying a physical game casing which can be put on display in their home. As seen in appendix C20 62% of our survey participants, however would in fact like for digital distribution to become the main channel for purchasing games in the future, signifying that the digital transformation has indeed gained a foothold in the minds of gamers.

Electronic Arts in the Gaming Industry | 5.

Discussion

60

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

6.

Conclusion

Through a comprehensive analysis and discussion we have presented a wide array of considerations pertaining to our goal of investigating the company Electronic Arts, and especially its Origin distribution platform. Being avid gamers ourselves, we naturally set out on this task with a lot of preconceived knowledge. We have however also gained a substantially more in-depth understanding of EA’s activities and how current developments are crucial for the future of the gaming industry, a concern which of course in the long run also affects us as gamers. In our analysis we have stated and assessed some of the current trends of gaming industry, and investigated factors and issues which are the basis for these. To sum up on these trends, in one simple phrase, they can largely be attributed to the digital transformation of the industry, a fact which led us to our analysis of recent developments within EA, especially considering the extensive structural and objective-oriented changes which the company has undergone in the last 4 years, roughly. We quickly found that these changes were indeed directly initiated for the purpose of keeping up with current trends of the industry, seeing as the company had been in a declining state for the larger part of the past decade due to failing to innovate itself. On this basis, our analysis also looks into some of the new popular business models which EA utilize, and how it has in fact managed to gain a foothold in lucrative markets such as mobile gaming, ahead of prominent competitors. Furthermore we have explored how it has renovated its approach to expansion and corporate culture associated with industry consolidation and in relation to this analyzed some of the specific aspects playing into how EA currently value-enhances its processes and products, as a result of a more dynamic and creativity-driven corporate structure. Using Porter’s five (seven) forces framework, we have also analyzed industry attractiveness of the gaming industry, and applied this in relation to which possibilities EA has for competitive edge. Our findings pointed towards the competition between EA and its main competitor Activison Blizzard, and the significance of value-enhancing games and offerings to differentiate from the other, but at the same time concluding that cooperation is necessary against regulative threats and that the growth of the industry is substantial for the
Electronic Arts in the Gaming Industry | 6. Conclusion 61

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

presence of both major companies. Perhaps the most important thing to draw from the considerations of the framework is that the penetration of new markets, as in the form of launching a digital distribution system, are key in relation to gaining competitive edge. Conclusively, Origin can be seen to have both capabilities and potential to engage in the market for digital distribution. It is without any doubt that EA has chosen to develop this initiative in order to benefit from the numerous advantages that ensure profitability while simultaneously making EA a strong industry competitor. Yet, EA acknowledges that the current state of Origin does not catch up to the features offered by other competitors. For this to happen however, it is not of sole importance to constantly develop the infrastructure, business models, or the variety of features, but to grasp exact consumer demands. Through our survey, we gained an understanding of which aspects of the gaming culture’s perception on current issues, hold significant importance for EA to stay in touch with the player base. The major findings were that it is important to effectively apply CRM, meet the players, and let them reap some benefits from digital distribution, as consumer perception is highly focused around the trade-offs associated with the digital vs. retail purchase consideration. Morten Nielsen still finds that physical retailers are important distributers, as these still prove profitable due to the highly established consumer base and consumer flow. Therefore, in order to establish Origin as a viable distribution platform it cannot be stressed enough, that buying game content online cannot by any means surpass the consumer outlays of buying the same products at a physical store. To sum up, and answer our core problem; yes, Origin is definitely the primary initiative of EA which signifies the possibility for gaining a considerably and sustainable competitive edge. As already mentioned EA has already implemented a lot of extensive changes which directly meet the necessity of staying in touch with industry trends. So staying on the path of utilizing contemporarily popular business models is of course a major factor, as is the valueenhancing, community-focused development approach as seen in AAA-game producing EA studios such as BioWare. However at the end of the day Origin is the embodiment of digital transformation, being a direct approach of EA to enter a market with essentially only one, albeit quite strong, already established competitor. In other words it really comes down to

Electronic Arts in the Gaming Industry | 6.

Conclusion

62

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

enhancing the offerings associated with Origin making it as easy and pleasant a process as possible for users. EA will inherently gain cost benefits from digital distribution, so the missing link, in relation to gaining a bigger and more stable user base, is to make it equally beneficial for gamers to use Origin over digital distribution platforms or retail purchases.

7.

Epilogue and Perspectives

Here we are at the very point of closure of a thesis that has hopefully managed to demonstrate the wide extend and complexity of the gaming industry, along with some of its most characteristic features and initiatives. In essence, this is an industry that is not only of immense financial and business-oriented significance, but an industry that actively shapes the foundations of a virtual entertainment lifestyle for millions of users worldwide. Unsurprisingly, this has made gaming communities and sub-cultures prosper, as more and more informed and involved consumers merge together to engage in game discussions and opinion-sharing. The effect of these communities have made many industry players realize, that understanding the demands and constructive criticism of the actual gamers and acting upon these, creates much more consumer-centered and value-embedded products. Thus, in relation to the future perspectives of the gaming industry, this emphasizes the importance for developers and publishers to constructively and efficiently engage in the close relationships with consumers. This will help the adaptation of synchronized and innovative products that can persistently follow the shifts in trends, tendencies, and intensity of consumer demand, securing competitive advantages and stability on the different industry markets in the long-term. A perspective can be made to the highly innovative trend of crowdfunding. The recent progress and attractiveness of crowdfunding platforms has made it possible for consumers to support individual game development projects, which would otherwise never had made it through the entry barriers of the dynamic environment of the gaming industry. To exemplify, the top three largest successfully completed projects on the entire "Kickstarter" platform (see appendix B3), are video games. The video game project named "Double Fine Adventure" managed to collect US$3,336,371 by the end of the expiration period. Having a

Electronic Arts in the Gaming Industry | 7.Epilogue and Perspectives

63

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

goal of US$400,000, the video game developers "Double Fine" and "2 Player Production" situated in San Francisco, USA, managed to appeal to a total of 87,142 backers and collect 834 % of the initially required funding. The second and third place belongs to respectively "Wasteland 2" with $2,933,252 (61,290 backers and 325% above goal) and "Shadowrun Returns" with $1,836,447 (36,276 backers and 459% above goal) (Kickstarter, 2012). Evident advantages of crowdfunding relate to the approach of enabling ideas, not directly fit or able to enter conventional investor patterns, through the help of a crowd seeing potentiality and usefulness of the eventual outcomes of a proposed project. Even though capital seeking ventures are required to publically disclose ideas at very early stages, which involve the risks of idea imitation or straight out copying by better-financed and positioned competitors, crowdfunding a solid approach to idea conceptualization. The point to be made here is that the gaming industry is a completely unique entity, not only in terms of strategies and development of products, but also in the way the consumers approach, commit, and engage in it. Thus, as long as the industry ventures innovatively approach and engage in cocreation of value with the gamer community, no initiative can reach too high or fall to low.

Electronic Arts in the Gaming Industry |

64

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

References
1UP, 2007 Klepek, Patrick; "EA Acquires BioWare, Pandemic"; November 10th 2007; as seen May 8th 2012 http://www.1up.com/news/acquires-bioware-pandemic Allee, 2008 AboutCrawler, 2011 Allee, Verna; "Value Network Analysis" Journal of Intellectual Capital; Vol. 9 Iss: 1 - p. 5 - 25; 2008 AboutCrawler; "Electronic Arts vs AB"; February 25th 2011; as seen May 16th 2012 http://aboutcrawler.com/electronic-arts-vs-activision-blizzard/ Andriopoulos, 2003 ARS, 2008 Andriopoulos, Constantine; "Six Paradoxes in Managing Creativity: An mbracing Act" Long Range Planning Journal; - Iss: 36 (2003) Caron, Frank; "Gaming expected to be a $68 billion business by 2012 An industry study conducted on the worldwide video game industry has predicted"; June 18th 2008; as seen May 16th 2012 http://arstechnica.com/gaming/2008/06/gaming-expected-to-be-a-68billion-business-by-2012/ Bilton, 2011 Businessweek, 2006 Bilton, Chris; "Management and Creativity: From Creative Industries to Creative Management"; Blackwell Publishing; 8th Edition; 2011 Waugh, Eric-Jon R.; "A Short History of Electronic Arts"; August 25th 2006; as seen as seen April 30th 2012 http://www.businessweek.com/innovate/content/aug2006/id2006082 8_268977.htm BusinessWire, 2008 BusinessWire; "EA Releases Details on Previously Announced Reduction of Facilities and Work Force"; December 19th 2008, as seen May 9th 2012 http://www.businesswire.com/news/home/20081219005462/en/EAReleases-Details-Previously-Announced-Reduction-Facilities Chandler, 2009 CNNMoney, 2012 Chandler, Heather Maxwell; "The Game Production Handbook"; Hingham, Massachusetts: Infinity Science; 2nd Edition; 2009 Pepitone, Julianne; "SOPA explained: What it is and why it matters"; January 20th 2012; as seen May 13th 2012 http://money.cnn.com/2012/01/17/technology/sopa_explained/index. htm

Electronic Arts in the Gaming Industry | References

65

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

E3Investor, 2011

Brown, Eric & Gibeau, Frank; "Electronic Arts E3 Investor Breakfast"; Westin Bonaventure Hotel, Los Angeles, CA, June 8th 2011 http://files.shareholder.com/downloads/ERTS/1746970887x0x475188/ 6d4ea4b7-0389-4c68-964f-af21a86c5a7d/E3_2011_IR_Breakfast_-_68_-_small_file_size.pdf

EAShareholder, 2012

Electronic Arts; Slides from Wedbush TMT Conference; March 8th 2012; http://files.shareholder.com/downloads/ERTS/1746970887x0x551496/ 6162F638-C8C9-45F2-AB77-463E59F00455/ERTS_Wedbush.pdf

Edery, 2009

Edery, David & Mollick, Ethan; "Changing the Game: How Video Games Are Transforming the Future of Business"; Pearson Education Inc.; FT Press; 2009

ESA, 2011

Entertainment Software Association; "2011 Sales, Demographic and Usage Data - Essential Facts About The Computer and Video Game Industry"; 2011 http://www.theesa.com/facts/pdfs/ESA_EF_2011.pdf

Eurogamer, 2008

Bramwell, Tom; "EA unveils Nucleus social games layer"; 2008; as seen May 1st 2012 http://www.eurogamer.net/articles/ea-unveils-nucleus-socialgameslayer

EuroGamer, 2009

Purchese, Robert; "PC Saboteur sabotaged by ATI cards"; December 10th 2009; as seen May 13th 2012 http://www.eurogamer.net/articles/pc-saboteur-sabotaged-by-aticards

EuroGamer, 2011

Purchese, Robert; "How Bad is PC Piracy Really?"; September 30th 2011; as seen May 12th 2012 http://www.eurogamer.net/articles/2011-09-30-how-bad-is-pc-piracyreally-article

Fields, 2010 Forbes, 2011

Fields, Tim; "Distributed Gamed Development: harnessing Global Talent to Create Winning Games"; Focal Press; 2010 Chiang, Oliver; "The Master of Online Mayhem"; Forbes Magazine; February 28th 2011; http://www.forbes.com/forbes/2011/0228/technology-gabe-newellvideogames-valve-online-mayhem.html

Forbes, 2012

Thier, Dave; "Petition: Electronic Arts Under Pressure to Denounce SOPA"; January 12th 2012; as seen May 13th 2012

Electronic Arts in the Gaming Industry | References

66

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

http://www.forbes.com/sites/davidthier/2012/01/12/petitionelectronic-arts-under-pressure-to-denounce-sopa/ Futurelooks, 2011 White, James & Garay, Eric; "EA's Origin Vs. Valve's Steam - A Comparison of Two PC Game Distribution Platforms"; October 10th 2011; http://www.futurelooks.com/origin-vs-steam-in-dept-comparison-ofthe-software-platforms/ Gamasutra, 2009 Barton, Matt; "The History of the Pinball Construction Set: Launching Millions of Creative Possibilities"; February 6th 2009; as seen April 30th http://www.gamasutra.com/view/feature/3923/the_history_of_ the_pinball_.php

Gamasutra2, 2009

Graft, Kris; "Stardock Reveals Impulse, Steam Market Share Estimates"; November 19th 2009 http://www.gamasutra.com/php-bin/news_index.php?story=26158

GameCareerGuide, 2012

Ibrahim, Mona; "Analysis: SOPA and its effect on digital distribution for independent development"; January 11th 2012; as seen May 13th 2012 http://www.gamecareerguide.com/news/39605/analysis_sopa_and_its _effect_on_.php

Gameguru, 2006

GameGuru; "EA to Supply Games for Nokia Mobile Devices"; September 14th 2006; as seen May 2nd 2012 http://www.gameguru.in/mobile/2006/14/ea-to-supply-games-fornokia-mobile-devices/

GamePolitics, 2012

GamePolitics; "Traffic Surges at The Pirate Bay After Court Ordered Ban in UK"; May 2nd 2012; as seen May 13th 2012 http://www.gamepolitics.com/2012/05/02/traffic-surges-pirate-bayafter-court-ordered-ban-uk

Gamespot, 2004

Feldman, Curt; "Electronic Arts buys stake in Ubisoft in "hostile" act"; December 20th 2004; as seen May2nd 2012 http://www.gamespot.com/news/electronic-arts-buys-stake-in-ubisoftin-hostile-act-6115370

Gamingbolt, 2012

Mudgal, Kartik; "Valve releases PR; Steam userbase doubles in 2011, Big picture mode coming soon"; Posted in News section; January 6th 2012; http://gamingbolt.com/valve-releases-pr-steam-userbase-doubles-in2011-big-picture-mode-coming-soon

Electronic Arts in the Gaming Industry | References

67

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

GamingVault, 2011

Pomerening, Joe; "EA pulling games from Steam, confirms Originexclusive titles"; June 16th, 2011: as seen May 9th 2012; http://www.thegamingvault.com/2011/06/ea-pulling-games-fromsteam-confirms-origin-exclusive-titles/

GNAS, 2012

Google Finance; as seen April 30th 2012 http://www.google.com/finance?q=NASDAQ:EA

GNAS2, 2012 Gummesson, 2008

Google Finance; as seen April 30th 2012 http://www.google.com/finance?q=NASDAQ:ATVI Gummesson, Evert; "Total Relationship Marketing: Marketing management, relationship strategy, CRM, and a new dominant logic for the value-creating network economy"; Elsevier; 3rd edition; 2008 Hemer, Joachim; "A Snapshot on Crowdfunding"; Frauhofer Institute for Systems and Innovation Research ISI; Working Papers Firms and Region No. R2/2011; 2011 Rundle, Michael; "Star Wars: The Old Republic Is 'Fastest-Growing MMO Ever' With 1m Users"; December 27th 2011; as seen May 8th 2012 http://www.huffingtonpost.co.uk/2011/12/27/star-wars-the-oldrepublic-sales-record_n_1171028.html

Hemer, 2011

Huffington, 2011

HUKD, 2012

HotUKDeals; Deal posted on forum; February 2012; http://www.hotukdeals.com/deals/ea-origin-loves-action-up-70-lessmass-effect-1-2-dead-space-1-2-dragon-age-2-bulletstorm-1131784

Industrygamers, 2011

Peterson, Steve; "Game Industry Forecast Shows Solid Growth"; Industrygamers.com; October 12th 2011; as seen May 16th 2012 http://www.industrygamers.com/news/game-industry-forecast-showssolid-growth/

Initiative, 2010

Initiative; "In-Game Adcertising: Gaming is a global phenomenon and presents huge opportunities for advertisers"; Initiative; 2010 http://www.initiative.com/sites/default/files/Game_Advertising.pdf

Jelassi, 2008

Jelassi, Tawfik & Albrecht, Enders; "Strategies for e-Business: Creating Value through Electronic and Mobile Commerce"; Prentice Hall; Pearson Education Limited; 2nd edition; 2008 Hinkle, David; "Report: Game industry worth $74 billion in 2011"; joystiq.com; July 5th 2011; as seen May 18th 2012 http://www.joystiq.com/2011/07/05/report-game-industry-worth-74billion-in-2011/

Joystiq, 2011

Electronic Arts in the Gaming Industry | References

68

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Joystiq, 2010

McElroy, Griffin; "EA Sports MMA won't be sold in Denmark because of energy drink law"; August 27th 2010; as seen May 12th http://www.joystiq.com/2010/08/27/ea-sports-mma-wont-be-sold-indenmark-because-of-energy-drink-l/

PCMag, 2011

Hachman, Mark; "EA Sells 5 Million Copies of 'Battlefield 3' in a Week"; October 31st; as seen May 8th http://www.pcmag.com/article2/0,2817,2395640,00.asp#fbid=kcpkIYOI beD

Porter, 1993 Kickstarter, 2012

Porter, Michael E.; "Competitive Strategy" Measuring Business Excellence; Vol. 1 Iss: 2 - p. 12 - 17; 1993 Official website of 'Kickstarter' - 'Help' section; as seen May 14th 2012 http://www.kickstarter.com

Lambert, 2012

Lambert:, Thomas; Schwienbacher, Armin & Belleflamme, Paul; "Crowdfunding: Tapping the Right Crowd"; CORE Discussion Paper No. 2011/32; 2011 http://papers.ssrn.com/sol3/papers.cfm?abstract_id= 1578175#captchaSection

Lovelock, 2011

Lovelock, Christopher & Wirtz, Jochen; "Services Marketing: People, Technology, Strategy"; Pearson Education Inc.; Seventh Global Edition; 2011 Gallagher, Dan; "Electronic Arts' Riccitiello aims highy: Videogame publisher moves to get ahead of shifting industry"; January 17th 2012; as seen May 18th 2012 http://www.marketwatch.com/story/electronic-arts-riccitiello-aimshigh-2012-01-17?pagenumber=2

MarketWatch, 2012

MCV, 2012

Parfitt, Ben; "The Consumerist readers vote EA "worst company in America"; April 5th 2012; as seen May 16th 2012 http://www.mcvuk.com/news/read/the-consumerist-readers-vote-eaworst-company-in-america/093981

MEGamers, 2010

Uchil, Hitesh; "Mass Effect 2 and Dragon Age: Origins now banned in the UAE"; February 25th 2010; as seen May 13th http://tbreak.com/megamers/7311/news/mass-effect-2-now-bannedin-the-uae/

N4G, 2011

Blog by RedDragan; "Gaming Immaturity: One Big Reason Why The Industry Is Not Taken Seriously"; November 2011; as seen May 18th http://n4g.com/user/blogpost/reddragan/518763

Electronic Arts in the Gaming Industry | References

69

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

NYTimes, 2008

Schiesel, Seth; "A Company Looks to Its Creative Side to Regain What IT Had Lost"; February 19th 2008; as seen May 7th 2012 http://www.nytimes.com/2008/02/19/arts/television/19game.html?_r =3&oref=slogin

Origin, 2012

Official Origin website; 'About' section; as seen April 3rd 2012 http://www.origin.com/about

OriginFAQ, 2012

Official Origin website; 'FAQ' section; as seen April 3rd 2012 http://www.origin.com/faq

Page, 2009

Page, Stephen J. & Connell, Joanne; "Tourism - A modern synthesis"; Cengage Learning EMEA; Third Edition; 2009

Reuters, 2012

Reuters; as seen April 30th http://www.reuters.com/finance/stocks/companyProfile?rpc= 66&symbol=EA.O

Salvatore, 2007 SearchCIO, 2005

Salvatore, Dominick; "Managerial Economics in a Global Economy"; 6th Edition; Oxford University Press; 2007 Rouse, Margaret; "What is feature creep (requirements creep or scope creep)"; September; 2005; as seen May 22nd 2012 http://searchcio.techtarget.com/definition/feature-creep

Shah, 2005

Shah, Nik T. & Haigh, Charles; "The Video Game Industry: An Industry Analysis, from a VC Perspective"; MBA Fellows Projects; Glassmeyer/McNamee Center for Digital Strategies; March 11th 2005 Mattas, Jeff; "EA Origin to expand social features, reach 'other platforms'"; Shack News; February 2nd 2012; http://www.shacknews.com/article/72279/ea-touts-multi-platformstrategy-for-origin

Shack, 2012

Sherman, 2010 Softpedia, 2011

Sherman, Andrew J.; "Mergers and Acquisitions from A to Z"; 3rd Edition; AMACOM Books; 2010 "Dumitrescu, Andrei"; Electronic Arts Leader Says Company Will Regain Industry Leadership"; February 18th 2011; as seen May 9th 2012 http://news.softpedia.com/news/Electronic-Arts-Leader-SaysCompany-Will-Regain-Industry-Leadership-185005.shtml

Sondhi, 2008

Sondhi, Rakesh K.; "Total Strategy"; BMC Global Services Publications; 3rd Edition; 2008

Electronic Arts in the Gaming Industry | References

70

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Steam, 2010:

Official Steam website; 'About' section; as seen May 7th 2012 http://store.steampowered.com/about/?l=english

SteamGames, 2012

Official Steam website; 'Store' section; Search made on available games; as seen may 7th 2012 http://store.steampowered.com/search/#category1=998&sort_ order=ASC&page=1

SteamWorks, 2012

Official Steam website; 'Steamworks' section; as seen may 8th 2012 http://www.steampowered.com/steamworks/

Valve, 2012

Official Valve Software website; "About Company" section; as seen May 7th 2012 http://www.valvesoftware.com/company/

Wired, 2004

Kohler, Chris; "EA's CEO: How I Learned to Acquire Developers and Not Screw Them Up"; February 8th 2008; as seen May 7th http://www.wired.com/gamelife/2008/02/riccitiello/

Wordpress, 2008

Post made by "jeremyliew" (Originally created by Perry, David); "29 business models for games"; July 2nd 2008; as seen March 11th 2005 http://lsvp.wordpress.com/2008/07/02/29-business-models-for-games/

ZDNet, 2012

Whittaker, Zack; "SOPA, PIPA postponed: Nice work, everyone"; January 20th 2012; as seen May 13th http://www.zdnet.com/blog/btl/sopa-pipa-postponed-nice-workeveryone/67622

Electronic Arts in the Gaming Industry | References

71

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Bachelor Thesis May 2012 Copenhage n Bus iness School Business Administration and Service Management

ELECTRONIC ARTS IN THE GAMING INDUSTRY

Appendices

by

Christian László Mrázik Haulrich Michael Dimitri Soelberg

This appendix compilation is created as a supplementation to the thesis and the content is divided into four sections, respectively containing graphs, figures, case examples, and findings of the conducted quantitative and qualitative surveys.

Electronic Arts in the Gaming Industry | Appendices

72

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Table of Contents

Section A - page 74: Includes several tables, figures, and graphs relevant, but not
crucial to the gain complete understanding of the thesis.

Section B - page 77: Contains several case examples that purposely act as
supplementing insights to specific companies, relevant for specific parts of the thesis.

Section C - page 82: Lists a compilation of the survey research results, which is divided
into three categories, respectively presenting models, open-ended questions, and crossed graphs.

Section D - page 101: Shows the original copy of the correspondence with the Nordic
Marketing Director and Marketing Manager of EA, Morten Nielsen.

Electronic Arts in the Gaming Industry | Table of Contents

73

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Section A: Tables, Figures and Graphs
Appendix A1:

Global video game revenues 2002-2007 and a five year estimate until 2012 (PWC, 2008)

Appendix A2:

Porter's value chain framework (Jelassi, 2008)

Electronic Arts in the Gaming Industry | Section A: Tables, Figures and Graphs

74

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Appendix A3:

Electronic Arts vs. Activision Blizzard
$ million 2008
5000 4000 3000 2000 1000 0 -1000 -2000 EA Revenue AB Revenue EA Net Income AB Net Income source: google.com/finance 2009 2010 2011

Comparison of revenue stream between EA and AB 2008-2011 in US$ millions

Appendix A4:

Origin: Expected Launch Roadmap (E3Investor, 2011) Electronic Arts in the Gaming Industry | / 75

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Appendix A5:

The elements of Origin's integral system 'Nucleus' (E3Investor, 2011)

Electronic Arts in the Gaming Industry |

76

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Section B: Contemporary Company Examples
Appendix B1:
WildTangent's "Brandboost" Brandboost is an advertising platform that allows consumers to unlock various temporary premium game content by engaging with brand advertisement. This process is what the company calls "value exchange advertising" as game content that would otherwise require payment becomes free, as the consumer chooses to engage in brand advertisement exposure. This strategy is spread across a variety of downloadable, subscription based MMO's, virtual worlds, and social games. How the platform works can be explained in four steps. 1. the consumer is presented with two choices for content access, either through payment or for free after exposure to a brand. The associated sponsor is indicated by a logo and leaderboard ad. 2. If the consumer chooses to engage with a brand, the advertisement is presented in a rich media experience format, typically through a video, while the free game content is loading in the background. 3. after approximately 30 seconds, the player can proceed to the free game content. 4. upon completion of the game session or redemption of a specific virtual item, the player is reminded of the sponsor brand through a message alongside a leaderboard ad. The company clearly points out, that consumers are most receptive to advertisement when brands add value to the entertainment experience. Moreover, they state that when given a choice, 95% of all consumers will prefer brand advertising in return for free game content. Thus, as a consumer has personally made the choice of being exposed to a brand, attentiveness and openness to brand messaging will be at its highest.

In addition to the enormous reach of BrandBoost, which currently includes 30 million unique users, the company has a portfolio of huge advertisers, such as; Microsoft, Disney, Subway,
Electronic Arts in the Gaming Industry | Section B: Contemporary Company Examples 77

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

and EA. The main focus of the platform is to provide its sponsors with engagement at scale and only make advertisers pay (http://www.wildtangent.com/).

Appendix B2:
"Kickstarter" Kickstarter is the world's largest funding platform for creative project, encompassing categories of art, design, music, publishing, video games and more. The general ideology behind the platform is driven by the belief that a well-communicated and competent idea can spread fast and wide to a large group of people that are able to provide both a source of money and encouragement. Thus, all creative projects are encouraged to utilize the

Kickstarter platform and are not restricted by factors of size, seriousness, or experimental conditions. As an example, the video games category includes projects aiming for everything between monetary goals of $1,000 to more than $900,000. However, Kickstarter has some clear guidelines on specific requirements a project must fulfill in order to qualify for funding: - Projects must have clear and outlined goals that can define a state of completion and the final outcomes. Thus, the project cannot be open-ended. - Projects must relate directly to one of the categories supported by the platform. - Projects are prohibited from being used for raising money for charity, cause funding etc. The figure below (inspired by Hemer, 2011) illustrates the operational chart of Kickstarter, which acts as an intermediary in relation to receiving, providing and sharing information between the network of the capital seeking ventures, crowdfunders, and financial institutions/services. The way this mechanism works is basically explained through several steps. First the capital seeking venture (CSV) submits an authorized project to Kickstarter, which is then communicated further to the network of crowdfunders using the platform. Those, to whom the project is appealing, can then become backers by pledging a monetary amount of minimum $1 within a specified timeframe of e.g. 50 days. The CSV will typically create incentives for pledging bigger amounts through a tiered rewards system, which will be delivered if the project becomes fully funded (to give an example: pledging $20 rewards

Electronic Arts in the Gaming Industry | Section B: Contemporary Company Examples

78

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

the backer with a copy of the final game - pledging $10,000 invites the backer to a special private party with all developers). The financial transactions are paid through the micropayment providers, which communicate information to banks and back to Kickstarter. If a project is not funded before its time expires, the 'All-or-nothing' platform mechanism ensures that no money are withdrawn from the deposited pledges. Contrary, if a project becomes fully funded, the system allows a continuation of pledge inflow until the time expires. Upon successful closure, Kickstarter collects a 5% fee along with 3-5% for third-party transaction costs. Also, Kickstarter does not take any percentage of ownership of intellectual property. However, the platform does neither investigate a project's claims, nor does it hold any responsibility for validating and enforcing completion and delivery of promised products (http://www.kickstarter.com/).

Operational chart of Kickstarter (inspired by Hemer, 2011)

Electronic Arts in the Gaming Industry | Section B: Contemporary Company Examples

79

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Appendix B3:
BioWare and "Star Wars: The Old Republic" BioWare is a game developing division of Electronic Arts, which has a history of creating highly successful games, with an emphasis on storytelling, working both with original IP and established licenses. BioWare recently launched a new online role-playing game, Star Wars: The Old Republic, which reached a milestone 1 million subscribers within just 3 days, making it the fastest growing MMO game in history. Furthermore, while no official budget has been stated, production cost have been estimated as being up to $200 million, making it not only the most expensive game ever made, but even surpassing many contemporary blockbuster movie productions. Reportedly the game would prove profitable with a mere half million subscribers. Obviously SWTOR has been quite a substantial project for both BioWare and EA, so it is interesting to consider whether such a record-breaking game production was undertaken with a mind to applying the recent trend of the development team functioning as part-time-marketers. And the answer is yes. The team surrounding SWTOR is in fact a prime example of the emphasis put on connectivity with fan communities. For more than 2 years, leading up to launch date, BioWare employees prepared a weekly update, which included both videos and written blogs, featuring the developers, giving insight into the various phases of development. Following launch, both developers and assigned community managers continue to provide regular updates on current issues and the future of the game, either through social networking or the official website. References: http://www.huffingtonpost.co.uk/2011/12/27/star-wars-the-old-republic-salesrecord_n_1171028.html http://latimesblogs.latimes.com/entertainmentnewsbuzz/2012/01/star-wars-old-republiccost.html http://www.gamespot.com/news/star-wars-the-old-republic-cost-200-million-to-develop6348959

Electronic Arts in the Gaming Industry | Section B: Contemporary Company Examples

80

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Appendix B4:
Valve Corporation and the digital distribution platform, "Steam" Developed by the veteran game-development company, 'Valve'*, 'Steam' currently hold the title as the world's largest online digital distribution, DRM, multiplayer, communications and gaming platform. Initially released on September 12th, 2003, Steam has progressively expanded its features, user-base, and available content. Today the platform offers various community features, automated game updates, in-game VoIP**, Steam-exclusive game discounts, cross PC/Mac/Linux compatibility, cloud data storage, profile security services, and mobile cross-contact chat functionality (Steam,2012). As of May 2012, there were 1601 games available for purchase on Steam, including games from both major publishers and smaller independent developers (SteamGames, 2012). Moreover, the 'Steamworks' system was released in 2010 with a focus on creating a span across different game platforms. Although it still not implemented into the X-box console, the system provides features of cross-platform matchmaking, achievements, anti-cheat technology, in-game economy with microtransactions etc. (Steamworks, 2012). Although Valve never releases sales figures, an estimate made in 2009 by Stardock*** indicated that Steam enjoyed the position as market leader with a market share with approximately 70 percent of all digital distribution (Gamasutra, 2009). These sales estimates were still considered plausible in 2011 (Forbes, 2011). Today the Steam client is available in 25 languages and has over 40 million active users, while operating on a year-over-year unit sales increase of more than 100% for the seventh straight year (Gamingbolt, 2012). *Valve has a portfolio of a series of award winning titles, such as Half-life, which was release in 1998 and has won over 50 'Game of the Year" and a few "Best Game Ever" awards (Valve, 2012). ** Voice over IP represents communication protocols used for delivery of voice communications. *** Stardock is a software developer and one of the first to distribute software products via a free digital distribution program.

Electronic Arts in the Gaming Industry | Section B: Contemporary Company Examples

81

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Section C: Survey Results
C1: Gender?

Male

73%

Female

27%

0%

10%

20%

30%

40%

50%

60%

70%

80%

C2: Age?
17 or less

17%

18 - 21

26%

22 - 25

38%

26 - 29

9%

30 - 39

7%

40 or more

2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Electronic Arts in the Gaming Industry | Section C: Survey Results

82

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C3: Which statement fits you best in terms of how much time you use on playing digital games?
I never play digital games 7%

I play them occasionally

26%

I play a few hours per week

16%

I'm a casual gamer, playing most days, up to a few hours I'm a dedicated gamer, playing every day, several hours

28%

19%

I spend nearly all of my pastime on gaming

4% 0% 5% 10% 15% 20% 25% 30%

C4: Which of the following types of games do you play?

PC games (PC/MAC or laptop)

81%

19%

Stationary console games (Playstation 3, Xbox 360, Nintendo Wii etc.)

56%

44%

Handheld console games (Playstation Vita, Nintendo DS etc.)

10%

90%

Smart-phone games

63%

37%

Internet Browser games (i.e. Facebook games)

40%

60%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%
Play Don't play

Electronic Arts in the Gaming Industry | Section C: Survey Results

83

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C5: Which statement fits best to your familiarity with Origin: (The online distribution platform of Electronic Arts)
Never heard about it 44%

Heard about it, never considered using it

20%

Heard about it, considered using it

6%

Used it once or twice

13%

Used it more than twice

16%

0%

5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

C6: Did you experience any issues or problems using Origin? (e.g. problems concerning the process of payment or downloading and installing the game)

Yes

41%

No

59%

0%

10%

20%

30%

40%

50%

60%

70%

Electronic Arts in the Gaming Industry | Section C: Survey Results

84

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C7: Did you contact Origin customer support?

Yes

52%

No

48%

45%

46%

47%

48%

49%

50%

51%

52%

53%

C8: Was your issue/problem solved?

Yes

36%

No

64%

0%

10%

20%

30%

40%

50%

60%

70%

Electronic Arts in the Gaming Industry | Section C: Survey Results

85

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C9: How would you rate Origin customer service, based on your encounter?
1 - Bad 45%

2

27%

3

18%

4

9%

5 - Excellent

0% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

C10: Do you feel, purchasing through Origin, has had a negative influence on your feeling of ownership of the product?

Yes

36%

No

64%

0%

10%

20%

30%

40%

50%

60%

70%

Electronic Arts in the Gaming Industry | Section C: Survey Results

86

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C11: Overall, how would you rate the experience, using Origin as an online distribution platform?
1 - Bad 14%

2

22%

3

30%

4

26%

5 - Excellent

8%

0%

5%

10%

15%

20%

25%

30%

35%

C12: Familiarity with other distribution platforms?

Never heard about any of them

3%

Heard about one or more, never considered using it/them

6%

Heard about one or more, considered using it/them

14%

Used any of them once or twice

16%

Used any of them more than twice

60%

0%

10%

20%

30%

40%

50%

60%

70%

Electronic Arts in the Gaming Industry | Section C: Survey Results

87

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C13: Did you experience any issues or problems using whichever online distribution platform you've tried? (e.g. problems concerning the process of payment or downloading and installing the game)

Yes

23%

No

77%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

C14: Did you contact customer support of the online distribution platform which you've tried?

Yes

40%

No

60%

0%

10%

20%

30%

40%

50%

60%

70%

Electronic Arts in the Gaming Industry | Section C: Survey Results

88

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C15: Was your issue/problem solved?

Yes

73%

No

27%

0%

10%

20%

30%

40%

50%

60%

70%

80%

C16: How would you rate the customer service of the given online distribution platform, based on your encounter?

1 - Bad

9%

2

18%

3

36%

4

27%

5 - Excellent

9%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Electronic Arts in the Gaming Industry | Section C: Survey Results

89

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C17: Do you feel, purchasing through the online distribution platform, has had a negative influence on your feeling of ownership of the product?

Yes

13%

No

88%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 - Bad

0%

C18: Overall, how would you rate the experience, using the online distribution platform, which you've tried?

2

2%

3

18%

4

45%

5 - Excellent

35%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Electronic Arts in the Gaming Industry | Section C: Survey Results

90

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C19: Do you think games downloaded from an online distribution platform should be priced lower than physical games bought in retail stores?

Yes

80%

No

20%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

C20: Would you like for online distribution platforms to become the main channel for purchasing games and content in the future?

Yes

62%

No

38%

0%

10%

20%

30%

40%

50%

60%

70%

Electronic Arts in the Gaming Industry | Section C: Survey Results

91

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C21: Would you like to answer the additional questions?

Yes

80%

No

20%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

C22: Which type of business model do you prefer in games?

Free-to-play, ad-supported

21%

Free-to-play, micro-transactions

14%

Premium priced, in its entirety content-wise ("classic" model)

51%

Premium priced, purchasable downloadable content

14%

0%

10%

20%

30%

40%

50%

60%

Electronic Arts in the Gaming Industry | Section C: Survey Results

92

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C23: Which statements fits best to your opinion on in-game advertising?
It is not acceptable 23%

Acceptable, if it doesn't disrupt immersion or gameplay

55%

Acceptable, if it leads to either a lower price of the game or more content

10%

It is completely acceptable

5%

I do not care about in-game advertising

7%

0%

10%

20%

30%

40%

50%

60%

C24: How important are player/gamer communities to you, when playing a game? (e.g. activity on social networking sites, messaging boards etc.)
1 Not at all important 24%

2

11%

3

19%

4

26%

5 - Very important

19%

0%

5%

10%

15%

20%

25%

30%

Electronic Arts in the Gaming Industry | Section C: Survey Results

93

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C25: Which statement fits best with your opinion, regarding the extent, to which player/gamer communities should be able to influence the game development process?
Little to no influence 11%

Some influence

39%

Extensive influence

20%

Players should always be entitled to influence game development

28%

None of the above are close to my opinion

2%

0%

5%

10% 15% 20% 25% 30% 35% 40% 45%

C26: Which statements - if any - do find to be true concerning game piracy? (i.e. illegally downloading games, free off the internet)

Piracy is bad for the gaming industry, in the SHORT term

31%

Piracy is bad for the gaming industry, in the LONG term

31%

Piracy is acceptable, if you purchase the game later on

32%

Piracy is acceptable, if the pirated game is not available for purchase in your geographical region

55%

Piracy helps create attention to a game

46%

0%

10%

20%

30%

40%

50%

60%

Electronic Arts in the Gaming Industry | Section C: Survey Results

94

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C27: Do you see online distribution platforms as a solution to piracy?

No, it actually increases piracy

6%

No, it has no effect on piracy

15%

It is a potential solution, dependent on optimization

45%

Yes, it decreases piracy somewhat

24%

Yes, it is a perfect solution

10%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

C28: DRM continued
DRM is a necessary solution to piracy 20%

DRM should not be a problem if you have nothing to hide

25%

DRM is annoying

46%

DRM makes me question my ownership of a product I've paid for

33%

DRM is an invasion of privacy

25%

DRM has no use whatsoever

24% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Electronic Arts in the Gaming Industry | Section C: Survey Results

95

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

SECTION C: Survey Results (Continued) - Open Questions Unedited
No.14: Feel free to elaborate on your experience with Origin customer support: (OPTIONAL)
   my game didnt show up after i bought it My problem wasent solved at all.. I had 5 or 6 diffrent supports to help me, over a few days. my friend fixed my problem on 4 hours.... Well, the basically screwed me over. Their only "help" was: Buy a PC or buy Sims for mac elsewhere. / I had bought Sims for my wife through EA earlier and wanted to redownload it because her HD wiped.

No.17: Feel free to elaborate on your experience with Origin: (OPTIONAL)
   No need for all game developers to create their own program. I'd rather just play it without origin or with the most famous game client, Steam Smooth, not as many options as Steam though. I haven't had any problems with Origin, but i don't exactly trust EA, partly because of thier bad reputation and the fact that it seems like a company only interested in making a lot of money. Also I've used Steam in some years, and it seems a bit unnecessary ti have two digital platforms at the same time. EA always had it's own distributor which was EA Downloader, but I guess they felt it needed a better UI, shop section and a social item to it. / But I felt it was unnecessary and kinda annoying that they stopped releasing games on the Steam service and made their own version of it.. which is very lacking, because it only houses EA games and not widely used like Steam. Dårligt at man ikke kan spille spillene uden brug af origin. As it is a quite new service, the ownership feeling is lacking to me compared to similar well-established services as Steam. I need to feel that this will stay on the market and not be shut down by EA if it turns out to be a bad investment. But I do like the way it works with BF 3. Der findes allerede Steam hvor størstedelen af alle mennesker har linket alle deres spil til. Det er for åndsvagt at vi må installere to forskellige klienter, samtidig med et voice program for at kunne spille ordentligt med vores venner. EA må kunne forhandle med Valve eller noget, som de åbenbart allerede har gjort med deres gamle udgivelser (BF2 ligger i hvert fald på Steam). I do actually prefer to buy the hard copy of a game, but online distribution is convenient and easy to use. Seems unnecessary with yet another platform for purchasing games / Difficult to get a good overview and to navigate around / Uncertain whether my transfer was validated
Electronic Arts in the Gaming Industry | SECTION C: Survey Results (Continued) - Open Questions Unedited 96

 

 

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

    

origin is okey, however occasionally unstable in regards with login, and it's graphical design/GUI could use a major overhaul SImpsons Tapped Out game for iPhone. Sometimes I can't load the game. It says connection lost. I have to wait for hours until I have time again to try to log in. They have some great offers every now and then, sometimes even better than those on steam. The only real competitor to steam, insofar as I know, though this might be straining the word "competitor" a bit. EA. Nuff said Compared to Steam I think Origin is a terrific example on having a clean user interface, easy to navigate, and just works very well. It's not messy, and my overall experience with the product is above good.

No.24: Feel free to elaborate on your experience with that particular customer support: (OPTIONAL)
  Have had some issues on Steam with lost account information, but managed to fix it with the help of customer service. MMO launch where the support was very meh and generic answers like we are working on it... without giving any insight

No.27: Feel free to elaborate on your experience with an online distribution platform: (OPTIONAL)
 It is very convenient to be able to download the game. However, I as well as others, don't want to miss the feeling of going to a game store, buy the game, open it, smell it, before putting it in the computer, playstation etc. you can compare it to buying a real book, or renting it on your ipad or kindle Mostly used Steam, it works perfect I use google play alot, steam is horrible though I think you will allways feel like you have less ownership of a product that is only purchased through a digital platform. But at the same time it is just super easy and fast to use and that's why i keep using it. I've had great experience with "Onlive" as well. I feel that online distribution platforms are better than actual stores and physical copies. / But there are some gamers, who feel that owning the actual CD and casing makes it better, just like how a person reading often prefers a book over an e-book. / / Also online distributions allow a lot more service and support for your product. Not to mention the social aspect in online distributions, for example the Steam software, allows a person to add friends, check out his statistics in games, play matches against them or with them, chatting, also you are able to see the games your friend has and which he recommends. Its quick, safe, easy and often cheaper than buying a hard copy of the game
Electronic Arts in the Gaming Industry | SECTION C: Survey Results (Continued) - Open Questions Unedited 97

    

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

Ofcourse there are occasional hiccups with downloading some games, but they are inevitable and thus I do not mind them, since they are so rare.  Steam  Couldn't download my new game, but worked the day after..  Steam: Der er et hav af spil. Det er sjældent at der er downtime, hvor jeg ikke kan downloade et spil og steam friends/community er et super godt initiativ. Man kan kun håbe på at flere spil vil tillade understøttelse af steam friends (altså at joine direkte til deres online spil) ligesom Valve's spil allerede gør.  I mainly use Steam, and I have only had good experiences in doing so.  Origin really sucks :)  2strong  Using steam on regular basis / Easy to use - updates the games itself. / Making it difficult to hack the games, though ;)  Bought some games from blizzard but they got stuck in some merging problem, so they can go to *Biiip*  Some games contained errors or were missing features that the retail game should have.  My boyfriend and I have different Apple ID for different countries. So sometimes upgrading an App can be a challenge.  Steam is by far the distribution platform, which I have used the most. It (almost) always works. They have great sales every week. Furthermore, they offer excellent tech support, should a problem arise.  Used Steam and PS store.. Both works perfect without any problems.  App Store works flawlessly. Android Market works flawlessly. Steam is the very pinnacle of flawlessness. apple app store and steam are stores i have used. / never had any reason to call/chat/contact customer support.

Electronic Arts in the Gaming Industry | SECTION C: Survey Results (Continued) - Open Questions Unedited

98

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

SECTION C: Survey Results (Continued) - Crossed Graphs

C29: Ratings of Overall Experience Using a Digital Distribution Platform
50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1 2 3 4 5

Origin Others

C30: 'Gender?' crossed with 'Which statement fits you best in terms of how much time you use on playing digital games?'
I never play digital games I play them occasionally I play a few hours per week I'm a casual gamer, playing most days, up to a few hours I'm a dedicated gamer, playing every day, several hours I spend nearly all of my pastime on gaming 0% 20%
Male

23% 77% 49% 51% 74% 26% 91% 9%

97%
3% 71% 29% 40% 60% 80%
Female

100%

120%

Electronic Arts in the Gaming Industry | SECTION C: Survey Results (Continued) - Crossed Graphs

99

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C31: 'Age?' crossed with 'Which statement fits you best in terms of how much time you use on playing digital games?'
8%

I never play digital games
0% I play them occasionally I play a few hours per week I'm a casual gamer, playing most days, up to a few hours I'm a dedicated gamer, playing every day, several hours I spend nearly all of my pastime on gaming 4%

8%

69%

8% 8% 12% 55% 14% 12% 6%4% 19% 3% 6% 23% 22% 27%

42%

40% 0% 5% 0% 0% 0% 5% 43% 14%14% 14% 14% 20%
22 - 25

5%
35% 59%

40%
26 - 29

60%
30 - 39

80%
40 or more

17 or less

18 - 21

C32: 'Which statement fits best to your familiarity with Origin: (The online distribution platform of Electronic Arts)' crossed with 'PC games (PC/MAC or laptop)'
35%
24% Play 6% 16% 19%

85%
6% Don't play 0% 3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 6%

Never heard about it Heard about it, considered using it Used it more than twice

Heard about it, never considered using it Used it once or twice

Electronic Arts in the Gaming Industry | SECTION C: Survey Results (Continued) - Crossed Graphs

100

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

C33: 'How important are player/gamer communities to you, when playing a game? (e.g. activity on social networking sites, messaging boards etc.)' crossed with 'PC games (PC/MAC or laptop)' 17%
12% Play 21% 28% 22%

67% 6% Don't play 6% 0% 10%
1 Not at all important

11% 11%

20%
2

30%
3

40%
4

50%

60%

70%

5 - Very important

Section D:
Correspondence with Nordic Marketing Director and Marketing Manager Denmark at Electronic Arts, Morten Nielsen (MN) - Unedited and in original language

Ifølge EA's egne statistikker (EA Investor Breakfast 2011) er der enklar tendens tilimplementering af sociale netværk, smart phones og Internet, når det drejer sig om gaming. For industrien skaber dette gode forhold for supplementerende udvikling af digitalt indhold, f.eks. i form af franchises gennem kompatibilitet på tværs af platforme, hvortil der integreres elementer af den sociale virtuelle sfære. Udviklingen af EA's digitale distributions-platform "Origin" er det fremtrædende eksempel på, at sådanne muligheder spiller en vigtig rolle i forhold til skabelsen af både forbruger-værdi og

konkurrencedygtighed. Ydermere tyder den kontinuerligt voksende strøm af "Nucleus" konto-registreringer på, at brugere ønsker en placering i et interaktivt netværk, istedet for

Electronic Arts in the Gaming Industry | Section D:

101

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

blot et individuelt produkt. Dette leder tankerne over på nogle spørgsmål med relation til kundeforholdsstyring (CRM), kunderettigheder og konkurrencedygtighed. 1. Følger Origin de mere traditionelle forbruger-segmenterings metoder, eller er brugerne ikke længere delt op efter specifikke rammer, somf.eks. demografiske forhold? MN: Naturligvis er Origon bygget op således at man stadig segmenterer sine forbrugere. Visse vil gerne hve det hele imens andre gerne vil se og høre i forhold til deres interesse dvs Sports fans kun får sports nyhederect.. 2. Er udviklingen af Origin, og udvidelsen til nye og voksende platforme,ment som et værktøj til at underbygge EA's kundeforholdsstyring? MN: Udviklingen af Origin skal ses som et vellykket forsøg på at skabe en platform hvor brugerne nemt og hurtigt kan få adgang til deres favorit spil fra EA samt andre udgivere som er med omkring Origin. På den lange bane anser vi Origin for at være et socialt samlingssted for fans af samme interesser om man spiller FIFA på PS3 eller Iphone mm Lærerbøgernes teoretiske tilgang til kundeforholdsstyring understreger den afgørende vigtighed af et solidt, velfungerende og indbyrdes funktionelt forhold mellem bruger og udbyder. 3. I hvilket omfang kan det samlede bruger-samfund påvirke EA i forhold til udvikling af produkter, nye strategier, osv.? MN: Det er da klart at man hele tiden holder øje med tends, forbruger spend mm.. men omvendt er man i en branche der skal være på forkant og innovativ så det er vigtigt man kontinuerligt investerer i fremtiden. 4. Nogle brugere føler sig berettiget til at kunne påvirke udviklingen af digitale produkter. I hvilken grad er dette et retfærdigt ønske, og bør brugerne i realiteten have en sådan indflydelse?

Electronic Arts in the Gaming Industry | Section D:

102

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

MN: Det er svært at sige og dette forholder sig jo forskelligt fra produkt til produkt men det er altid rart at have bruger feedback med i udviklingen om det så er indenfor platforme eller spil Følgende spørgsmål retter fokus mod konkurrencedygtigheden og den fremtidige udvikling af Origin: 5. Det ses tydeligt, at EA's strategiske tilgang for Origin fokuserer hovedsageligt på en udvikling af et solidt cross-platform system. Er et sådanne aktiv tiltænkt at være dominerende for Origin's konkurrencedygtighed, især set i sammenligning med Valve's Steam, der har flere års erfaring inden for den specifikke online distributions industri? MN: Kort fortalt er Origin en service der skal fungere som en ”hub” hvor brugerne kan dele deres interesser indenfor bestemte spil men samtidig også altid 24/7 have adgang til de bedste spil derude hurtigt og nemt 6. "Star Wars: The Old Republic"var en eksklusiv Origin udgivelse. Blev dette gjort med et henblik på at opbygge en ekstensiv kerne-brugerbase, og hvis ja, kommer vi så til at se flere lignende tiltag? MN: Det kan jeg ikke sige på nuværende tidspunkt men SWTOR var ikke ekslusivt til Origin, alle fysiske retailere mm.. havde spillet til salg 7. På længere sigt, er det målet at aftage EA's fokus fra distribution og produktion af fysiske produkter? MN: Man ser hele tiden på at optimere forretningens og ROI i forhold til distribution men den fysiske retailer er meget vigtigt igennem deres kundedatabase, forbruger flow mm.. så er ikke lige noget jeg ser der sker i morgen 8. Har pirat-kopiering stor økonomisk indflydelse på salg af digitale produkter, og i såfald, vil en mere aggressiv håndhævelse i relation til forvaltning af digitale rettigheder igennem Origin være en plausibel løsning?

Electronic Arts in the Gaming Industry | Section D:

103

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

MN: Gaming branchen har aldrig været speciel aggressiv på dette område men anser derimod online for at være en ny mulighed for at give brugerne indhold til spillene og være mere loyale så det forventer jeg ikke sker, nej CEO John Riccitiello, har tidligere, gjort det klart at han mener at top-down processer, centraliseret styring, et uniferet brand osv. er en dårlig ide, og har været nogle af de primære problemer for EA gennem tiden. I det hele taget gøres der, så vidt vi kan se, meget ud af nu at promovere selskabet som havende en høj grad af individuel autonomi i diverse administrative og produktions-orienterede afdelinger. Desuden er det vores indtryk, igen delvis udfra kommentarer fra Riccitiello,at der lægges stor vægt på den individuelle medarbejders kreative tankestrøm og kompetencer. 9. Kan man tale om at der i EA er en overordnet kreativ frihed mht. til at løse udfordringer der måtte komme? MN: Dette er meget forbeholdt udviklerne så er svært at svare på 10. Kommer dette til udtryk i dagligdagen indenfor EA, selv i etmindre afdelingskontor som i Danmark? MN: EA er ikke typisk US virksomhed. Der er en stor tiltro til medarbejderne og deres indfyldelse og know how. 11. Kommer det til udtryk i samarbejdet med HQ og andre afdelinger? MN: Nu taler man mest med vores regions kontorer men ja bestemt, alle er hjælpesomme og supportive på de områder hvor det kan lade sig gøre EA har også tilsyneladende skruet lidt ned for den tidligere, meget dedikerede, opkøbnings strategi. De senste år har så vist at tilgangen man har brugt i forhold til Bioware og Maxis, fungerer meget godt, altså med mere decentralisering, kreativ frihed, selvstændigt brand osv. 12. Kan du beskrive den overordnede vision mht. at få flere gode eksempler som Bioware og Maxis?

Electronic Arts in the Gaming Industry | Section D:

104

[BACHELOR THESIS – MICHAEL SOELBERG & CHRISTIAN HAULRICH] May, 2012

MN: Ikke udover den som er meldt ud men EA arbejder hele tiden på at skabe innovativ underholdning for forbrugerne med det formål at skabe de bedst mulige produkter. 13. Er det målet at skabe et multinationalt selskab med endnu flere individuelle brands? MN: Det har EA allerede med EA Sports, Maxis mm.. 14. Kan du beskrive hvad nogle af fremtids overvejslerne kunne være i dette henseende? Altså er vejen frem at gøre som man har gjort med BioWare f.eks.? MN: Nej desværre ikke, det må jeg ikke udtale mig om

End Notes
i

Entertainment Software Association , the trade association of the video games industry in the US. A monthly fee is obligatory to enter the game. Small, impulsive driven up selling. Additional, official, and payable content for a video game.

ii

iii

iv

v

Developing and writing the source code of the game, which in layman's terms is the instructions which tell the computer how to run the game.
vi

Or independent developers and game enthusiasts. Has since changed its name to Arlington Asset Investment Corp.

vii

viii

A system, or program, which simulates physics and dynamics within the game. For example, how a wall reacts to being shot at, in a shooting game.
ix

A metadata file which has target information on files on the internet, which if used together with a filesharing protocol application, enables the download of the file in question.
x

The trade association of the gaming industry in the United State of America. Currently still running in beta. Costs of packaging, delivery, and various retailer merits.

xi

xii

Electronic Arts in the Gaming Industry | End Notes

105

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->