Financial Analysis of Ea Games Essay

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Part A: INDUSTRY INFORMATION

1. Economic Features

Market size and Growth Potential (as of 2003):

* The video game industry is currently a $31 billion global market. * Market size has tripled in value over the last decade from $10 billion in 1995 to $31 billion as of 2003. * In five years the industry is expected to grow approximately 14.8% ($36,042/$31,374), at a rate of approximately 2.96% per year (14.8%/5). * We feel that the industry is entering the early maturity stage of the growth cycle for the overall global market. * Some observers feel that growth potential is massive, predicting that the video game market is "on track to rival the movie, music, and television industries" * Further analysis …show more content…
* Executives at EA games believe the gaming experience will be taken to a point beyond what consumers can experience from movies and TV shows.

The Potential Entry of New Competitors:

Threat of entry is weak due to the following factors:

* Many of the independent game developers have built a strong relationship with the console manufacturers to develop games for their gaming console. * Learning curve will be more difficult, since most of the game developers have acquired intellectual individuals who have a great mind for video games. * Brand recognition seems to be vital to the success of an independent game developer where consumers identify certain types of video games with a game developer. For example, EA Games with their sports franchise titles. * Entry into the gaming industry is even more difficult since competition exist not just with the various independent game developers but also with the big three console manufacturers (Microsoft, Nintendo, and Sony) who publish some of their own games. * Independent game developers, such as EA Games and Activision, have developed a strong relationship with
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