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Introduction Analysis of the Marketing Environment Michael Whitt Marketing Analysis for Blizzard Entertainment INTRODUCTION This paper will analyze Blizzard Entertainment’s marketing strategy in relation to core and peripheral marketing theories and will explore potential alternatives that aim to improve their overall strategy. Since 2005, Blizzard Entertainment has implemented various tactics to navigate China’s volatile and difficult government policy landscape with varying success. After years of cooperation, Blizzard still has difficulties with punctual launch dates, localization, and general marketing throughout China. Recommendations for a future marketing strategy will be considered and given after thorough conceptualization. A subsidiary of Activision-Blizzard, Blizzard Entertainment was founded in January of 1991 in Irvine, California. Blizzard’s contribution to Activision-Blizzard’s 2016 record net revenue of $6.6 billion (42% increase YoY), was $2.4 billion, placing Activision-Blizzard among the most successful gaming companies of all time (Activision-Blizzard, 2017). Blizzard Entertainment is at the vanguard of the gaming industry, which is evident as Activision-Blizzard is the only gaming company named in the top 10 of Fortune’s Future 50, a new list that identities the top 50 companies in a position for strong future growth (Fortune, 2017). Much of AB’s success can be attributed to Blizzard’s innovative marketing strategy and products, which will continue to be a powerful factor in future endeavors but should be altered when pivoting focus to a new brand domain. ANALYSIS OF THE MARKETING ENVIRONMENT After a thorough examination of external and internal opportunities and disadvantages in relation to the PESTLE, SWOT, and Porter’s Five Forces analyses, we can see that Blizzard Entertainment has areas for improvement but also is a force to be reckoned with. China has overtaken the rest of the world in the global video game market in 2017 and is projected to continue growth at 2 billion USD per year until 2020. However, by 2020 63% of the market share is projected to be mobile gaming, which is a threat to Blizzard as they currently own one IP playable on mobile platforms (Newzoo, 2017). Mobile game success coupled with China’s political landscape, government policies, direct and indirect competition, and growing middleclass must all be treated as major factors in these subsequent analyses. PESTLE ANALYSIS As expressed in Figure 1 below, there are many factors displayed in the PESTLE analysis that affect current and prospective outcomes for Blizzard Entertainment. General government policies, such as censorship of violence, language, and free speech, greatly determine the release date of not only new IPs from Blizzard, but also all upcoming content patches which are incremental changes to a game, both aesthetic and gameplay. Historically, Blizzard has entered into contractual joint ventures, defined as two or more companies creating a partnership without a singular entity being formed (Jobber & Ellis- Chadwick, 2016), with production and distribution companies in China with mandates from the government to alter the Blizzard IP through content localization (such as the removal of skeletons from World of Warcraft) prior to joint release. This is evident as Blizzard partnered with The9 and later NetEase for the release of World of Warcraft: Wrath of the Lich King, an expansion previously released November 13th, 2008 in the US and subsequently delayed in China until August 31st, 2010 after multiple iterations were deemed inappropriate by the Chinese government (Engadget, 2010). A solution to these issues would be to wholeheartedly comply with the government’s wishes, as Blizzard has done previously and according to the fact that they haven’t pulled all IPs from China implies the political and legal hurdles are worth the effort. ECONOMIC Figure 1: PESTLE POLITICAL Government Purchasing Policies Power ENVIRONMENT SOCIAL BLIZZARD Recycleable IN Culture Localization Materials CHINA TECH LEGAL Mobile Phone Delays / Bans Competition In terms of economic factors, the growth of Chinese purchasing power is evident and notable. The overall GDP per capita, which has risen to nearly 7000 USD in 2016 up from 4900 USD in 2010 expressed in figure 2, is relevant for Blizzard to consider launching a new IP, altering, adding or removing paid features from existing IPs (Trading economics, 2017). With the existence of free-to-play (F2P) games taking over large market segments, games that have an upfront cost and a subscription fee (such as Blizzard’s World of Warcraft), experts have wondered how Blizzard’s golden goose has remained relevant. With a lofty15 USD a month on top of a $40 initial purchase, WoW is still competing with F2P games such as League of Legends, which makes money from microtranscations in-game. While these microtransactions occasionally can give players a competitive advantage, they allow players to boost their experience through customization purchases such as changing the aesthetics of a character or even as far as increasing experience or resources gained. While World of Warcraft is one of few games to still run on the subscription model, Blizzard’s other IPs such as Hearthstone and Overwatch have adapted new payment models; F2P and F2P after initial purchase respectively. This allows Chinese gamers to play the games and compete without spending a massive amount of money each year on subscriptions, which I argue is a strategic advantage and necessary for World of Warcraft and future IPs to survive and thrive in China. Figure 2: China GDP Per Capita, taken from www.tradingeconomics.com/china/gdp-per-capita Social elements comprise an important facet of the Chinese market, as these are somewhat unique to China and closely related to government regulation. As stated before, content localization is necessary before a game can even be released in China. Regardless of the political oversight, this localization is an intelligent step in the right direction for Blizzard. Using Blizzard’s 4th expansion for analysis, World of Warcraft: Mists of Pandaria (MoP) we can see that MoP was not only localized to China, but was designed for it as well. This expansion features not only a new playable race, “Pandaren”, which is not only all but identical to pandas, but “Pandaren” can be broken down into “Panda-ren”, where “ren” means person in Chinese. A clever race design choice to appeal to a Chinese audience. Additionally, a newly added playable location to the game,”Pandaria”, closely resembles China in not only architecture, but also ancient culture. In figure 3, it is difficult to not see the similarities immediately. While government policies historically have forced Blizzard to localize content in order to release a game, it is evident that Blizzard embraced this issue and learned to overcome it through creative design and lore solutions; something Blizzard must continue doing on all IPs in China. Figure 3: World of Warcraft: Mists of Pandaria ad screenshot, taken from us.blizzard.com/en-us/games/mists/ A major threat to all but one of Blizzard’s IPs currently released in China, mobile phone gaming poses is a considerable problem as China’s mobile game revenue and popularity has already surpassed that of PC and is projected to gain further control (Newzoo, 2017), as shown in figure 4. Figure 4 (below): As mobile phones are widely used and relatively inexpensive compared to gaming computers in China, and with mobile eSports quickly gaining traction in China, Blizzard must be prepared to deliver a solution. Two responses would be for Blizzard to design and release another successful IP for mobile phones, or find a way to optimize current IPs for mobile phone use. However, with the overwhelmingly successful releases of both Overwatch and Destiny 2 shattering multiple records not only in revenue but also customer retention, there is little reason to adapt to mobile users. However, adding mobile versions of current IPs could help prepare for users leaving PC gaming for mobile gaming. Additionally, Blizzard is experiencing record years in revenue and is projected to continue high margins across all IPs (Activision-Blizzard, 2017) so I argue a contingency plan that can quickly be implemented is sufficient. Lastly, a minor issue for gaming companies in general is the environmental impact. Blizzard sells the vast majority of their games online, nearly 10 times the amount of sales online compared to brick and mortar sales (Activision-Blizzard, 2017). The major issue is that materials used for video game production do not decompose. In 2012 Big Fish Games, a gaming blog, posted an infographic analyzing the environmental effects of Nintendo’s games in circulation, with the bottom line being games should be sold online as landfills are too full (figure 5). Figure 5: Nintendo’s contribution to pollution, taken from https://www.bigfishgames.com/blog/environmental-impact-of-video-games/ PORTER’S FIVE FORCES ANALYSIS Blizzard has low to moderate competitor threat overall, but is in a thriving position in the Chinese market for a number of reasons. According to Porter’s Five Forces Analysis, it is evident that Blizzard will be able to defend their position in the Chinese market, although there are certainly strategic decisions available to gain further market share. New Entrant Threats -Market Share Defense -Entry Barriers -Low Customer Switching Cost -High Production Cost Supplier Power Industry Competition Buyer Power -Highly Saturated -Highly Saturated Market -Low Buyer Switching Costs -High Market Growth -Brand Identity on Quality -Government Policy -Low Buyer Switching Costs -Low Switching Costs -Substitute Ability -Brand Identity on Quality -Brand Identity -Product Differences Substitute Threats -Low Substitute Performance -Low Substitute Cost Figure 6: Porter’s Five Forces Analysis Figure 6 conveys various advantages and disadvantages, but overall Blizzard is in a strong position. Blizzard’s sole publishing partner, NetEase, boasted a revenue report of 12.5 billion RMB for 2016, much of this surely attributed to the release of Blizzard’s Overwatch, and taking about 36% of the market share behind only tech-giant Tencent (Seeking Alpha, 2016).
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