Group 3| Activision Blizzard| Marketing Report| | | | “Video games sit at the confluence of history, technology, and art in such a way that’s found in no other medium, a place where influences from every creative field meet, mix, and recombine. ” – Daniel D. Synder, The Atlantic| Activision Blizzard, Inc. is one of the leading companies in the entertainment and game software industry in the world.
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. PEST Analysis: – for detailed PEST Analysis please refer to the Appendix Activision Blizzard SWOT Analysis – for detailed SWOT Analysis please refer to the Appendix Strengths| Weaknesses| * Worldwide popularity * Digital distribution * Strong line of successful game franchises: World of Warcraft, Starcraft, Diablo, Call of Duty Series * Diverse portfolio of gaming products: online games, action figures, cards, board games, novels. Leading R&D department with 250 designers; Attention to detail| * No option for profitable expansion in case of drop in popularity levels * Sales seasonality * High product development costs * High risk in developing new franchises * Large dependency on single product success| Opportunities| Threats| * Lower subscription costs to attract new customers * Creation of TV series * Expansion in the growing Social Gaming: Facebook games, iPhone and Android Apps, etc. In-game advertising| * Bad press image: “addictive” * Growing popularity of competitor products * Government regulation * Slowdown in the economy| Action Planning and Implementation 1. Activision Blizzard Goals: “We continue to pursue our mission to be one of the largest, most profitable and well-respected interactive entertainment software companies of the world. ” – Activision Blizzard Mission Statement 2. Strategy: Market Structure & Segmentation
Activision Blizzard is a worldwide developer and distributor of video games, its games can be downloaded through the internet or bought in the retail stores in the data devices as CDs. The company has developed all kind of video games targeting different segments in the video game industry. Company As mentioned in the business model section, Activision-Blizzard Inc. ’s strategy is primarily based on marketing video gaming software and online based MMORPGs that are subscription-based such as StarCraft, Diablo, Call of Duty and WarCraft.
This organization “focuses on diversified categories of games which include action sports, simulation, first-person action, racing, role-playing, action and adventure and music-based gaming. ”64 This is particularly evident with its recent acquisition strategy of Bizarre Creations in order to compete in a $1. 5 billion USD segment that previously Activision-Blizzard was not competing in, outside of sports65. The reason behind this acquisition was that for many years, it “didn’t have the development capability to put out a top game (to compete with the Need for Speed franchise) and there were not many external options around. 66 In terms of the revenues from gaming platforms through licensing agreements, “82. 76% is comprised by console gaming, followed by Handheld which is 10. 84%, and PC with 6. 39% respectively. ” Competition Activision Blizzard’s gains competitive advantage in the industry through its strong titles and games. Currently its strongest competitors are EA and Take Two Interactive. EA competes with them directly in the action genre. Activision Blizzard’s main title in this genre is Call of Duty Modern Warfare 3.
Its strength over EA is shown by the fact that the Modern Warfare 3 surpassed 1 Bln. dollars in sales in 16 days. Furthermore, Activision Blizzard maintains a strong consumer subscription base in its Call of Duty, War of Warcraft and Diablo III Series. Collaborators Activision Blizzard products are available for sale or rental in thousands of retail outlets in North America. Their North American retail customers include Best Buy, GameStop, Target, Toys “R” Us, and Wal-Mart, also an upcoming online distributors like Steam. Online Gaming Market: The Wall Street Journal
Online Gaming Market: The Wall Street Journal Customers The total revenue of the gaming industry is 24. 75 billion dollars. This includes $16. 54b in content, $5. 59b in hardware and $2. 62 in Accessories. Activision Blizzard’s markets share is currently 9% which makes it a total of 1. 72 Billion dollars. This was calculated taken only content and accessories since Activision blizzard does not deal with hardware. Market Structure Geographic segmentation: The main products of the company are downloadable through the internet which makes the games accessible worldwide.
The main Video Games markets are United Stated, Western Europe, Japan and South Korea, and the market with more rapid growth is China. Games Segmentation: In the video game industry has being segmented based on the different type of games as racing, adventure, role-playing, shooter, sports and action. Demographic Segmentation: The company has developed games in different the games segmentation targeting different demographic customers including gender and age. Other groups in this segment will not be taking in account since religion, race and nationality do not influence in the video gamers.
Physiographic Segmentation: The video game customers vary their hours played and type of games based in with whom they are playing with. Gamers use to play with their parents, other family members, friends and/or Spouses. Target Market: Activision Blizzard? s main player are between 18 and 45 years old, these players are called Dormant Players, they are low playtime players because of work, family or studies. They start playing video games between the first and fifth generation gamers between 1972 and 2002; they have preferences on specific brands or game styles.
Therefore, Activision Blizzard is targeting teenagers’ men and women in high school who spent an average of 58 hours played per month and play normally with friends. These players will become the regular customers from future games, as Blizzard division is already doing with their three main brands Diablo III (2012), StarCraft II (2010) and World of Warcraft Mist of Pandara(2012) where most of the players used to play the first version Diablo (1996), StarCraft (1998) and Warcraft (1994). Value Proposition: Company Value The company’s revenue model is based on combination of selling nteractive gaming software and subscription-based online games. In this way, the company operates in two business segments: publishing of interactive entertainment software/peripherals and distribution of interactive entertainment software and hardware products. Customers Value The company provides a high-quality game to hardcore and casual PC gamers, plus on-line monthly subscription for WoW, many hours of immersive entertainment through a captivating virtual environment and a genuine customer experience.
The company places multiplayer characteristics (interaction and the contribution of these customers through feedbacks) at the front line of their complex social strategy which enhances the customers’ value proposition providing them maximum bang for their buck. Collaborators Value The company creates opportunities & in turn wealth for its collaborators in terms of revenue, market awareness & penetration. 3. Tactics Product The products of Activision Blizzard can be categorized as a hybrid of tangible and intangible goods. This is because they buy a physical CD in order to access the software through a license.
The games follow a regular product lifecycle. However they can prolong the time until decline of the game by introducing new features, expansion packs, downloadable modifications and allowing users to build their own customizations. Price 42% of gamers generally think that buying a game gives them the most value for their money. For purchase, the industry standard price is usually around $60 and the online subscription fee (World of War Craft and Diablo) is approximately $15. Promotion In 2011 AV blizzard spent $545 million in advertisement. Activision Blizzard has a massive presence on the internet.
They advertise through social media networks such as Facebook, 9GAG and YouTube. For example Activision Blizzards latest highly anticipated release, Diablo 3 was immensely marketed through 9GAG by fans of the series. Place In addition to their regular merchandisers such as Best Buy and GameStop, customers can easily download the game off digital distribution network such as the Steam platform. 4. Implementation Activision Blizzard executes their strategy of selling games by making sequels to the existing games. These games are already so famous that it is guaranteed that the consumer base will receive them favorably.
In the past two years they released 2 sequels of Call of Duty, a revamp of a James Bond game and Diablo 3 along with an expansion pack of the popular online game World of Warcraft. Call of Duty: Modern warfare exceeded sales of $1 billion within 16 days of launch. This shows that the customer base prefers games they are familiar with and the quality of the games Activision Blizzard produces. 5. Control Activision Blizzard ensures that they are on the right route by constantly adding new features and modifications to the games. They sustain customer satisfaction and confidence by providing efficient support for their online and offline games.
For example, to endure the high server load during the release of Diablo 3, they increased the servers throughout the globe. Furthermore, it is easy for companies such as Activision Blizzard to track customer satisfaction by looking at subscription numbers and play statistics. 6. Recommendations Since the video game industry is high paced and rapidly growing, Activision Blizzard must react to these trends in order to compete. Future trends show that games are increasingly made available online. Activision Blizzard must increase the placement of their products in this sector and slowly start to rely less on the production of physical CDs.
Another factor they must consider is the rising popularity of smartphone and social media games. Activision Blizzard’s current focus is on the console and PC market. Activision Blizzard is at risk of losing market share to upstart companies such as Zynga if they do not react to this threat. They should also try to break in the Chinese Market to dominate the gaming industry. Appendix PEST ANALYSIS 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. SWOT Analysis After careful analysis of the company, the following strengths, weaknesses, opportunities, and threats are to be noted: Strenghts:
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. Weaknesses: 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. Opportunities: 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.
Threats: 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. References http://www. activisionblizzard. om – 2011 Activision Blizzard Annual Report -http://investor. activision. com/annuals. cfm http://www. ign. com Essential Facts about the Video Game Industry – 2012 Demographic and Usage Data – http://theESA. com UNIVERSITY OF OREGON INVESTMENT GROUP – Activision Blizzard SWOT Analysis http://en. wikipedia. org/wiki/Electronic_arts http://en. wikipedia. org/wiki/Activision_Blizzard Video Game Software Publishing in the U. S. – http://clients. ibisworld. com/industryus/default. aspx? indid Activision Blizzard Inc. (2011). Games. Activision – http://www. activision. com/index. html#games|en_US
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