Risks Facing Electronic Arts, Inc. and Impacts of Investing

Introduction 

Electronic Arts, Inc. (EA) serves as a global dealer, developer, distributor, and publisher of video games. The company initiated the initial home computer delights while it emerged successful in influencing its programmers and designers responsible for games. Initially, EA embarked on publishing amusements aligned to home computing. The organization advanced through the efforts of a number of successful developers while it emerged as among the largest third party publishers (Noonan, 2014) . In the recent years, EA has emerged successful for sports games, which follow the EA sports label together with trendy films, including Harry Porter in line with games attributed to long-term franchises, such as Need for Speed, Medal of Honor, Battlefield, The Sims , and currently games in Command, Burnout, and Conquer series. Most of the sports series follow the EA industry while the biggest enlargement studio in the world EA Canada facilitates in distributing the Rock Band series (Community BUFF, 2018) . For this paper, it revolves around the risks facing Electronic Arts in the gaming industry, which influence chances for investing in the company. 

Research Question 

What are the major challenges facing EA in the gaming industry and what impact do they have on the investment prospective within the company? 

SWOT Analysis 

A SWOT analysis refers to the internal strengths and weaknesses as well as the external opportunities and threats facing an organization. For EA, its SWOT analysis is as in Table 1. 

Electronic Arts, Inc. Risks 

One of the key challenges facing EA is that it is considered as having problems. Despite being one of the biggest game publishers, EA has acquired a negative reputation when it comes to quality control as well as innovating products. The corporation has regularly been accused of offering substandard games ridden with bugs in line with failing to offer significant improvement in quality between instalments of franchise (Wyman, 2012) . Whereas most of the criticism results from vocal minority, no clear instances prevail whereby EA has offered high-profile releases. Furthermore, the quality and the manner in which EA handled the 2013 Battlefield 4 release resulted to outrage among consumers as well as numerous lawsuits. One particular case charged that EA had misled investors willingly concerning the nature of the game. Concerns still prevail as to whether Battlefield 4 has impacted the wider series and whether it will influence future Battlefield games (Greenspan, 2013) . While the company serves as among the ones offering biggest game releases, performing softly on the area would lead its operations to misfire. Moreover, the corporation has witnessed tremendous criticism regarding the content, quality, as well as revenue models attributed to recent games, including Dragon Age II, SimCity, Plants vs. Zombies 2, Mass Effect 3, and NBA Live 14 (Noonan, 2014) . The various properties that the company has attributed to these games are of significant importance to EA, although in numerous instances, the firm has failed to employ sufficient effort when it comes to delivering on content and quality. 

EA has shown tremendous reliance on licenses, which has also led it to experience various threats. While the company is among the major game publishers, it has numerous funds that can permit it to attain lucrative licenses. Recently, the organization secured exclusive rights for the FIFA game, which is increasingly popular until 2022. It also has license for the Star Wars game until 2023 irrespective of the fact that the prior Star Wars failed to perform as expected in the market (Greenspan, 2013) . Moreover, EA has licenses for NBA, NFL, NHL, UFC, and the Simpsons. For these properties, they are significantly strong, although the degree to which the performance of EA relies on them leads to the emergence of extra risks and variables. For instance, evasive comments and rumors from representatives of EA claim that EA might fail to have explosive rights to the NFL, while the Take-Two Interactive might serve as a key rival. Whereas the later might serve as a smaller publisher, it has managed to beat EA in the area of basketball since its NBA 2K14 was able to beat the poorly performing NBA Live 14 by EA both commercially and critically. The basketball by Take-Two has also managed to outperform the latest PlayStation 4’s Madden as well as the one on Xbox One. Nonetheless, the small cash reserves by the organization indicate that the NFL license might serve as a huge investment. Still, other major firms prevail in the gaming sector, which might pose rivalry to EA in the event that the license is availed (Noonan, 2014) . With the chance for growing rivalry, the quality control issues at EA are compounded. 

Additionally, the uncertainty of the Internet presents risks to EA. The chance of EA collaborating with Comcast to offer streamed content presents various possibilities, although the initiative might go wrong. For instance, the recent cycle of console hardware has seen the organization back out from a collaboration with Nintendo while leading it to rework its strategy for offering content after supporting the vision of the original Xbox One. The goal of EA is to emphasize on shaping advancement content distribution and online gaming, although it is experiencing certain challenges (Community BUFF, 2018) . In the event of Compact, for instance, it has revealed that it anticipates planning commencing charging consumers in terms of bandwidth. Comcast also seems to be experiencing power struggles with providers of online content, such as Google and Netflix, which are well documented. In the event of Electronic Arts, it will experience similar hindrances in it anticipates offering consumers access to its services and content (Wyman, 2012) . Digital ecosystem members of EA might also find themselves paying more money to access the Internet and additional online content, which has the probability of reducing the existing pool of spending. 

Theoretical Framework 

In the gaming industry, companies are experiencing growing pressures to cope with the advancing technology to allow them to offer astonishing games to consumers. The state of competitiveness in the sector is growing intense, particularly as companies strive to deliver for feature-rich and quality content to users. Additionally, the battle for licenses has intensified in the recent years, which has created a need for companies in the gaming sector to devise means of acquiring licenses, which would boost their relevance and competitiveness in the market place. In this vein, EA needs to understand all these issues, which are revolving around the gaming world in order to continue being relevant despite the growing competitiveness in the field. Thus, it needs to lay more emphasis on content, quality, and competiveness in order to continue serving as one of the key players in the gaming world. Regarding the syllabus, the key areas covered revolve around competitiveness and the need for the gaming sector to strategize in order to cope with the emerging trends in the area.

Methodology 

For this study, the researcher will adopt a case study approach. A case study method facilitates an in-depth and detailed exploration of sophisticated issues as they appear in the real world setting. A case study approach is valuable since it has realized significant recognition in the law, business, and policy fields among others. The method is mostly vital when applying it in areas aimed at acquiring detailed appreciation of a particular event, issue, or phenomenon of interest as it prevails in the real life setting. The case study approach will apply to the case of EA mostly because it contributes greatly to understanding business phenomena (Crowe, et al., 2011) . Since the risks facing EA are business in nature, the approach will be critical to identifying the forces behind the risks facing the organization and the probable approaches to dealing with them in order to remain relevant and competitive in the gaming industry.

Action Plan 

In undertaking the study, the activities to be carried out and their time scale will comprise of the introduction (1 day), research question (1 day), SWOT analysis (2 days), discussion of risks facing the organization (3 days), and the methodology (1 day). The individuals and organizations to be approached will include CEO of EA and developer as well as the company itself to gain deeper insights regarding the operations of the company. On the probable sources of information, the researcher will gather them from websites and books in order to gain increased understanding of the issues facing the organization and probable solutions. Nonetheless, while undertaking the study, it will be probable that certain difficulties will emerge. One of the challenge will entail ensuring to acquire accurate information from the company CEO as well as the organization itself regarding its performance. Overcoming these issues will be of paramount importance to make sure that the study offers comprehensive details pertaining to how EA can deal with the prevailing trends in the market.

References

Community BUFF. (2018). The biggest gaming companies and what they’re worth. Retrieved from https://medium.com/buff-game/the-biggest-gaming-companies-and-what-theyre-worth-91755a1969de

Crowe, S., Cresswell, K., Robertson, A., Huby, G., Avery, A., & Sheikh, A. (2011). The case study approach. Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3141799/

Greenspan, D. (2013). Mastering the game: business and legal issues for video game developers. Geneva: World Intellectual Property Organization.

Noonan, K. (2014). 3 huge risks facing Electronic Arts Is EA still a good investment despite the hurdles it faces? Retrieved from https://www.fool.com/investing/general/2014/06/17/3-big-risks-facing-electronic-arts.aspx

Wyman, M. T. (2012). Making great games: an insider's guide to designing and developing the world's greatest games. Reading: Taylor & Francis.