CASE 3-8: The Activision Blizzard Merger
In December of 2007 the merger of Activision and Blizzard was announced. Blizzard Entertainment, one of four divisions of Vivendi games, was the key ingredient for synergy between the two firms. First, an introduction to the video game software industry is pertinent. This will be followed by some discussion regarding the major trends and major players in the industry. Second, some insight will be provided on the merging companies, Activision and Blizzard. Third, the potential value of the merger will be explored, along with some analysis of the partnership. Lastly, I will give my personal views of the merger itself.
The Industry, domestically the video game software industry was worth $9.5 …show more content…
Activision Pre-merger: Activision was a leading developer and publisher of video game software for consoles. Its top titles include Guitar Hero, Tony Hawk, and Call of Duty, all of which have multiple games in their series. The company itself was moderately vertically integrated, with ownership of some development, publishing, and distribution activities. Its strengths lie in its growth strategies; partnerships allowed the firm to exclusive rights to certain brands. Other strengths include leading game titles for multiple platforms, hit sequels that are less capital intensive to develop, a stringent “green light” process for quality control, ability for online game play, and divisions in over a dozen countries. Weaknesses include lack of existence in foreign markets, lack of PC software development techniques, and the fact that licensed content is vulnerable to competition. The opportunities available are sequels to already established titles, growth in industry, and future partnerships based on their good reputation with previous alliances. Threats include competition from other software developers like THQ and Take-Two, the cyclical nature of releases, and the reliance on game consoles for use of software.
Blizzard Pre-Merger: Strengths for the Company include top performing titles manufactured for use on computers, reoccurring revenues based on subscriptions, and a presence in the hard to penetrate Asian market.
Click here to unlock this and over one million essaysGet Access
However, GameStop is still at a disadvantage, because there are such a large number of competitors in the industry. Buyer’s bargaining power are high, since there is no brand loyalty in the industry. Customers are very well aware of the market price of a product and will look for the best deals they can find. Suppliers have high bargaining power since suppliers can choose to integrate forward and sell their products themselves. The success of the retail gaming industry is very dependent on the availability of supplier’s goods. Additionally, since there are low barriers of entrance, substitute products and new entrants often appear in the market. Since most competitors in the industry do not have a strong presence, the expected retaliation towards new entrants is low. An increasing popularity of smartphone games and social media games such as Farmville on Facebook, allows customers to play against friends. Although these social media games do not offer the same experience as a video game, the fact that virtually no switching cost is associated with switching to a competitor’s game and since they are so cheap compared to video game disk and consoles, can easily drive customers from video gaming to online gaming. (Exhibit 2)
Video games are an ever-growing franchise that is constantly undergoing change. Ever since the dawn of video games, new consoles, games, developers, and teams have come together, fallen apart, triumphed, and failed. What is it that has allowed some to thrive where others failed? Several different factors have changed and influenced the world of gaming, including the history that is continuously being written, the people who have built the games behind the scenes, and, of course, the actual video games themselves. Numerous video games have been more successful than others, but identifying what components set the successful apart from the unsuccessful is something definitely worth observing.
The mainstream gamer enjoys games but may not finish every game they buy and doesn't have time for long MMO (Massive Multiplayer Online) quests. The mainstream gamer represents approx. 15% of the gaming market.
To attempt counteract this cyclical slowdown, EB games have introduced an ever-growing variety of accessories with games to increase the revenue raising capacity of their respective consoles, as well as maintaining the loyalty and attention of a fickle gaming public. Some types of games have been released, with specialty controllers to great success, mitigating the expected lull in sales in the lead-up to new consoles. Recently however, the competition has become slightly skewed. Nintendo’s newfound dominance of the market is causing some headaches for Sony and Microsoft.
The video game industry is the economic sector involved with the development, marketing and sale of video and computer games. It includes video game consoles, game software, handheld devices, mobile games and online games. The video gaming industry has been growing exponentially in recent years with Sony, Microsoft and Nintendo competing for the higher profits in the market. This essay will analyze each of the five forces acting on the industry: threat of new entrants, threat of substitute products or services, bargaining power of buyers, bargaining power of suppliers, and the competitive rivalry among existing firms. Then it will be determined if the video game industry is still an
Sometimes it seems like the computer game industry is dying, crushed to death by its own bulk. Every year more and more gaming companies get gobbled up into huge conglomerates like Electronic Arts, companies that mostly put out trash that is technically and visually impressive, but devoid of concept and content. However, there are some small gaming companies that buck the trend. While mostly just small groups of programmers and artists, some are huge unions of fans who, irritated with the dropping quality of computer games, have decided to use the power of the internet to get together and to produce games tailor-made to their personal preferences.
Both Sony and Microsoft focused their efforts on hard-core gamers and offering processing power and cutting-edge features to attract them. On the other hand, Nintendo has been trying to attract new customers that traditionally are non-gamers. The
Global Video Game Console Industries must try to maintain a sustainable competitive advantage through innovation such as creating an upgraded version of the game every year or increase their on and off line presence to better satisfy their customers. There are many competitors in the Video Game industry that include PlayStation 3, Xbox 360 and Wii. These gaming consoles compete in terms of price, durability and loyalty. With Intensity Rivalry being a major determinant of competitiveness, video game companies work towards dominating the industry as well as gaining the major part of the industry profit pool. (Blackwell, 2002)
The fifth and final force is that of the intensity of rivalry. This is the strongest force in the video game industry. Nintendo was very strategic in targeting an audience that Microsoft and Sony neglected. While Microsoft and Sony focused on the typical gamers, males ages 18-34, Nintendo focused on a broader audience “everyone” when creating their Wii. In the video game industry rivalry Microsoft and Sony are battling for the same market, while Nintendo has much of its audience all to itself. This is why
In 1954, Alpha Plastics was founded near Manchester. And by the mid 1969’s, the company had developed into a medium-sized company with around 6,000 employees. The company was famous for developing and manufacturing a wide range of laminates and industrial adhesives. Also, it had explored the market in synthetic fibre manufacture by take-over. In 1988, Alpha Plastics involved in merger with the Colmar Chemical Company, which is a slightly larger organisation with 8,500 employees and located near Stockport. Colmar produces a variety of industrial chemicals besides plastic and specialises in the production of synthetic fibres. Alpha Plastics believed that the merger would allow taking advantage of
A business unit can be defined by a set of operating divisions that are organized by market, customer, product, or other means, which essentially act as self-sufficient businesses with separate profits. (Thompson et al 2015).
The introduction of smart phones and tablets have change the gamers’ way on playing video games. These new gadgets allow people to be 24-7 connected on the internet and the amount of games available online that can be play on a telephone or a tablet is huge. Therefore, mobile device gaming is a segment with a fast growth rate at the moment, though the world is in a recession.
The main obstacle facing a start-up video game console company from entering the industry is saturation of the market from the larger video game console makers or the “big three” Nintendo, Microsoft, and Sony. The big three tend to release new game consoles around the same time frame and compete head to head for sales. During the time frame it is impossible for a new entry to jump into the fray. 2010 was a banner year for video console sales Sony’s PS3 sold 14 million units followed by Microsoft’s Xbox 360 13 million and surprisingly Nintendo’s Wii led the big three selling 17 million units. After the 2010 release of all three consoles sales started to decline for each company. Nintendo took the largest sales loss at 72% in 2013 only 747,000 were sold compared