MBA Enterpreneurship Report

I am currently working on an MBA, and for the program you choose a company to use as a case study. I have been using Activision Blizzard, the makers of such games as World of Warcraft and Call of Duty to give my MBA classes an emphasis in Game Design, at least from the business side of things.

Here is the final paper from my Entrepreneurship course. It’s copied from a Google doc, so there are some formatting errors.

 

  • Market Domain

 

eSports, or electronic sports, is the moniker given to competitive events that are held in the digital space. eSports have existed in their current iteration since the 1990’s and really came into their own with the release of Blizzard’s game StarCraft II in 1998 and the emergence of the Korean eSports market. Blizzard’s historical success in eSports has mostly been limited to South Korea; competing companies such as Valve and Riot Games have had measurable success in North America over the past decade. Blizzard released a competitive digital card game, Hearthstone, last year, released its 5 vs 5 MOBA (Multiplayer Online Battle Arena) Heroes of the Storm (HotS) last June, and is releasing its multiplayer FPS (First-Person Shooter) Overwatch next year. Blizzard is making a large push into eSports, and while a very lucrative opportunity, it doesn’t come without risk.

 

 

  • Historical Significance

 

Historically eSports have been a niche market. There have been video game events since the 1980’s, but it wasn’t until reliable high-speed internet became the norm that eSports became a viable business strategy. Traditionally eSports events were held at a venue over a Local Area network (LAN), and the events were only seen by those in attendance. Now that high-speed internet is common, events can be held remotely, where each competitor plays from their home computer, and the event is live-streamed over the internet on sites such as Twitch.tv. This revolution in connectivity has exponentially increased the number of viewers for eSports events, and opened the door for reliable advertising revenue and marketing campaigns.

 

  • Factors

 

The rise of eSports can be directly attributed to three factors: reliable internet connectivity; increased acceptance of video games and video game culture; and broadcasting of eSports events on mainstream television channels.

  1. Impact of Factors

In the days of dial-up modems, eSports events were held over LANs because the internet infrastructure in place couldn’t reliably run the events. Current internet lines (cable, DSL, fiber optic, etc) are now able to allow players to compete in events from any location, and more importantly, allow viewers to see the event in real-time from anywhere.

Video games are commonplace and children are exposed to video games via dedicated consoles, or more likely mobile phones, at a young age. Adults aged 18-30 grew up with video games, and are more receptive to video game related purchases than the prior generation. The acceptance of video games as part of daily life, and the passive viewing of video games via streaming has opened up the marketing opportunities for publishers.

As eSports have proven themselves to be reliable revenue streams and have attracted advertisers, major networks have aired events (Taylor, 2015). This allows additional exposure to potential customers that may not have seen the events online.

 

  • Competitive Readiness
  • Internal Factors:
  • SWOT

 

Blizzard has brought quality eSports products to a crowded market, and success is tenuous at the moment (Joost, 2015). There is currently a vacuum in the leadership positions for the eSports venture, which is not a positive indicator. If Blizzard focuses their marketing on the customers of their competitors, I predict failure. If instead Blizzard targets wholly new customers to the genre, I predict they will see much more success. HotS will probably never be as popular as Riot Games’ League of Legends (LoL), but it doesn’t have to be. HotS can still command a sizable market presence, and has the potential to generate revenue at a regular rate. In my opinion, the success of expanding into eSports for Blizzard depends largely on who they decide they want their customer base to be.

 

 

  • Prioritized List

 

To reliably compete, Blizzard needs to focus on who their customer base is going to be. Blizzard needs to establish inroads to those customers if they don’t already exist, develop marketing strategies to target those customers, and highlight what makes their product unique from their competitor’s.

 

  • Readiness

 

Activision Blizzard has the monetary resources to make a big push into whichever market it chooses; much of this monetary success is from Blizzard’s titles. Blizzard has the capital to invest heavily in the eSports venture, and the steady income to see it through to the end. Blizzard has already established a partnership with TeSPA, a collegiate esports organizer, to promote brand awareness on college campuses and to create eSports teams on college campuses, bringing legitimacy to eSports. Blizzard has a diverse range of games, each with their own loyal customer base. HotS capitalizes on this by using characters from those franchises as playable characters; this makes it easier to bring customers from those franchises into the new one. In addition to TeSPA, Blizzard has already had a HotS event aired on ESPN2, and commercials for its games air regularly on television. Twitch.tv is the web-channel that is the leader in eSports viewing, and videos of Blizzard’s titles regularly appear in the top 10 viewed games on a per month basis.

An additional asset that Blizzard has over its main competitors Riot Games and Valve, is Hearthstone. Hearthstone is available on PC or mobile devices; the same can’t be said for the competition’s games. having a game in the mobile market provides Blizzard with a significant advantage in the continually expanding mobile marketplace.

However, Blizzard still lacks leadership in key eSports personnel positions, particularly at the global level. This fact downgrades Blizzard’s readiness: they have the capital, but not necessarily the leadership and expertise.

 

 

  • External Factors:
  • PEST

 

The economy is still weak, and will likely continue to be. Smart-phones have exponentially increased the video game customer base. Hundreds of new titles are released on the Apple App-Store everyday, making it tough for a developer to succeed in a crowded market. In this video game market, name recognition and brand loyalty is key. With the likely passage of the Trans-Pacific Partnership (TPP), the cost of exports to Asia will drop, increasing profits (Chifelle, 2015). Smart-phones have opened up third world markets that didn’t exist a decade ago. For a new developer, generating profit will be difficult, if not impossible due to the flooded market; an incredible amount of luck is required. For established brands with the capital, expertise, and willingness to innovate, the overall outlook is positive, and will continue to improve as the global economy continues to recover.

 

 

  • Prioritized List

 

Being an established brand, Blizzard has the upperhand in the current economic climate. To best capitalize, Blizzard needs to expand its market presence into the emerging markets of Africa and Central/South America.

 

  • Readiness

 

Blizzard has historically focused on the established markets of North America, Asia, and Europe. Purposeful expansion into emerging markets will require Blizzard to hand over operations to a partnering agency, at least temporarily. Blizzard has experience in this regard, as a separate company manages their IPs in China. TeSPA also manages Blizzard’s eSports on college campuses, and a similar deal could be reached with a partner in South Africa. Unfortunately Blizzard is missing key Global eSports personnel that could improve the viability of this venture, but I feel Blizzard has enough other experience to make up for this, at least in the short term.

 

 

III. Opportunities and Trends

 

  • Intrapreneurial Opportunity

 

Blizzard has successfully organized large gaming events a multitude of times, and I suggest that Blizzard hold an event in South Africa as soon as feasible. The increasing middle class in Africa is creating independent game developers all over the continent, and Blizzard should work with these individuals to foster additional goodwill. By combining a traditional Blizzard-centric gaming event with an exposition of up-and-coming developers native to the continent, Blizzard can show it wants to be a positive contributor to Africa’s gaming success.

The mobile gaming market doesn’t exist in many countries in Africa, but it will very soon and Blizzard will want to be on the ground when it comes to fruition. Additionally, English is spoken in Nigeria, Kenya, and South Africa (three of the largest markets), so Blizzard doesn’t need to convert any games to new languages; they can be played as-is, unlike markets in Asia.

 

 

  • Intrapreneurial Assessment

 

Blizzard has experience partnering with local organizations to promote its brands (TeSPA), and could do the same in South Africa. Blizzard also has years of experience hosting major events, and can bring that expertise to South Africa for both eSports events and traditional expos. The African gaming market will continue to increase, and establishing a presence before the market matures will give Blizzard a competitive advantage.

Blizzard has been trying to establish its games as legitimate eSports contenders, with some success. StarCraft is almost a national sport in South Korea, but has seen limited eSports success elsewhere. Blizzard’s newest title Heroes of the Storm is competing with League of Legends and DOTA2 in the saturated Multiplayer Online Battle Arena (MOBA) market, and will remain in third place for the foreseeable future. Additionally, Hearthstone is the only eSports title in Blizzard’s portfolio that can be played on a tablet or smartphone, making it ideal for the African market. Rather than battle competitors in the North American, European, and Asian markets, Blizzard can create its own market in Africa. Specifically, by establishing a foothold in South Africa, fostering positive brand awareness, and then expanding Northward.

 

 

  • Entrepreneurial Opportunities

 

Mobile gaming is the leading revenue generator in video games, surpassing both consoles (XboxOne, PlayStation4, WiiU) and PCs (personal computers) (Gaudiosi, 2015). The prevalence of the smartphone has allowed developers to release games to millions of users simultaneously, and those users tend to be working-aged women, not the adolescent males that have defined “gamers” for the past two decades. Many developers that traditionally developed titles for consoles and PC have had mixed results. Blizzard Entertainment, the video game studio that is the subject of this paper, had avoided the mobile game space entirely until last year (2014). That venture into the mobile space possibly occurred by accident, as the game in question, Blizzard’s Collectible Card Game (CCG) Hearthstone: Heroes of Warcraft, was developed using the Unity game engine instead of creating an internal engine per normal because the project was so small scale; being created with Unity allowed the game to be transferred to mobile fairly easily.

To take advantage of the rising revenue associated with mobile games, I propose  the development of a new mobile game based on Blizzard’s PC Real-Time Strategy (RTS) game StarCraft II.

Blizzard games are known for their high quality, and Hearthstone is no exception and is currently generating $20 million in revenue per month for Blizzard. Hearthstone has proven that Blizzard can be successful in mobile gaming, and their next mobile title should utilize StarCraft II. RTS games are very popular with mobile customers; SuperCell’s Clash of Clans and Boom Beach can attest to this fact. The just mentioned titles are derivative of StarCraft, a defining series in the RTS genre. Blizzard could easily leverage their knowledge of RTS, coupled with the fact that Blizzard’s parent company Activision-Blizzard recently purchased King, the creators of Candy Crush Saga, to create an excellent mobile RTS to rival the success of SuperCell’s titles.

 

 

  • Entrepreneurial Assessment

 

Developing a new mobile game that lives up to Blizzard’s standards of quality, a company notorious for not releasing content until it is ready, will take several years and thousands of man-hours. While this is a good investment that will yield predictable returns, and should be carried out, I feel it is too in-line with Blizzard’s existing portfolio and doesn’t represent a true entrepreneurial opportunity.

 

 

  • Trends

 

Africa has been politically unstable for decades, preventing investment capital from flowing into the continent. Recent history has seen some progress, but infrastructure is still severely lacking and is a major barrier to economic progress. South Africa is the lone outlier, with stable government and infrastructure that makes it the best location for a foothold in Africa. Mobile phones are as commonplace in South Africa as they are in the United States, and 34% of users in South Africa have a smartphone. eSports do currently exist in South Africa, but not with the same fervor as the triad of Asia, Europe, and North America. All African and Middle Eastern countries are currently part of the European server network for Blizzard (Blizzard, 2015), clearing showing the small number of users in Africa don’t even warrant their own servers.

The market potential of Africa, coupled with its need for infrastructure, has led private companies to create the infrastructure themselves to further their economic goals. Chinese companies in particular have been upgrading local infrastructure in the central continent to expedite the mining of raw materials (Pitlo, 2015). South Africa does not need additional infrastructure, so a regional base of operations could operate without creating a location from scratch. Expanding northward into new emerging markets will likely mandate investment in infrastructure.

 

 

  • Impact on Opportunities

 

The increase in mobile users worldwide has greatly increased the potential customer base for Blizzard. Blizzard already has Hearthstone available to play for mobile devices, and this functions as marketing for Blizzard products on PCs and consoles. As the world shifts away from dedicated gaming consoles towards mobile game devices, Blizzard would do well to continue to develop games for the mobile audience.

 

 

  • Impact on Sustainability

 

The digital game space continues to shift towards mobile, and Blizzard will need to develop additional mobile games to remain viable in the long-run. Blizzard has established IPs on PC that will continue to generate revenue, but those streams will shrink over time as mobile gaming continues to constitute more of the market. All major developers have recognized the importance of mobile, and Blizzard is no different. Developers will need to devote more resources to mobile applications, specifically applications catered to the emerging markets overseas. Mobile phones have become a necessity and will remain a viable platform for the foreseeable future.

 

 

Resources

  1. Taylor, Rich. (March 4, 2015) Rise of eSports is a Game Changer. The Huffington Post. http://www.huffingtonpost.com/rich-taylor/rise-of-esports-is-a-game_b_6784174.html
  2. Activision Blizzard. (October 21, 2015). Investor Relations. Activision Blizzard. http://investor.activision.com/
  3. van Dreunen, Joost. (June 1, 2015). Can Blizzard’s Storm Tackle a Saturating MOBA Market? gamesindustry.biz. http://www.gamesindustry.biz/articles/2015-06-01-a-storm-is-coming
  4. van Dreunen, Joost (October 13, 2015). Heroes’ Fate Could Determine Activision’s. gamesindustry.biz. http://www.gamesindustry.biz/articles/2015-10-13-heroes-fate-is-tied-closely-to-the-success-of-activision
  5. Chifelle, Cristian. (October 6, 2015) 4 things to know about the TPP trade deal. World Economic Forum. https://agenda.weforum.org/2015/10/4-things-to-know-about-the-tpp-trade-deal/
  6. Blizzard (July 8, 2013) Blizzard Entertainment and Netease, Inc. to bring Hearthstone: Heroes of Warcraft to mainland China. Blizzard Press Release. http://us.blizzard.com/en-us/company/press/pressreleases.html?id=10392614
  7. Xu, Beina. (April 7, 2015) Media Censorship in China.Council on Foreign Relations. http://www.cfr.org/china/media-censorship-china/p11515
  8. Economist (October 31, 2015) Take It Easy: Economies are too weak for normal monetary policy to resume. The Economist. http://www.economist.com/news/finance-and-economics/21677234-economies-are-too-weak-normal-monetary-policy-resume-take-it-easy
  9. Gaudiosi, John. (January 15, 2015) Mobile game revenues set to overtake console games in 2015. Fortune. http://fortune.com/2015/01/15/mobile-console-game-revenues-2015/
  10. Ghemawat, Pankaj. (December 2005). Regional Strategies for Global Leadership. Harvard Business Review. https://hbr.org/2005/12/regional-strategies-for-global-leadership
  11. ZA, Holden. (2015, September 22). Mobile gaming dwarfs PC and console gaming in South Africa. GameZone. http://www.mweb.co.za/games/view/tabid/4210/Article/21949/Mobile-gaming-dwarfs-PC-and-console-gaming-in-South-Africa.aspx
  12. Pitlo, Lucio Blanco. (August 6, 2015). Chinese Infrastructure Investment Goes Abroad. The Diplomat. http://thediplomat.com/2015/08/chinese-infrastructure-investment-goes-abroad/
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About Wes J.

Your Focus Determines Your Reality
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