Video Game Console Industry

Nintendo’s strategy for pricing of consoles and games was to lock-in the network effects consoles offered by pricing them at- or below- cost and reaping profits by pricing video games at significant margin. Nintendo took these actions because it knew that if consumers used the NES/ Famicom console, they would be a captive audience for its higher-margin video games which were necessarily more perishable from a consumer taste perspective. This affected the value created by

• Every company produce video game for different consoles, consoles are developed new generations fast, game developer should compete to gain license for new generation console.

In order for Microsoft to become the leader in the console industry, it is critical to know the kind of consumers that are going to be targeted. According to the Fundamental Marketing article by Isaiah King, the target market for Microsoft Xbox users focuses on three main components: demographic, psychographic, and behavioral (Fundamental Marketing 1). The demographic of Xbox users range from age, generation, and gender. The hardcore gamers age group range from 16 to 30 years old. However, generation plays a huge role in the demographics of the console. Students of 18 years and younger are aimed highly more than older people, as they are leaders of the digital innovation. This variable of the demographic is important, as this age group will be the future industry in new products.

In addition, Sony operates in the one business sector which is the computer entertainment industry. Sony distributes and market PlayStation products including PS4, PS3, PS2, PSP and others accessories and gaming equipment (IBISWorld, 2013). Thus, I believe there is a high power of suppliers on the subject of hardware and accessories. We need to estimate the prices of the cost of hardware units that we need to use. Since the productivity of IBMs Cell

As sales of Nintendo’s Wii and DS dominate the PlayStation 3 and Xbox 360, and PlayStation Portable, respectively, the pressure continues to mount on Sony and Microsoft to move to the next level in the ongoing console wars. Sales of the Wii in 2008

Strategy 1 and 3: Mattel should integrate the technology market without abandoning its initial market.

Sony, Microsoft and Nintendo have been competing for a decade with Sony dominating the market throughout most of the years because of their superior technological products. The video games industry faces an entirely new rivalry situation. In 2008, Sony lost its strong position on the market, because of Nintendo’s success with their dynamic Wii over Sony’s high-tech PlayStation 3 and Windows’ Xbox 360. Although the Wii was technologically much less advanced than PS3 and Xbox 360, the Wii's cheaper price, ease of use, innovative motion-sensitive controller, and simple but fun games, made the console a hit all demographics from 9 to 65 years old, male and female. All these factors resulted in Nintendo’s Wii dominating sales and surpassing Sony’s by an impressive ratio of 2:1.

Bargaining Power of Buyers: In 2008, the bargaining power of buyers did not play a huge role in the video game industry. Buyers were very intrigued by these products and were willing to pay fairly high products to get them. In the future that may not always be the case, since prices are often fueled by demand, if the draw to video game consoles drops significantly then the power of buyers will have a greater role. In 2008, there were an abundance of buyers, more than the supply could meet in many cases. Buyers like their brands and they trust the products that are being made so they are generally willing to pay a fairly high price for these products.

Future growth expectations for the Video Games industry have been significantly moderated, as the picture of the market for gaming on mobile platforms becomes clearer. Since mobile games are sold at much lower prices compared to traditional console and PC games, their rise may foretell a slowdown of the video game market in the United States. While the recent launch of the next generation video game consoles is expected to rekindle interest in the more expensive console gaming market, the rise of low-cost, low-margin mobile gaming market may weigh on the overall gaming market. Consequently, this is expected to pull revenue downward as consumers pay less per hour for gaming entertainment. Revenue is expected to reach $47.4 billion in 2019 as a result of the expanding population and an increased percentage of Americans

Both Sony and Microsoft focused their efforts on hard-core gamers and offering processing power and cutting-edge features to attract them. On the other hand, Nintendo has been trying to attract new customers that traditionally are non-gamers. The

The bargaining power of suppliers for this industry is Low to Medium. Nintendo, Sony, and Microsoft respectively, are the world’s largest players in the video game industry (Euromonitor, 2014). With their sizes, these companies create bidding wars between suppliers for their business lowering the power that suppliers hold. The ability for suppliers to bargain simply on technology is weak, however the price is another matter. For example, the Xbox One costs $471 with a retail price of $499, giving it little room for profit

The fifth and final force is that of the intensity of rivalry. This is the strongest force in the video game industry. Nintendo was very strategic in targeting an audience that Microsoft and Sony neglected. While Microsoft and Sony focused on the typical gamers, males ages 18-34, Nintendo focused on a broader audience “everyone” when creating their Wii. In the video game industry rivalry Microsoft and Sony are battling for the same market, while Nintendo has much of its audience all to itself. This is why

I believe common consumer with less gaming finesse would jump on the Nintendo console first, which leaves

Nintendo however is not present in this new market and therefore it is very important to take in consideration to enter this new area because at the moment the company does not have products that satisfy those new needs resulting in the loose of sales and consequently revenues.

The main obstacle facing a start-up video game console company from entering the industry is saturation of the market from the larger video game console makers or the “big three” Nintendo, Microsoft, and Sony. The big three tend to release new game consoles around the same time frame and compete head to head for sales. During the time frame it is impossible for a new entry to jump into the fray. 2010 was a banner year for video console sales Sony’s PS3 sold 14 million units followed by Microsoft’s Xbox 360 13 million and surprisingly Nintendo’s Wii led the big three selling 17 million units. After the 2010 release of all three consoles sales started to decline for each company. Nintendo took the largest sales loss at 72% in 2013 only 747,000 were sold compared