It is estimated that 250-300 million people worldwide played video games in 2007. Prior to this, games were typically for preteens, teen and young adults. This however seemed to have changed as by 2005, the average age of game players had increased to 33 years and interestingly, 25% of game players were of over the age of 50. Another factor was that the average time spent per each person on playing video games had increased tremendously. In 2003, it was said that about 75 hours were spent playing video games. This was double the 1997 time spent n video games. On the part of revenues, more than $35 billion have been spent on video game consoles, online games, game software and hand held devices.
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Three companies have had the upper hand in driving video games and related sales both in the US and elsewhere. They are Microsoft, Nintendo and Sony. For example, Sony’s PlayStation, Nintendo’s Wii and Microsoft’s Xbox 360 were expected to drive sales of more than $51 billion by 2012. The companies have video games equipped with very powerful microprocessors, connection to the internet, HD resolution graphics and hard drives thus giving them visual effects and new capabilities that are expected to spur interest even by traditionally non-gamers. Due to the increased market, the three companies were locked in a fierce battle to control the $5.8 billion pie with each company using different models to generate more revenues and profits while at the same time trying to build its competitive advantage.
The history of video games dates back to 1947 when early games were tested by engineers working television projects. Further developments saw the first patented video game in 1968 and were later introduced to US consumers in 1972. It allowed users to play such games like shooting gallery, table tennis, football and hockey. The graphics were in black and white and consumers were getting tired of “simple” games by 1983. However, in 1985, Nintendo its first video game called Super Mario Brothers that sold 61.9 million NES systems by 1991. This led to the other companies also introducing their own versions of video games.
The above discussed makers of video games have been engulfed in a fierce battle to control this multi-billion industry. What matters most is the technological leadership and graphic representation that will render a critical competitive capability that is much needed in the console segment of this video industry. Another competitive factor is the availability of intriguing games that is vital in driving up sales, thus increasing the bases of installed consoles (like in Nintendo). Competition also ensured that the three companies established relationships with value chain allies like toy stores, discounters and electronic retailers. Wal-Mart, Best Buy, Toys “R”, Circuit City and specialty retailers dedicated acres of space to video games and accessories. The Sony, Microsoft and Sony accessories seemed to sell at almost comparable prices across different retailers.
Big Three Strategy
Microsoft had become the most important software in developing and selling Windows, Internet Explorer, Word, Excel and PowerPoint. Microsoft uses a good chunk of its profit on research and in 2006 it used about 15% on the same. This is to ensure that it offers products that can sustain its advantageous point in the market. Microsoft introduced Xbox and in 2006 and used a variety of selling approaches to market them. An example is when Microsoft agreed with Burger King to promote Xbox 360 games in Burger King Restaurants. Microsoft went further to promote Xbox games with Kellog company while it also advertised with its retail partners. Microsoft also developed high innovative marketing campaigns for Xbox games as well as with its titles. Sony realized that viral marketing was important especially with gamers while they resented the traditional marketing.
Sony is the world leading manufacturer and marketer of communications, audio, IT and audio products. Sony’s strategy included developing blockbuster game titles for its consoles. When introduced, Sony’s Ps2 were packed with graphics, different game titles, and a CD optical drive. Sony later reduced the retail price of PS2 in the US and sales had surged by the end of 2006. The Sony PS2 was compatible with game titles making the PlayStation a success. As a result Sony sold more than 100million PS2 consoles and achived a 70% global market share. With the PS3, Sony packed it with more technological features that allowed developers to create both 3D and HD titles. Sony later introduced PSP that challenged the dominance of Nintendo in handheld systems, which used a 333-mhz microprocessor and a 4.3” LCD screen allowing gamers to play 3D games, connect to wireless internet, watch recorded TV programs, listen to music, review pictures and even watch full length movies.
The company used a different strategy as opposed to either Sony or Microsoft. Its focus was on earning profits from sale of game consoles and software sales. Nintendo thus succeeded in developing intuitive and easy to operate game systems. Although they did not offer cinematic experiences, Nintendo’s games were fun to play and this strategy matched well with children as well as casual gamers. In 2001, Nintendo launched the GameCube whose processing capabilities were almost twice that of the PS2 (but less than the Xbox). In 2006, Nintendo introduced the Wii that could appeal to non-gamers and moms but also that could easily fit the ‘budget.’ Wii users had also the advantage of accessing older games on the Wii Connect24 gaming site.
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