Essay Financial Analysis of Ea Games

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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
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* Others such as Sega and significantly smaller players have decided to focus on game producing only. * Some major industry players are increasingly turning to outsourcing some of their game production to independent licensed game developers.

2. Competitive Analysis

*Due to the vast amount of information regarding the gaming industry, we concentrated more on the work of independent game developers than on the three makers of game consoles.
The Rivalry among Competing Sellers in the Gaming Industry:

Rivalry is seen as being intense due to the following factors:

Major players in the gaming industry: THQ, Acclaim Entertainment, EA Games, Microsoft, Sega, and Activision

* Gaming industry has experienced fierce competition due to the presence of three (Sony, Nintendo, Microsoft) different console manufacturers and several independent game developers. * All three makers of gaming consoles also develop some of their own games, which are exclusive to their own console. * Game developers are continually coming out with new games in attempt to improve upon previous releases that were of a lesser technological quality * The smaller game developers are having difficulty staying competitive due to a lack of capital, and unpredictable cash flows. * Standardization is definitely present in the many games that are released; therefore we see many game players switch
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