Group Yellow, Strategy & Online Business

Electronic Arts in Online Gaming

I.

Situation Analysis
A. The key issue that will impact EA's ability to thrive is maximizing its game's sales,
irrelevant of the console platform dynamics.
B. Key Success Factors:
B1) Then:
1. Licenses with branded franchises
2. Large portfolio of successful game franchises
3. Platform agnostic approach, which made games available across all consoles
4. Innovation - aggressive move to online gaming (nascent market)
B2) Now:
1. Continued licenses with brand franchises
2. Big market share in growing online gaming segment
3. Improved gaming experience (customer experience, technology improvement)

II.

Strategic options at EA's disposal to increase sales

A. Online-enable EA games for Xbox only, if possible on better terms (% of revenue
from subscriptions, at least sharing customer behaviour)
A1) Significance of option:
1. Significant brand partnership - positions EA as a part of Microsoft's vision for
entertainment and enables it access to 80% footprint in US
2. Benefits from Xbox Live's features promoting gamer community and "closed"
network
3. Xbox Live's strategy positions itself as a 2-sided network platform. EA could
benefit from network effects.
A2) Reasons why this option might not be optimal:
1. In the worst-case scenario, EA won't have access to critical customer behaviour
data.
2. Microsoft becomes a lynchpin of online gaming industry. In any "Winner Takes
All" scenario, it is more probable the deal might work against EA.
3. Rules for game development are rigid. EA will have to cede its marketing and
distribution functions.
4. EA risks losing a big part of Sony PS2 market, at least until the next industry
cycle.
B. Stick to your guns approach: Online-enable EA games for PS2 only
B1) Significance of option:
1. EA retains its control on marketing and distribution.
2. Allows EA to gather relevant customer behaviour.
3. Fights Microsoft in positioning itself as market lynch-pin
B2) Reasons why this option might not be optimal:
1. EA risks losing sales and market share, in an indirect fight with Microsoft

Group Yellow, Strategy & Online Business

2. EA's cost base would increase - as it would be forced to provide customer
experience quality that is at par/better than Xbox.
3. No assurance that Sony wouldn't make a move similar to Microsoft. In such a
case, no matter which 'Winner Takes All' scenario plays out, supporting Sony
would most probably work against EA.
C. Platform agnostic approach: Online-enable EA games for all supporting
platforms (PS2, Xbox Live etc.)
C1) Significance of option:
1. Ensures EA access to complete online-gaming market.
2. Allows EA time to study and adapt to the online-gaming market's direction.
3. EA retains its control on marketing, distribution and customer data for platforms
other than Xbox.
C2) Reasons why this option might not be optimal:
1. Increased technical complexity for managing multiple platforms might
compromise homogenous gaming experience for consumers. It would also lead
to additional costs.
2. Microsoft decides online platform rules (data is kept private, no revenue from
Xbox Live shared with developers) with no words from EA, plus it sets a
precedent for future online platforms

III.

Recommendation

We recommend EA to maintain a platform agnostic approach (option C), albeit at higher costs,
expecting access to the complete online-gaming market.
The reasons supporting this recommendation are as follows:
1. The concern should be accessing a larger market size, and thereby increase sales.
2. It is too early to accurately determine the long-term status of online gaming market.
Besides, choosing sides, with either Sony PS2 or Xbox, translates into ceding too much
control to one of them. This could result in longer-term problems.
3. EA already dealing with a large portfolio of franchises across multiple consoles. Hence,
the additional complexity should be well within their resources and capabilities.
Risks/Limitations of implementing the same include:
1. To release games on Xbox, fixed costs increase by $1million per game (porting costs).
2. Risk of compromising homogenous gaming experience for consumers across multiple
consoles/platforms.
The console software market is too fragmented for any individual console software player, even
EA, to impact the platform wars without hurting its sales badly, as Xbox has a significant market
share and an attractive Xbox Live platform. One could argue software developers should unite to
make Microsoft yield and propose better conditions. However, using prisoner's dilemma as the
logical basis, it is prudent to maintain a platform-neutral or platform-agnostic approach.