An Industrial and Market Analysis: A Casestudy of Blizzard Entertainment Inc.
Brief Company Description
Blizzard Entertainment Inc. is an American based company that develops and publishes entertainment software. The firm was originally founded on Feb 8, 1991 as the Silicon & Synapse Company but later changed its name to Chaos Studios Inc. and later Blizzard Entertainment Inc. Blizzard Entertainment Inc. is well known for its reputable video game collections, having achieved multiple Game of the Year awards across its blockbuster franchises. Besides its software portfolio, Blizzard Entertainment Inc. actively offers online-game services. Bloomberg categorically provides that the firm holds the largest online following on a global basis (Bloomberg, 2017).
Video Games Industry
One can hardly ignore the competitive nature of the video-game industry. Firms within this industry have totally transformed, particularly with the improvement of technology and the need to have superior quality products. Consequentially, revenues have soared and forecasts have indicated a continuing growth of the industry in the future. As of 2016, the gaming industry generated $30.4billion in revenues, $0.2billion more, as was reported in 2015. The value incorporates revenues from hardware, software, peripherals and other in-game purchases.
Of the $30.4billion generated, $24.5billion was ascribed to the sales of video-game software, which includes downloadable content, physically packaged products, subscriptions, mobile games and other revenue streams. Reported revenues reflected an increase of approximately $1.3billion. Groundbreaking products such as the virtual reality systems largely contributed to this increase in revenue with consumers appreciating and acknowledging their release (Entertainment Software Association, 2017).
The above statistics give formidable grounds that characterize the video-gaming industry. The different products that collectively form the video-game industry can broadly be segmented into two groups: the software sector, which mainly constitutes of the games themselves and the hardware sector that largely constitutes of the physical platforms that support the software games. This strategic segmentation provides a channel to categorize the different players involved into strategic groups (Langlotz & Whaley, 2008).
Understanding that Blizzard Entertainment Inc. falls under the software development and publishing segment, it then becomes paramount to recognize the key competitors within this market segment. Generally, the U.S gaming market hosts a number of developers and publishers. In fact, Anderton (2017) offers that at least each state in the U.S hosts a video game developing and publishing company; thus making the industry extremely competitive. Statistical figures provide that there are at least 2,322 and 526 developing and publishing companies respectively in the U.S (Anderton, 2017). The different software companies generally target consumers in different market segmentations, which collectively establishes different strategic groups. The strategic groups can be classified into six categories: a) mobile, b) PC, c) virtual reality, d) subscription, e) portable devices and e) digital consoles.
Despite the many players involved, the market is largely dominated by Electronics Arts (EA), Value Corp, Ubisoft, Take-Two, Zynga in addition to Blizzard Entertainment Inc. The five aforementioned firms stand as major Blizzard competitors in the software segment. Nevertheless, Blizzard stands out as the remarkable online software game provider. The firm holds the biggest market share in the U.S. Statistical comparisons to EA show that Blizzard owns 100% of the total online subscription market share; thus making it the biggest online-gaming company in North America. In addition, online subscription services amount to be the biggest revenue contributors for Blizzard Entertainment Inc., statistically contributing 23.19% of the company’s total revenue (CSIMarket, 2017).
Industry Changes or Disruptions
The gaming industry is continuously experiencing growth and an expansion in its markets. Unlike the past, present times have adjudicate a proliferation of gaming materials not only in the developed economies but also in the developing countries. Gamers’ needs have also changed with time while entry-barriers have significantly loosened, subsequently creating a stringent environment for game-developers. The digital world has increasingly influenced the gaming industry, consequently spelling three major disruption trends within the industry.
A change in the consumer base provides one of the disruptive factors affecting the gaming industry. The number of gamers has consistently increased, resultantly creating a diverse and heterogeneous consumer market. Supporting devices have increased to include platforms such as mobile phones and specific portable gaming devices. Digital advancements have given the consumer a better bargaining power, particularly for low-cost, good enough products.
The second disruptive factor revolves around video game evolutions. Loosened barriers of entry coupled with innovative technologies have consequently driven a growth in the gaming industry and enabled immersive gaming experiences. Smartphone penetration has remarkably been on the rise with statistics providing that at least 72% of the global mobile subscriber market hold smartphones and 35% of adults over 18 own tablets. This represents a significant market segment, particularly considering the low costs involved in developing games within this sector.
Beyond mobile devices and traditional consoles, Virtual or Augmented reality presents innovative and immersive forms of experiences in the gaming industry. Devices such as Oculus Rift have enjoyed significant appreciation from gamers, subsequently creating a commerciable opportunity for game developers. Linked together with AR/VR developments, developers have realized the economic benefits ascribed to channel story telling. The concept largely relates to entertainment strategies engaged by film and television companies, where interactive content is a fundamental factor in maintaining and recruiting new consumers. For example, HBO and The Games of Thrones. Video game developers are also taking on the same path with companies such as Amazon or Disney mimicking media assets from comic books or movies.
Digital distribution channels have significantly changed the video-gaming industry. These channels are slowly becoming the norm, subsequently disrupting physical distributions channels and ongoing consumer engagements. The proliferation of the internet has changed much of how people live in today’s world including how they play their favorite games. Statistical data shows that annual rates from physical distributions decreased by 13.1% as from 2009-2012 while digital distribution rates surged by 12.6% as of the same period (Kelly, Mishra, & Jequinto, 2014).
Porter’s Five Analysis: Blizzard Entertainment Inc.