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Introduction To The New Technology For Video Games Marketing Essay

Paper Type: Free Essay Subject: Marketing
Wordcount: 2346 words Published: 1st Jan 2015

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The video game has made prominent expansion with the introduction in 1985 of the Nintendo Entertainment System (NES). Initially they had limited processing capabilities and offered poor graphic techniques, but now the latest Video Game Industry has boomed in with Sophisticated and powerful microprocessors, WiFi Connectivity and advanced real time gaming techniques which has been carried out by Microsoft, Nintendo and Sony. Especially Sony with Play station and Microsoft with Xbox attracted huge number of gamers with introduction of new and advanced techniques which the gamers could not even image, but Nintendo Wii also allowed users to play games online, but its unique wand controller was the key to its success in the marketplace. The Wii controller took over one year to develop and was able to respond to hand motions that were used in throwing a ball, swinging a baseball bat, pointing a gun, or playing a musical instrument.

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Video game consoles market war heated up to new levels in November 2006 with the launch of Sony’s advanced PlayStation 3 (PS3) and Nintendo’s Wii. Both Sony’s and Microsoft’s console offerings upped the ante by producing advanced and expensive hardware which took advantage of the trend towards high-definition media. It is widely believed that both high-end consoles are subsidized by their respective manufacturers in order to gain market share and appeal to consumers who would not pay their high priced. The base PS3’s retail price is $499 and the base Xbox 360 costs at $399. The Wii, on the other hand, delivered a lower cost platform with a highly interactive controller technology. The dramatic increase in the amount of time consumers spent playing video gamesduring the late 1990s and early 2000s was primarily attributable to the improved capabilities of game consoles launched at the turn of the 21st century. The adoption of consoles depends heavily on the content available for them, as video game-like movies-have become increasingly hit-driven. All three companies publish a catalogue of their own video game software as well as receive royalties from video game companies such as Electronic Arts.

Buyers Force

The average game player in 2003 was 33 years old. Gamers have increased in numbers considerably after the intervention of these market giants and the competition played its role make this industry an opportunity to all. In 2005, 31% of all games players were under 18, 44% were in the 1-49 age group, and 25% were over age 50% ( up from 13% in 2000).

Industry sales slowed down between 2003 and 2005 as gamers postponed purchases until the eagerly awaited next generation of consoles became available. The buyers have little space from the retails shop giants like Best buy, Jumbo, Jacky’s.

The number of supplier is high for a few major competitors in the gaming industry. New technologies are been bombarded into the console, features such as online gaming, Bluetooth, wireless LAN, HDMI, Blu ray, Intel Duo core, Motion sensors. The Power of Buyers in the video game industry is low as there are very few successful alternative companies in the video game industry; therefore a relatively small range of choice in video games is available to buyers. The price of the product is influence by the price of the suppliers who supply parts to manufacture these consoles i.e. IBM, Nvidia, ATI etc. These form the important of producing these consoles and form of part of the production cost for it. At the end of the day the consoles will have to decide the price.

Substitute Product

There are many other products available in the market now days. The competition from products like iphone, Mobile Games, N-gage, PC Games etc has a strong influence on the gaming industry. Apart from these consoles games there are other replacements in the market. The features available on these consoles held the consoles high above than the other substitutes.

New Technology

The future for the gaming is vast as the competitors in the market are few in number. Microsoft’s Natal project uses no joystick or remotes as controls; they use body action to control the games. 3G wireless technologies enable the gamers to take their games to the next level of entertainment.

Industry Forecast:

The video-game sector will remain one of the above-average growth segments of the global entertainment industries through 2011, with global games spending set to exceed music spending this year, according to consulting firm PricewaterhouseCoopers.

Videogame graphics will continue to grow richer and more detailed. But don’t expect that photo realism alone will be enough to sell a game. Sony’s face-flop with the PS3 proves gamers aren’t obsessed with hyper-realistic graphics to the extent that game designers are.

Video game growth will be strongest in the Asia Pacific region, its largest market, with a 10% annual growth rate through 2011, but will increase in the Europe/Middle East/Africa region (10.2%), the U.S. (6.7%), Canada (9.4%), and Latin America (8.2%) as well.

By 2011, the worldwide gaming market will be worth $48.9 billion at a compound annual growth rate of 9.1% during the five-year period, with gains slowing every year because of the maturation of the current generation of consoles, according to the report. The compound gains handily exceed the 6.4% advance that PwC foresees for the overall entertainment economy during the period.

Driving Forces

There are 5 primary driving forces in the video game industry that have been behind the change and evolution of the industry.

Technological change Technology in the industry constantly changes, producing successive generations of increasingly powerful hardware that cost low and energy efficient.

Change in the Growth rate The industry has been characterized by significant cyclical patterns, although the long term opportunities are high.

Changes in the computer industry as a substitute for the consoles the lower cost and increasing performance of home computers can eventually threaten the industry.

They gaming industry appeals to the teenage males groups, changes due to the demographics can expand to young adults and women in general.

Boom in mobile game industry, strong market forces from the substitute products enable the competition to drive the console game industry with new innovations and features for their products.

Strategic Group Map:

Many

Few

LOW

HIGH

Features

PRICE / PRODUCTION

PC GAMES

MOBILE GAMING

SONY

MICROSOFT

NINTENDO

The prevailing competitive pressures and industry driving forces favour some strategic groups and hurt others. Discerning which strategic groups are advantaged and disadvantaged requires scrutinizing the map. Here the Sony has a strategy where the product is priced high because the features available are many i.e. the processor speed is high when compared with others. They are the first gaming console to use Blu-ray disc in their consoles. They have captured a strong market from the year 2000. Many gamers are still loyal to the product. Nintendo focused on a new and the most innovative feature and attracted a lot of gamers and non-gamers as well. The Wii controller took more than one year to develop and was able to respond to hand motions that were used in throwing a ball, casting a fishing line, swinging a baseball bat, pointing a gun, or playing a musical instrument. While Nintendo’s strategy for the Wii of concentrating on pioneering a daringly different video game controller ( as opposed to building a raft of new graphics features and technological capability into the console itself – as had been done for the Xbox 360 and PS3) was viewed as very risky, it so far had proved spectacularly successful. Indeed, Nintendo quickly sold out of Wiis in the 2006 holiday season, sold all the consoles it could produce throughout 2007, and was expected to have still higher sales in 2008.

Microsoft’s early launch of its next generation console had allowed it quickly to build an installed base and economies of scale in production. By year – end 2006, Microsoft had sold more than 10.4 million Xbox 360 units, with more than 1.1 million units selling in December alone. By comparison, Sony sold 491,000 Playstation 3 units in December 2006, while Nintendo sold 604,000 Wii systems. The large number of sales prior to the launch of the PS3 and Wii had allowed Microsoft to lower production costs for the Xbox360 to $306 per unit by year-end 2006.

SWOT Analysis

Strength:

Integration of next generation such as Blu-Ray disc & HD technology.

Backward compatibility with

previous Xbox Games.

Online product – the first of its kind

 Lower price than most comparable

Competitor, PS3.

MICROSOFT

Threat:

Lower cost competitor i.e. Nintendo.

Delays in production

Constant strategy change

Opportunity:

Penetration of new markets

Penetration of untouched markets by means of bundling.

 Partnership with Hollywood studios.

Weakness:

Expensive hardware and games

 Production flows

Direct competition with Nintendo because of equally large customer base.

Threat:

Loss of potential customer due to lack of game selection and sophistication of games.

 Software developers abandon game development because of lack of adequate profits.

No improvement on technology to compete over Microsoft or Sony.

Opportunity:

Marketing to novice gamers including seniors and adults

Penetration of new markets

Well use of popular games to increase demand.

Weakness:

Joystick liability

Limited selection of Games

Strength:

Uniqueness of hardware motion detection

 Low cost hardware and software

Ease of use

Nintendo

Threat

Lower cost competitor i.e. Nintendo.

Delays in production

Constant strategy change

Opportunity

Great product lunch covering global spectrum.

Penetration of new markets.

Penetration of untouched markets by means of bundling.

Partnership with Hollywood studios.

Weakness

Expensive hardware and games. ($499- $599).

Not compatible with the previous versions.

Strength

Introducing Cutting edge graphics & could able to connect to internet.

Integration of next generation Technology.

Backward compatibility with previous PS2.

Online free services & online free store.

Highly reputed console & games

Sony

Industry’s Economic Features:

Size of the Market:

In 2008, the industry’s revenue was at $37,000 million rising from $24,352 million 2000

It is predicted that the market value will hit 51 million by 2010.

Competition:

Technological leadership in computing power and graphics rendering were critical competitive capabilities needed in the console segment of the video game industry. However, such capabilities did not guarantee success in the industry.

Growth Rate:

Over the past five years the industry has gone 7.65 percent per year. There is a steady increase in the market value of the consoles.

Integration:

There are many industries which are supported through this competition, example the processors and the microchips are been manufactured by the companies like IBM, ATI etc.

Industry Profitability:

In the past five years Nintendo has grown from $300 million net income to $2500 million. These three players are major market holders.

The analysis of competitor:

Sony Corporation one of the leading electronics has comprised of variety of products from audio, video & communication industry. The way entered the video game market in the year 2000 with their original play station. Sony had contributed in the year 2004 about 20 percent of the market share. Their flaw was that there was no compatibility between the old and new devices.

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Microsoft being the giant in the software market since the eighties, they had a strong hold in the market. They spend 15 percent in 2001 into R&D and thus enable the Xbox to be a direct competitor for the Sony’s PS3. There was some amount of innovation in their product, but our market hero the Nintendo excelled in innovation and people were attracted toward this gaming platform. Competition in the industry also mandates that gaming console manufacture establish relationship with such value change alliance. Video game industry analyse were quiet satisfied with the Xbox HD graphics. In November 2006 Sony’s PSP was a deviation from the Son’s intended strategy. Just to compete with the Xbox360 Sony release a backward compatibility to the PS2.

Conclusion:

Competition was in full swing among the video game consoles producers, to be the market leader in the year 2008. The three major players Microsoft, Nintendo and Sony followed different strategies and business models to dominate the market and increase their market share.

Initially, Sony’s first two PlayStation models were very much popular and dominated the market over rivals. But the introduction of Nintendo’s wand controller, which allowed users to respond to hand motions that were used in throwing a ball, casting a fishing line, swinging a baseball bat, pointing a gun, or playing a musical instrument, was the key to its success in the marketplace.

Word Count:

Pages – 15

Word Count – 2184

Paragraphs – 135

Lines – 374

 

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