Since its creation in 1979, Activision has been able to keep up with the ever changing aspects to the industry to be sure that it is still producing exceptional products for the video game market. If not for its adaptability, Activision would not be consistently making a profit when other companies are taking losses. Through the analysis of Activision’s current strategy, this report points out the key issues Activision is facing as a company today and recommendations on how to improve upon and benefit financially from these issues.
Activision Blizzard has four main products, StarCraft, World of Warcraft, Call of Duty and Diablo. Situation Analysis The interactive gaming industry is comprised of manufacturing and developing of home entertainment software for the PC (including Macintosh), console gaming systems (Xbox 360,Nintendo Wii & GameCube, Sony Playstation 2 & 3), portable gaming systems – Playstation System Portable, Gameboy Advance, Nintendo DS), online gaming (web and Java based software), and mobile platforms (iPod, iPhone and Smartphones)6.
In this way, this industry is very much global in terms of the development of games to the end users of software that are comprised of hardcore and casual gamers across many multiple platforms.
In order to gain more understanding of the gaming industry, it is important to examine the external macroeconomic factors that are affecting this industry as a whole. Following factors need to be considered in the analysis:
- Political: This will include factors like home market lobbying, future legislation, and funding/grants by governmental bodies. For example, Game publishers submit all pertinent content of a game to the Entertainment Software Rating Board (ESRB) during the final process of development. The ESRB will assign a rating that helps parents make informed decisions about which games to purchase for their child.
- Economic: Currently, the interactive gaming industry is facing challenges because of the increase in costs associated with developing the games, and the recessionary trends occurring throughout the world. The general economic trends associated with issues in the global economy, monetary/trade policies, and market trends associated with the interactive gaming industry play a key role.
- Social: This greatly influences the organization’s strategic formulation of which genre of games that it should compete in. In the interactive gaming industry, a high degree of customization is required, where the end users can adapt their lifestyle and software to the local culture.
- Technological: Certain technological innovations such as the Internet, and processing power, have led to tremendous growth of interactive gaming. As technological innovation is continuously evolving and revolutionizing the landscape of interactive gaming software and its capabilities, those who want to survive must maintain their competitive advantage developing new and dynamic ways to entice customers. Organizations must be aware of the technology adoption life cycle, realize when it will reach maturity, and be prepared through research and development initiatives to be ahead of the curve.
After careful analysis of the company, the following strengths, weaknesses, opportunities, and threats are to be noted:
The main strength of the company is its worldwide popularity and digital distribution. Currently Activision Blizzard Inc. has the largest share in the entertainment software industry – 9. 2%. The company recognizes digital distribution as key for its growing popularity: many of its video games are available for direct download via internet and do not a physical carrier (CD, DVD, Blue-Ray, USB, etc. ) like many of its competitors. Digital distribution not only allows the company to bypass retailers and increase profit margins but also provides gamers with a lower subscription-barrier for its products.
Company’s financial success is indeed ensured by the rising popularity of its subscription-based core franchises World of Warcraft, Starcraft, Call of Duty and Diablo Series. As of December 31st 2010, World of Warcraft’s subscriber base alone totaled over 12. 000. 000. The company has a very positive image in the gaming world, with innovation and attention being among its main distinctive characteristics.
Company’s main weaknesses are connected to its depency on single profitable products and the general seasonality in the gaming industry as a whole. World of Warcraft’s series has dominated the sales in online gaming since its first launch in 2004 and its success was vital for the financial well-being of Activision Blizzard: the high product development costs in the industry put extreme pressure on each product and cause high risk in the development of new franchises.
Example for the challenges faced by the company are its financial results, showing that almost 60% of its revenue is connected to two product series only – World of Warcraft and Call of Duty. Moreover, the gaming market as a whole is directed by a general sales seasonality, with sales volumes peaking during the year-end holiday period – titles that fail to catch the public interest in that period lead to financial losses and lack of profitable expansion options.
Despite facing great challenges in its current operations, Activision Blizzard has a variety of options still to be explored: One of the main opportunities for the company is the rising popularity of the Social Gaming sector. Over the last couple of years there have been exponential growth in various forms of gaming on the social networks.
Due to its accessibility, Social Gaming is reaching a broader audience via Facebook and mobile applications, delivering impressive growth data: According to the Wall Street Journal, in the period 2008-2012 the number of people engaging in video games online has risen 241%. These numbers create platform for new expand opportunities, where the company can cash on its already existing popularity in the gaming industry as a whole. Moreover, novels and TV series remain area not completely utilized by the company and offer great potential for provoking interest and attracting new customers.
Company’s main threats are the negative image of gaming as a whole, described as “addictive” and often “violent” by the media. These qualifications affect the public opinion and create additional expansion barriers. Moreover, government intervation and censorship are to be frequently seen in recent years and limit the growth of the industry worldwide. Last but not least, the competition is keeping up with Activision Blizzard’s success and is constantly targeting the existing customer base of the company with new offers.