Company Overview Presentation: EA Sports

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Slide 1: The video game industry is worth an estimated $25.1 billion as of 2010 in the US alone (ESA, 2012), a year in which Electronic Arts earned $3.6 billion in total revenue and $2.025 in North America, giving the company an approximate market share of 8%. The company published titles on all major platforms for the year. The company has a gross margin of 65% but barely turned a profit, this coming after several years of losses. Slide 2: Michael Porter's five forces framework allows us to determine the pricing power within a given industry, and can be tailored to an specific firm within that industry. The five forces are bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitutions, and the intensity of rivalry within the industry. Slide 3: The bargaining power of buyers is moderate. Buyers are attracted to hit titles and will pay more for them, but this is moderated by strong competition in the number of titles. The bargaining power of suppliers is high, as evidenced by the very high fixed costs in the industry. Talent in particular is expensive, but without top talent the games will not be competitive quality. Slide 4: The threat of new entrants is high, as the most talented producers can start their own studios. There are fairly low barriers to entry in video game software. The threat of substitutes is high, since video games are simply another form of entertainment, just about anything can be a substitute. A major new
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