Interactive software case

  1. Evaluate the future market attractiveness of the following in terms of size, growth, profitability, and competition:

Video Games
Casual and Social Games
Mobile Games
Massively Multiplayer Online Games (MMOG)

Casual and Social







  1. What are the strengths and weaknesses of T2 relative to these markets?
  2. How should T2 approach the changing video game market? Consider three options:

T2 should focus on its core business
T2 should experiment with new market(s). Indicate which market(s) and how to experiment.
T2 should pursue new markets aggressively. Indicate which market(s) and how to pursue.

To aid in your quantitative analysis, open an attached excel exhibits
In Exhibit 11, this is an online survey of consumers, not a survey of online gamers. So, 10% of consumers are “hardcore,” as the case text suggests, not 10% of online gamers. Exhibit 11 excludes the 33% of consumers who do not play video games (case p. 5).
For the purposes of discussion, you may assume that there are 235 million consumers in the U.S. (source: US Census Bureau, 2010 population >= 18 years of age).
How do different types of games make money? Consider both fixed and variable costs.
It helps to construct an income statement for video games based on Exhibit 6. Note, wholesale price in Exhibit 6 is the publisher’s price (e.g., T2) to the retailer. The manufacturer royalty is the license fee the publisher (T2) pays to console manufacturers (e.g., Microsoft, Sony). All costs in Exhibit 6 are part of cost of goods sold, i.e., they don’t account for SG&A, R&D, or other operating costs.
What are the financial and implementation implications of your choice in question 3?
Carl Icahn is an investor with a reputation for buying substantial stakes in organizations and then putting management under intense pressure to quickly increase shareholder value.

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