The Video Gaming Industry : Microsoft, Sony, And Nintendo

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

However, GameStop is still at a disadvantage, because there are such a large number of competitors in the industry. Buyer’s bargaining power are high, since there is no brand loyalty in the industry. Customers are very well aware of the market price of a product and will look for the best deals they can find. Suppliers have high bargaining power since suppliers can choose to integrate forward and sell their products themselves. The success of the retail gaming industry is very dependent on the availability of supplier’s goods. Additionally, since there are low barriers of entrance, substitute products and new entrants often appear in the market. Since most competitors in the industry do not have a strong presence, the expected retaliation towards new entrants is low. An increasing popularity of smartphone games and social media games such as Farmville on Facebook, allows customers to play against friends. Although these social media games do not offer the same experience as a video game, the fact that virtually no switching cost is associated with switching to a competitor’s game and since they are so cheap compared to video game disk and consoles, can easily drive customers from video gaming to online gaming. (Exhibit 2)

Video games are an ever-growing franchise that is constantly undergoing change. Ever since the dawn of video games, new consoles, games, developers, and teams have come together, fallen apart, triumphed, and failed. What is it that has allowed some to thrive where others failed? Several different factors have changed and influenced the world of gaming, including the history that is continuously being written, the people who have built the games behind the scenes, and, of course, the actual video games themselves. Numerous video games have been more successful than others, but identifying what components set the successful apart from the unsuccessful is something definitely worth observing.

To achieve a distinction, I will be exploring the future of the gaming industry on each of the various platforms.

The Nintendo brand has changed over the years, starting out as a simple card company that has expanded into the massive electronic giant we know today. They have had their ups and downs through their time as a gaming company but they always have the gamer’s interest in mind. As the late CEO of Nintendo, Satoru Iwata said, "On my business card, I am a corporate president. In my mind, I am a game developer. But in my heart, I am a gamer" (Yu, E., & Chan, W.

To attempt counteract this cyclical slowdown, EB games have introduced an ever-growing variety of accessories with games to increase the revenue raising capacity of their respective consoles, as well as maintaining the loyalty and attention of a fickle gaming public. Some types of games have been released, with specialty controllers to great success, mitigating the expected lull in sales in the lead-up to new consoles. Recently however, the competition has become slightly skewed. Nintendo’s newfound dominance of the market is causing some headaches for Sony and Microsoft.

However, the extent to which the hardcore gaming demographic dictates the structural aspects of the gaming industry as a whole is remarkable. Companies are still willing to cater to this audience because it is a profitable enterprise, as it is only the most devoted of fans who will line up days before a system release while generating free publicity on the internet and through word of mouth in the months prior. Thus, and perhaps unexpectedly, an important factor in the Wii's meteoric rise was Nintendo's ability, through the strength of its brand and residual nostalgia effects, to co-opt this hardcore gaming culture with a console that at best, only occasionally acceded to its wishes, while at worst, marginalized them completely. What Nintendo realized, and ultimately capitalized on, was that the hegemonic structure influencing the industry was inherently weak, in that it was essentially a small minority overwhelming the relatively silent masses. Although there are doubts to the sustainability of such an endeavor, the signs are present that the Wii has already altered the video game

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.

Intensity of Rivalry Among Competitors: In the video game industry, this is a very strong force. For years in the industry no one company could hold the most popular console for more than one consecutive generation. The rivalry among competitors is very strong. Each holds its own powerful brand identity, and Sony, Microsoft, and Nintendo all want to be leaders in the industry. They each may have their different approaches

Global Video Game Console Industries must try to maintain a sustainable competitive advantage through innovation such as creating an upgraded version of the game every year or increase their on and off line presence to better satisfy their customers. There are many competitors in the Video Game industry that include PlayStation 3, Xbox 360 and Wii. These gaming consoles compete in terms of price, durability and loyalty. With Intensity Rivalry being a major determinant of competitiveness, video game companies work towards dominating the industry as well as gaining the major part of the industry profit pool. (Blackwell, 2002)

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

The role of technology is vital in this industry as it focuses on technological efforts for competitive advantage. Every new development uses new technology. Though there are restricted innovations in the gaming industry, the speed of technological transfer is very high. Nintendo’s role from playing cards to toys to video games and then with each console introduced, included many technological changes. Technological up gradation increased hardware costs and discouraged innovation. The online capability of Nintendo Wii was a major change in the technology of the video game industry though they were not able to do as well as their competitors (Sony, Microsoft).

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.

Herman et all (2002) points out that history of video games begins from 1971 year, when Nutting association released 1500 machines with Spacewar video game. At the beginning it was too difficult to control the game process and playing machines had huge dimensions. But by the time with new technologies they become more compact and easier to play. According to the information given by Herman et all (2002), the period between the years of 1978-1981 is called ‘golden age’ of video game industry. In this period the arcade games ‘Football’ and ‘Space Invaders’ were released. All previously known sale records were broken by these two games with nearly equal wages. In this time interval great breakthroughs in the field of graphics were achieved,

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