ERTS - Electronic Arts
Let me warn you, this is a very technical, nuts and bolts type report. It is interesting, and you will learn a few things, but chances are if you don't know what all the jibber jabber means in the Money section of the Washington Post means, you may have some trouble here. Now I personally dont like EA very much at all, but to make a better grade, and things easier, I said I liked the company quite a bit. I chose this company because they are a supreme business leader. If I had invested $10,000 in EA 15 years ago, I'd have $16,000,000 to play with now. Hmmmm.... the works cited is horrible, but who cares, its there.
Kevin Ford
4/26/05
Behan
Bus 100
Stock End Review: ERTS
Chapter 1: Overview
Hello, my name is Kevin Ford, and for this 14 week Stock tracking project, I’ve followed the events of Electronic Arts. Electronic Arts is the biggest third party entertainment software developer, and publishing company in the 10 billion dollar video game economy. (EA) As the demand for better technology continuously rises, Electronic Arts proceeds to provide consumers with cutting edge visuals, thrilling audio and realistic game play, taking story telling to a whole new level never yet experienced through literature or the cinema. As their company profile states,
“Electronic Arts (NASDAQ: ERTS), headquartered in Redwood City, California, is the world’s leading interactive entertainment software company. Founded in 1982, Electronic Arts posted revenues of $3 billion for fiscal 2004. The company develops, publishes and distributes interactive software worldwide for video game systems, personal computers and the Internet. Electronic Arts markets its products under three brand names: EA SPORTSTM, EA GAMESTM, and EA SPORTS BIGTM. EA's homepage and online game site is EA.COMSM.”
Having invested 10,000 dollars into EA, worth 164 shares at $60.81 each, I can honestly claim the choice to pull out so soon could have been a blunder. Unhappily on the date of 4/19/05, each share was worth ten dollars less, at 50.74. (Yahoo Finance) The total price difference equated out to a negative $10.74, and my Net Loss after liquidation on that day brought me down $1,761.36. I started with $10,000.00. I ended with $8,238.64. Having said that, had I truly invested $10,000.00 into Electronic Arts, I would have more than reserved them, as EA is rapidly expanding towards a fully global market with its brightest days just ahead with no end in sight.
EA throughout the years has gained a reliable reputation on par with entertainment giants Nintendo, Sony, and Microsoft. The battle to control the 5 to 35 year old target market is by no means ending as gamers only want the best product in what is already a very overcrowded market. Why EA is on top is because every one of their efforts reaches millions of fans across the world, and all of their efforts are nothing less than that of spectacular. Racing fans love Need for Speed Underground, providing anyone the opportunity to race a virtual car of their own design from the inside out. War worshippers find satisfaction in EA’s Battlefield, Medal of Honor, and Command and Conquer Series. Why watch the same two hour movie over and over when you can enjoy a 20+ hour story of your own, such as in the Lord of the Rings, Batman, Harry Potter, and for the mobster in you, The Godfather. EA doesn’t stop there, as no more than one company allows you to play with virtual lives, and with that, EA presents The Sims, the most potent IP of 2004.
In the world of sports interactivity, EA is at present number one. Almost every sport has been digitized into a game, Football, Baseball, Basketball, Hockey, Golf, NASCAR, F-1 Racing, Rugby, the list goes on. Furthermore, EA now controls video gamings leading cash cow, which is the NFL. John Madden may be famous for his Raider’s coaching or his superb commentaries on television, but today’s generation know John Madden as the man who boasts the world’s best selling franchise under his belt. The NFL, NCAA as well as the #1 worldwide leader in sports, ESPN, have all just signed groundbreaking, exclusive contracts with EA, so that only EA may make games based on NCAA football, as well as everything that has anything to do specifically with the NFL (NASDAQ). With these contracts, EA can provide special unique qualities to their games, in which no other company can.
For those at work with a few minutes to spare, consumers may sign up for EA’s POGO service. Like many other web-based game sites before it, POGO offers their own take on Card Games, Board Games and Puzzle Games. For those who enjoy winning things, users may sign up for POGO and play games to potentially win cash and other prizes.
Chapter 2: Management/ Business
EA turned into a publicly-traded company on September 20, 1989 on the NASDAQ at a split-adjusted price of $0.50 per share, and have split 4 times since, each 2 for 1. (EA) To date, prices range in and around 50 to $60 a share. The company runs as a C-Class corporation, deep inside what is seemingly a perfect market, although Oligopolies are developing. Well over a hundred different studios vie to place their product in the market for the same prices as they were ten years ago.
During fiscal 2004, EA’s Studio and Publishing teams delivered 27 platinum titles which helped to bring in 3.3 billion dollars by years end, up 19% from 2003 fiscal year end. Six franchises sold over 5 million units, which include The Sims, Need for Speed, Medal of Honor, FIFA Soccer, Lord of the Rings, and Madden NFL franchises. In Europe, business has risen by 200% within the last three years, and doubled within the Asian market. As a new handheld boom takes place, EA is prepared to make the most of the new PSP and DS platforms. Also, within the next two years, Nintendo, Microsoft, and Sony will have all released their innovative next generation consoles, which are anticipated to provide the power necessary to create games which could eerily mimic real life. Earlier last year, EA embraced Microsoft’s highly advanced LIVE network during the annual E3 expo, complete with superstars holding games in which people would soon be able to play together globally, connected through the internet.
One of EA’s strengths is that they are able to create and release their titles continuously for almost all the major systems out today, such as the X-Box, Playstation 2, Gamecube, PSP, DS, Gameboy, N-Gage, and up and coming cellular phones. It is EA’s mission to put the best products into the hands of the consumer, despite development costs. EA since their initial incorporation in 1982 have published games for over 43 different platforms. The company’s flexibility comes from its wide array of first party studios and publishing centers as well as 3rd party developers. These studios are located near Orlando, Los Angeles, San Francisco, Chicago, Vancouver, Montreal, London, and Tokyo. EA publishes their products under three major brands, EA Sports, EA Games, and EA Big, as well as co-publishes, and EA distributes products in which are made by other companies, such as Square-Enix’s Final Fantasy X-2. During fiscal 2004, EA pushed 32 internally developed titles, and co-published 11.(EA) EA’s most profitable franchise for the calendar year was the Sims; selling more than 16 million copies while Need for Speed sold over 15 million.
As of late, EA has been acquiring new licenses, buying massive shares of powerful competitors stock, and completely removing all competition in several forms of video game entertainment. The company completed its acquisition of Criterion Software, makers of what many professional entertainment sites claim as the 2004 GOTY, and has agreed to purchase 19.9 (21, TFT) percent of Ubisoft for 90 million, most famous for Tom Clancy’s franchises usually set in the events of tomorrow. EA also purchased more of Digital Illusions, makers of the online Battlefield franchise. Ea purchased a young outstanding company, CryTek, makers of one of today’s most advanced games, Far Cry. What surprised, and angered many consumers this year were its flurry of exclusive horizontal, and conglomerate agreements with high-status companies. In the progression of less than three months, EA bought exclusive rights to develop NFL video games for the next five years, EA also bought the exclusive rights to make games based on the ESPN license for the next 15 years, practically stealing the ESPN brand away from then Sega owned 2KGames, running away with Sega’s two most competitive elements. Afterwards EA proceeded to buy the exclusive rights to make football games based on the NCAA for 6 years, and then the AFL. This is all on top of exclusivities with FIFA, NASCAR, and the PGA Tour.
Chapter 3: Distribution and Marketing
EA’s global business infrastructure is run by EA Partners, (EA) whom operate with the intent to generate and purchase intellectual properties crafted by third party developers, publishers, and licensors. EA Partners has established ties with DICE, Lionhead, Krome Studios, Black Hole Games, Free Radical Design and many others. EA Partners also distribute developed and manufactured goods in support of other companies, such as Capcom, Namco, Koei, and NovaLogic.
After the game code is finished or gone gold, the product is made available to consumers on disk or cartridge. They are generally sold to mass market providers, electronics, and video game specialty stores. Clients may buy off the company website, or through additional websites in which the games are sold. Also, EA may distribute games bundled with other software or hardware in which the consumer purchases the manufacturers product. With the innovations of the World Wide Web, some properties may even be bought and downloaded over the internet.
Revenue is gained primarily through direct sales, North American direct sales accounted for 95% of the total revenue.(EA) In order to maximize total revenue, extensive research to estimate demand for each product in terms of regional location takes place. Inventory is not retained, as strong product sales typically last from 60-90 days before the product value begins to decrease and thus every unit must be pushed. This process is known as LIFO, last in, first out. (McHughes) Units are sold all over the world, although on most occasions, units of the same title do not release at the same time from region to region. Business is conducted in countries including Australia, Brazil, Canada, China, England, France, Germany, Greece, Italy, Japan, South Korea, Spain, and Taiwan.
Having taken a class for the first time which specializes in business on a higher level, I can honestly say my mind has been made up in the direction I’d like to proceed in the coming years. While the idea of this stock project seemed more of a stock chore at first, I find myself reading the money section of the newspaper more often, and actually enjoying the ability to know what even the petty issues mean. Now I know, that if I had ten thousand dollars to spend, I would absolutely invest in the stock market, even ERTS. Electronic Arts is still a young company, but they are becoming the best, much like the youngest country in the world has become the planets most famous. I certainly would invest in Electronics Arts, in time, and in money.
Works Cited
1. a) Electronic Arts Homepage, April 18-24th
b) “Electronic Arts Reports Fiscal Third Quarter Results” Q3 2005 Earnings Release.
2005.
2. a) Yahoo.Finance,1/18-4/19. http://finance.yahoo.com/q?s=ERTS.
b) “ERTS”. Stocks and Quotes. 2005.
3. a) The NASDAQ Stock Market 1/18 – 4/19, http://www.nasdaq.com/
b) “Electronic Arts, Inc.” Summery Quote.
http://quotes.nasdaq.com/asp/SummaryQuote.asp?symbol=ERTS&selected=ERTS
4. McHugh, Susan, James M. McHugh, William Nickles “How Economics Affects Business:
The Creation and Distribution of Wealth”, Understanding Business, Edition 7, New York: McGraw-Hill/Irwin, 2005.
5. Grande, Carlos, Maija Pesola.”French games industy is also chaging” The Financial Times
Limited. 11 March. 2005: pg 21.
Kevin Ford
4/26/05
Behan
Bus 100
Stock End Review: ERTS
Chapter 1: Overview
Hello, my name is Kevin Ford, and for this 14 week Stock tracking project, I’ve followed the events of Electronic Arts. Electronic Arts is the biggest third party entertainment software developer, and publishing company in the 10 billion dollar video game economy. (EA) As the demand for better technology continuously rises, Electronic Arts proceeds to provide consumers with cutting edge visuals, thrilling audio and realistic game play, taking story telling to a whole new level never yet experienced through literature or the cinema. As their company profile states,
“Electronic Arts (NASDAQ: ERTS), headquartered in Redwood City, California, is the world’s leading interactive entertainment software company. Founded in 1982, Electronic Arts posted revenues of $3 billion for fiscal 2004. The company develops, publishes and distributes interactive software worldwide for video game systems, personal computers and the Internet. Electronic Arts markets its products under three brand names: EA SPORTSTM, EA GAMESTM, and EA SPORTS BIGTM. EA's homepage and online game site is EA.COMSM.”
Having invested 10,000 dollars into EA, worth 164 shares at $60.81 each, I can honestly claim the choice to pull out so soon could have been a blunder. Unhappily on the date of 4/19/05, each share was worth ten dollars less, at 50.74. (Yahoo Finance) The total price difference equated out to a negative $10.74, and my Net Loss after liquidation on that day brought me down $1,761.36. I started with $10,000.00. I ended with $8,238.64. Having said that, had I truly invested $10,000.00 into Electronic Arts, I would have more than reserved them, as EA is rapidly expanding towards a fully global market with its brightest days just ahead with no end in sight.
EA throughout the years has gained a reliable reputation on par with entertainment giants Nintendo, Sony, and Microsoft. The battle to control the 5 to 35 year old target market is by no means ending as gamers only want the best product in what is already a very overcrowded market. Why EA is on top is because every one of their efforts reaches millions of fans across the world, and all of their efforts are nothing less than that of spectacular. Racing fans love Need for Speed Underground, providing anyone the opportunity to race a virtual car of their own design from the inside out. War worshippers find satisfaction in EA’s Battlefield, Medal of Honor, and Command and Conquer Series. Why watch the same two hour movie over and over when you can enjoy a 20+ hour story of your own, such as in the Lord of the Rings, Batman, Harry Potter, and for the mobster in you, The Godfather. EA doesn’t stop there, as no more than one company allows you to play with virtual lives, and with that, EA presents The Sims, the most potent IP of 2004.
In the world of sports interactivity, EA is at present number one. Almost every sport has been digitized into a game, Football, Baseball, Basketball, Hockey, Golf, NASCAR, F-1 Racing, Rugby, the list goes on. Furthermore, EA now controls video gamings leading cash cow, which is the NFL. John Madden may be famous for his Raider’s coaching or his superb commentaries on television, but today’s generation know John Madden as the man who boasts the world’s best selling franchise under his belt. The NFL, NCAA as well as the #1 worldwide leader in sports, ESPN, have all just signed groundbreaking, exclusive contracts with EA, so that only EA may make games based on NCAA football, as well as everything that has anything to do specifically with the NFL (NASDAQ). With these contracts, EA can provide special unique qualities to their games, in which no other company can.
For those at work with a few minutes to spare, consumers may sign up for EA’s POGO service. Like many other web-based game sites before it, POGO offers their own take on Card Games, Board Games and Puzzle Games. For those who enjoy winning things, users may sign up for POGO and play games to potentially win cash and other prizes.
Chapter 2: Management/ Business
EA turned into a publicly-traded company on September 20, 1989 on the NASDAQ at a split-adjusted price of $0.50 per share, and have split 4 times since, each 2 for 1. (EA) To date, prices range in and around 50 to $60 a share. The company runs as a C-Class corporation, deep inside what is seemingly a perfect market, although Oligopolies are developing. Well over a hundred different studios vie to place their product in the market for the same prices as they were ten years ago.
During fiscal 2004, EA’s Studio and Publishing teams delivered 27 platinum titles which helped to bring in 3.3 billion dollars by years end, up 19% from 2003 fiscal year end. Six franchises sold over 5 million units, which include The Sims, Need for Speed, Medal of Honor, FIFA Soccer, Lord of the Rings, and Madden NFL franchises. In Europe, business has risen by 200% within the last three years, and doubled within the Asian market. As a new handheld boom takes place, EA is prepared to make the most of the new PSP and DS platforms. Also, within the next two years, Nintendo, Microsoft, and Sony will have all released their innovative next generation consoles, which are anticipated to provide the power necessary to create games which could eerily mimic real life. Earlier last year, EA embraced Microsoft’s highly advanced LIVE network during the annual E3 expo, complete with superstars holding games in which people would soon be able to play together globally, connected through the internet.
One of EA’s strengths is that they are able to create and release their titles continuously for almost all the major systems out today, such as the X-Box, Playstation 2, Gamecube, PSP, DS, Gameboy, N-Gage, and up and coming cellular phones. It is EA’s mission to put the best products into the hands of the consumer, despite development costs. EA since their initial incorporation in 1982 have published games for over 43 different platforms. The company’s flexibility comes from its wide array of first party studios and publishing centers as well as 3rd party developers. These studios are located near Orlando, Los Angeles, San Francisco, Chicago, Vancouver, Montreal, London, and Tokyo. EA publishes their products under three major brands, EA Sports, EA Games, and EA Big, as well as co-publishes, and EA distributes products in which are made by other companies, such as Square-Enix’s Final Fantasy X-2. During fiscal 2004, EA pushed 32 internally developed titles, and co-published 11.(EA) EA’s most profitable franchise for the calendar year was the Sims; selling more than 16 million copies while Need for Speed sold over 15 million.
As of late, EA has been acquiring new licenses, buying massive shares of powerful competitors stock, and completely removing all competition in several forms of video game entertainment. The company completed its acquisition of Criterion Software, makers of what many professional entertainment sites claim as the 2004 GOTY, and has agreed to purchase 19.9 (21, TFT) percent of Ubisoft for 90 million, most famous for Tom Clancy’s franchises usually set in the events of tomorrow. EA also purchased more of Digital Illusions, makers of the online Battlefield franchise. Ea purchased a young outstanding company, CryTek, makers of one of today’s most advanced games, Far Cry. What surprised, and angered many consumers this year were its flurry of exclusive horizontal, and conglomerate agreements with high-status companies. In the progression of less than three months, EA bought exclusive rights to develop NFL video games for the next five years, EA also bought the exclusive rights to make games based on the ESPN license for the next 15 years, practically stealing the ESPN brand away from then Sega owned 2KGames, running away with Sega’s two most competitive elements. Afterwards EA proceeded to buy the exclusive rights to make football games based on the NCAA for 6 years, and then the AFL. This is all on top of exclusivities with FIFA, NASCAR, and the PGA Tour.
Chapter 3: Distribution and Marketing
EA’s global business infrastructure is run by EA Partners, (EA) whom operate with the intent to generate and purchase intellectual properties crafted by third party developers, publishers, and licensors. EA Partners has established ties with DICE, Lionhead, Krome Studios, Black Hole Games, Free Radical Design and many others. EA Partners also distribute developed and manufactured goods in support of other companies, such as Capcom, Namco, Koei, and NovaLogic.
After the game code is finished or gone gold, the product is made available to consumers on disk or cartridge. They are generally sold to mass market providers, electronics, and video game specialty stores. Clients may buy off the company website, or through additional websites in which the games are sold. Also, EA may distribute games bundled with other software or hardware in which the consumer purchases the manufacturers product. With the innovations of the World Wide Web, some properties may even be bought and downloaded over the internet.
Revenue is gained primarily through direct sales, North American direct sales accounted for 95% of the total revenue.(EA) In order to maximize total revenue, extensive research to estimate demand for each product in terms of regional location takes place. Inventory is not retained, as strong product sales typically last from 60-90 days before the product value begins to decrease and thus every unit must be pushed. This process is known as LIFO, last in, first out. (McHughes) Units are sold all over the world, although on most occasions, units of the same title do not release at the same time from region to region. Business is conducted in countries including Australia, Brazil, Canada, China, England, France, Germany, Greece, Italy, Japan, South Korea, Spain, and Taiwan.
Having taken a class for the first time which specializes in business on a higher level, I can honestly say my mind has been made up in the direction I’d like to proceed in the coming years. While the idea of this stock project seemed more of a stock chore at first, I find myself reading the money section of the newspaper more often, and actually enjoying the ability to know what even the petty issues mean. Now I know, that if I had ten thousand dollars to spend, I would absolutely invest in the stock market, even ERTS. Electronic Arts is still a young company, but they are becoming the best, much like the youngest country in the world has become the planets most famous. I certainly would invest in Electronics Arts, in time, and in money.
Works Cited
1. a) Electronic Arts Homepage, April 18-24th
b) “Electronic Arts Reports Fiscal Third Quarter Results” Q3 2005 Earnings Release.
2005.
2. a) Yahoo.Finance,1/18-4/19. http://finance.yahoo.com/q?s=ERTS.
b) “ERTS”. Stocks and Quotes. 2005.
3. a) The NASDAQ Stock Market 1/18 – 4/19, http://www.nasdaq.com/
b) “Electronic Arts, Inc.” Summery Quote.
http://quotes.nasdaq.com/asp/SummaryQuote.asp?symbol=ERTS&selected=ERTS
4. McHugh, Susan, James M. McHugh, William Nickles “How Economics Affects Business:
The Creation and Distribution of Wealth”, Understanding Business, Edition 7, New York: McGraw-Hill/Irwin, 2005.
5. Grande, Carlos, Maija Pesola.”French games industy is also chaging” The Financial Times
Limited. 11 March. 2005: pg 21.
posted by Kev at 8:27 PM
<< Home