Sector: Telecom and Media Industry : Multi-media and graphics software Senior Analyst: MJ Vasquez Junior Analysts: Riya Jain, Wendy Qian, Owen You, Stanley Zheng, Jeffery Lee, Ayush Khattar, Aafreen Rajani, Jenny Rozenzoft, Roi Manor

2 Multi-media and graphics software  Companies in this industry design, develop and distribute software for multimedia production; graphics and web design. Software applications include font development software, video production, and streaming media encoding software.  All the companies in this industry are involved in the publishing of video games. EA Electronic Arts ATV Activision Blizzard NCTY The 9 Limited ZNGA Zynga COOL Majesco Entertainment TTWO Take Two Interactive

3 Technology $99,379.5B (100%) Software Industry $303.8B (3.05%) Multimedia and Graphics Software $73.3B (.73%) Gaming software companies $19.77B (.01%) Industry Breakdown By Market Cap Industry Breakdown

4 Industry Revenue Breakdown

5 Revenue Generation Game design plan Design Idea and concept development Develop Published and sold to mass-market consumers, retail outlets, whole salers, etc. Publish Games are then distributed to clients Distribute Most companies allow gamers to download directly through the use of wireless platforms Download Distribute: EA ATVI TTWO COOL Download: EA ATVI TTWO NCTY ZNGA Development time ranges from months to years ( Diablo III: Eleven years in the making)

6 Multimedia and Graphics Software Industry: Gaming Software Companies Outlook:NEUTRAL Presentation Overview Smartphone usage Console Sales Casual Gamers

7 Trend 1 Decrease in console gaming Trend 2Trend 3 Increase in Smartphone users Increase in casual gaming

8 Trend 1 : Decrease in console gaming  No indication that PS3 successor will be coming out soon  Revenue decreasing at a CAGR or -1.7%  Less releases  Console sales went down 20.1% from last year in relation to this year Large revenue comes from selling console games, than any other product or service. Millions of units per year since release

9 Trend 1Trend 2Trend 3 Increase in Smartphone users Increase in casual gaming Decrease in console gaming

10  LTE: standard for wireless communication of high speed data for mobile phones  Company penetration in LTE market  US as a leader  Growing at a annual growth rate of 4.01%  Gaming dominating  Possible threat to the industry  69% of U.S. mobile gamers play on smartphones Trend 2: Growth in LTE users Source: Idate LTE % CAGR

11 Trend 1Trend 2Trend 3 Increase in casual gaming Increase in Smartphone users Decrease in console gaming

12  Console is not in a position to meet demand of new social gamers  Increase in low cost, low margin mobile gaming  Companies beginning to focus on digital platforms Revenue from mobile gaming is close to half of console revenue Games most popular amongst apps 2011 Total games in the U.S Trend 3: Increase in casual gamers

13 Analysis Ratios slide

14 Security Measures Consumer protection and data privacy practices could be seen as not adequate and there could be unintended disclosures of consumer data Changing Technology Consoles and platforms are constantly changing, therefore companies must be able to produce games for these new platforms or their competitors will take advantage Regulation Risks Subject to increasing regulation and the adoption of proposed legislation the industry opposed could negatively impact the in companies in this industry Consumer Trends/ Well Received products Companies must keep their games up to date with the latest consumer trends or else consumers will lose interest. If companies release products that are not of high-quality and are not well received the revenue, margins and profitability of the companies in this industry will decline Company Rights Companies must obtain copyrights and patents for every aspect of their games or they face the threat of having their game copied or stolen by a third party Risks

15 Recommendation NEUTRAL Physical to digital platform Monetization of digital platform Risks Well Received products/Consumer Trends New Technology Company Rights Recommended Future Steps EA, ZNGA and ATVI are well positioned to benefit from this trend going forward. Conclusion

16 Also add: the list of the games available per company as backup Allowed to edit until monday Back up

17 Further Industry Breakdown (Back up slide)  Service revenue includes revenue recognized from games or related content that requires hosting support  PC  iPad  Digital revenue,22%, includes revenue from sales of software distributed through direct download through the Internet;  wirelessly through mobile carriers.  2011 showed a 47 % increase in current year digital sales