CASE 14

COMPETITION IN VIDEO
GAME CONSOLES: SONY,
MICROSOFT, AND NINTENDO
BATTLE FOR SUPERMACY
PRESENTED BY GROUP 3
FOR
DR SYED ZAMBERI AHMAD

UNIVERSITY OF MALAYA
KUALALUMPUR, MALAYSIA

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 Mohd Zia

Introduction

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 Video Games Industry
• Over the past 30 years, video games have become an
integral part of the lives of the people living in
developed countries particularly

• Video games industry has become a multi-billion dollar

behemoth, as the entertainment industry is taking new
shape with video games as a major player

• Video games now capture a similar market size as the

movie box office and music sales

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 Video Games Industry
• During the last few years, video games have been
appealing to a broader demographic base, and, for
example, average American is spending much more
time (75 hours in 2003) in playing games than the past

• The average game player age is increased to 35, and

65% of American households play computer or video
games

• In 2008, 26% of gamers were over the age of 50

• Out of total American gamers, 60% are male and 40%

are female

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Video Games Industry

5
Video Games Industry

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Video Games Industry

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Video Games Industry

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 Competition for the
Opportunity
• Makers of video game consoles
(Sony, Microsoft and
Nintendo) are the major
competitors in this fast growing
industry

• Independent game publishers

• Microprocessor and graphics

accelerator producers like IBM

• Makers of graphics processing

units (GPUs) to display the HD-
quality and 3D graphics

• PC manufacturers
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 Fierce Battle for Console
Market
• Prior to the launch of
Microsoft’s Xbox360, Sony
was enjoying market
leadership with its PS2 100
million units sold

• But, with the launch of

Microsoft’s next generation
console Xbox360, in
November 2005, a battle for
supremacy started in the
console technology

• Then, at the end of 2006,

Sony and Nintendo came up
with their next generation
consoles (PS3, Wii)
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 Microsoft:
• Since its founding in 1976, Microsoft
had become the most important
software company in the world

• It spent almost 15% of its revenues

on research and development in
2006 to sustain its competitive
advantage

• Microsoft entered the video console

industry in November 2001 with
Xbox system, which was the most
technologically advanced game
console of the time

• Then more advanced console

Xbox360 was introduced in
November 2005
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 Microsoft: Xbox 360
• Xbox360 had a 12 months head start on Sony’s PS3 and
Nintendo’s Wii

• $299-core system & $399-premium system

• 3.2 GHz power processor

• Xbox live online gaming service

• 12x DVD, optional HD-DVD at $199

• 64 MB memory card with core system

• Wired controller with core system, wireless with premium

• Wi-Fi

• Game Prices $40 to $60

• Compatible with approximately 300 Xbox titles

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 Sony:
• World’s leading manufacturer and marketer of audio , video,
communications, and information technology products

• Sony’s video game business had generated two-third of its total

operating profits in past years

• Sony’s instant success, PlayStation, was introduced in 1995

• Its cutting edge graphics, CD optical drive, 32-bit processor and

variety of game titles made it much more appealing

• In October 2000 Sony introduced its PlayStation2 with advanced

processing speed and backward compatibility with PS One

• The combination of technological superiority and large number

of hit game titles helped Sony to achieve 70% worldwide market
share by selling more than 100 million PS2 consoles
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 Sony’s PlayStation3 (PS3)
• Launched November 17, 2006

• A complete home entertainment system, equipped

with Blu-ray (High Definition) disk and hard drive

• $499 for 20-GB & $599 for 60-GB

• 3.2 GHz processor

• 256 MB dedicated system memory

• Wi-Fi available with 60-GB version

• Bluetooth wireless controller w/limited motion

sensing

• Free PlayStation online gaming network service for

demos and add-ons

• Game prices from $50 to $60

• Compatible with most PS 2 & PS One titles

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 Nintendo:
• The playing card manufacturer founded in 1889 in Koyoto, Japan, became known as
the Nintendo Company Ltd. in 1963

• Its 1981 introduction of a coin-operated video game, Donkey Kong, was an instant
success

• By 2007, Nintendo had sold more than 387 million game consoles and 2.2 billion
video games worldwide

• Business is limited to the sale of game consoles, handheld game systems, and
game software

• Company focuses on earning profits from the sale of game consoles as well as from
game software sales

• Never attempted to battle Sony and Microsoft for technological advantage

• Succeeded by developing intuitive and easy to operate game systems

• Mainly targeting the interests of children and casual gamers as Satoru Iwata,
president, explained “our goal is to expand the gaming population”

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 Nintendo:
• NES October 1985

• Game Boy (handheld

system) August 1989, Game
Boy was a runaway success

• Super NES August 1991

• Nintendo 64 September
1996

• Game Boy Advance

(handheld color video
resolution system) June
2001

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Nintendo’s GameCube & DS
• GameCube (with
twice processing
capability than PS2)
November 2001, but
was the least
successful console

• Nintendo DS/DS Lite

(handheld, Wi-Fi,
touchpad system)
November 2004

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 Nintendo’s Wii:
• Launched November 19, 2006 with company’s
biggest innovation of a wireless motion sensing
controller

• Price $249 (half of PS3)

• 729 MHz processor

• DVD available on late 2007 models

• 512 MB embedded flash memory

• Wi-Fi

• Online services like shopping, weather, news,

browsing & messaging

• Game Prices from $30 to $50

• Compatible with almost all Nintendo game titles

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 Ungku Alhady
Analysis of Industry

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 Analysis of Industry/Market
Type of Industry Turbulent and 7th generation
/ Market High Velocity of console
within 30 years
Technology Fast changing From simple
/rapid graphic to
photo-realism
Customer Fast evolving Hard core
requirement & gamers love
expectation new challenges

Products life Short Games software

cycle evolve every 18
21
months
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Video Gaming History

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Porter’s Five Forces Model

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 Porter’s Five Forces Model
Threats of Bargaining Bargaining Threats of Competitive
New Power of Power of Substitute Rivalry
Entrants Customers Suppliers Product

Very Low Fairly High Low High Very High

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 Khairul Anuar

Battle for Supremacy

• PlayStation
3
• Xbox360
• Wii
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Porter’s Generic Strategies

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 Product Differentiation
Wii PS3 Xbox 360
•3.2 GHz power processor • its 3.2-GHz Cell processor • features a powerful 3.2-
makes it technically the GHz processor.
Xbox live online gaming highest-end game console on • revamped Xbox Live
service
the market online gaming service
12x DVD, optional HD-DVD 256 MB dedicated system 729 MHz processor
at $199 memory
DVD available on late 2007
64 MB memory card with Wi-Fi available with 60-GB models
core system version
512 MB embedded flash
Wired controller with core Bluetooth wireless controller memory
system, wireless with w/limited motion sensing
premium Wi-Fi
Free PlayStation online
Wi-Fi gaming network service for Online services like
demos and add-ons shopping, weather, news,
Game Prices $40 to $60 browsing & messaging
Game prices from $50 to $60
Compatible with Game Prices from $30 to
approximately 300 Xbox Compatible with most PS 2 & $50
titles PS One titles
Compatible with almost all
Nintendo game titles
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 Product Differentiation
• Access to leading scientific
research

• Highly skilled and creative

product development team

• Well integrated Supply Chain and

Strong sales team

• Corporate reputation

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 1. Access to leading scientific research

Wii PS3 Xbox 360

•Concentrates on video •Sony leads in high end •Microsoft concentrates
games yet lack of R&D audio video, on software and lack of
•Being sued over Wii entertainment, electrical hardware technology
tech by Hillcrest Lab appliances •New yet fast forwarding
•$180 million on R&D •owns ‘wondertechlab’ in •$7 billion annual
•Lack of innovation as New York research and
reported by BBC news •$4 billion on games R&D development
“The president of games
giant Nintendo has said
he fears for the future of
the industry and has
warned that it must
innovate or die”
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Sony’s Competitive Advantage
Blu-ray Disc

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 2. Highly skilled and creative product
development team
Wii PS3 Xbox 360
•praised for doing •Sony Way •Collaboration &
something different •Latest tech of hard Integration
from everyone else drive and a Blu-ray disk •A cross-functional team
•10 – 20 group of 3 drive for reading high- of consultants was
people capacity game disks and assembled, including two
•given free rein to playing Blu-ray movies lead industrial design
couple (I.D.)
•Simple” and
“Comfortable”.
•a wireless motion-
sensing controller,
makes the most drastic
change in user input
since the Nintendo
Entertainment System
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3. Well integrated Supply Chain and Strong
sales team

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 Wii PS3 Xbox 360
-Viral marketing -Turnaround strategy -Highly innovative viral
(ambassadors in cities) -Networking marketing marketing $150m ad
•Choose one hardcore campaign in 2007
•Digital networking
gamer, one tech savvy (blogs, virtual forum) -agreement with
mom(alpha mom), one BurgerKing in promotion
-Partnership with fashion
family with spanned and style
from grandparents to publisher(Marmalade),
kids) MySpace

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 4. Corporate Reputation

Nintendo Sony Microsoft

•Pioneer in simple home •Leading manufacturer •The most important
entertainment products and marketer of software company in
like electronic toys, coin technology products the world with its
operated video games revolutionary software
•Known as first mover in like windows, MS Office
•Limited to the video innovative hi-tech etc
game business only products
•Software services are
•Focus is to “expand the •A trusted name in the the major business of the
company with $12.6
gaming population” market
billion net earnings in
2006

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 Deborah

Conclusion
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 Conclusion
• Nothing is certain in the video games fast morphing
business
• With both opportunities and risks increasing each
day, and new players vying for power, it will require
all of the wiles and muscle of the company to win.
• The goal: making gamers feel like they’re living the
games, not just playing them.
• “the advent of new technology… always
invigorates everyone in the industry,” says EA Chief
Executive Lawrence F. Probst III
 Conclusion
In this sprawling video games industry, nobody positioned better
than Sony.
Because,
- PlayStation is the Champion product of Sony, according to the
2005 Turnaround Strategy of Sony
- unlike any other players it already assembled all the pieces of
video game empire.
- It makes games such as the popular Gran Turismo racing and
Everquest online.
- Its own Sony Pictures and MGM movie studios, whose Spider-
Man and James Bond franchises have been megahit games for
Activision and EA. The combination has helped Sony sell 80
million PS2 consoles worldwide.
• Sony’s next-generation technology (Blu-Ray) is expected to
out-dazzle its competitors
• PS2 has had more than 2,000 software titles, with more than
775 million total game copies sold.
Consoles Comparison:

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Consoles Comparison:

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Our choice…

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 REFERENCES:
• Wikinvest, “Game Consoles Wars: Xbox360 Vs
PS3 Vs Wii”
• ESA (entertainment software association)
“Essential facts about the computer and video
games industry, 2008”
• Competitive forces in the video game industry,
Dietl & Royer, 2003: 416.
• VG Chartz
• Collaboration and the creation of the Xbox 360
By David Kemp

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 REFERENCES:
• INNOVATION: management, policy & practice; HELMUT M.
DIETL and SUSANNE ROYER
• Pearce ii, J. And A., Robinson Jr., R.B. (2007). Strategic
management: Formulation, Implementation and control.
McgrawHill: North America

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