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In the early 1990s, Nintendo was the market leader in the videogame industry. In 1994, the Sony Playstation made its debut and managed to dominate the market in four years (Luh 2003, p.109).
Microsoft launched the Xbox in 2001. Microsoft’s strong financial background and existing expertise in the computer industry gives it an edge in developing a console that can compete with the PlayStation, on both the technological and marketing front (Accountancy 2001).
Currently, Sony's PlayStation 2 (PS2) is the most popular machine and with the broadest choice of games. Its success is the result of several factors; a head start in launching the PlayStation 2 earlier than its two rivals; its support for older games written for the original PlayStation console; its ability to function as a DVD player; and Sony's close partnerships with games publishers, which ensured a stream of popular titles. All of this enabled Sony to garner a 70% global market share.
Nintendo's GameCube has a far narrower range of games than the PS2. Even though it has only a 15 per cent market share, Nintendo makes the most profit among gaming firms. This is because most of the money in the games industry is made from software, not hardware. Most of their best games, such as the Mario and Zelda franchises, are published by Nintendo itself.
Microsoft, in contrast, has yet to turn a profit from video gaming business. The Xbox is considered the most powerful of current generation consoles and appears to be targeted at the hard-core gamers. It also has the best online-gaming service, Xbox Live, which is run by Microsoft itself (The Economist 2005).
Competition in the $28 billion worldwide videogame industry looks set to get more intense with the launch of the next-generation gaming consoles (Jones 2005, 21).
In May 2005, the three major hardware manufacturers unveiled their next generation consoles in the period around the 2005 Electronic Entertainment Expo (E3). Microsoft’s new console, the Xbox 360, was announced a week before the E3 with a special show on MTV. (Sheffield 2005, p.4)
With the Xbox 360, Microsoft plans to target a much wider audience, both gamers and non-gamers. This is part of a broader strategy to dominate the living room and make the Xbox 360 the centerpiece of home-entertainment systems. The console also has a new design and the support of all the major game publishers. It will have the advantage of beating its rival to market by several months. The Xbox 360 is slated for release in November 2005, in time for the important year-end holiday sale season (Lewis 2005, p126).
Sony plans to launch its new console, the PlayStation 3 (PS3) in spring 2006. It is emphasizing on the technical superiority of the PS3, which is based around a new chip, called Cell, and a high-capacity Blu-ray DVD drive. This will give it greater processing power and storage capacity than its rivals, but both technologies are new and unproven.
Nintendo has not been so forthcoming about its new console, the Revolution, which is also due next year. The company claims that it will have an unusual new kind of controller and its online library of classic games will be its unique selling point. The idea is that these older games will draw in casual gamers who are put off by the complexity of modern titles (The Economist 2005).
The next round will pit Microsoft's marketing might against Sony's technological strength and Nintendo's innovation. Many observers believe that the PS3’s superior graphics will give it the edge, but others counterclaim that the catalogue of games is the main determinant of a console’s success. (Lester 2005, p.26)
Electronic Entertainment Expo, retrieved September 8, 2005, from http://www.e3expo.com/
Jones, K. (2005) 'The Console Wars: Sony, Microsoft, and Nintendo ready big gaming advances', PC Magazine, Vol.24, Iss.12, pp.21
Lester, R. (2005) 'Game Consoles - Real fight for virtual victory', Marketing Week, May 26, p.26.
Luh, S.S. 2003. 'Picking a Fight: The Rise of Sony’s Video-Game Business' in “Business the Sony way: secrets of the world's most innovative electronics giant�? p.107 – 135. United Kingdom. Oxford.
Nintendo (2005). retrieved October 18, 2005, from http://www.nintendo.com/systemsgcn
Sheffield, B. (2005) 'PS3, Xbox 360, Revolution Announced', Game Developer (San Francisco), Vol.12, Iss.6, p.4
Microsoft Corporation (2005), retrieved September 4, 2005, from http://www.microsoft.com/ , http://www.xbox.com/en-US/live/
Sony Computer Entertainment Inc. (2005), retrieved September 5, 2005, from http://www.playstation.com/products.html
Wikipedia (2005) “Blu-ray Disc�? retrieved October 23, 2005, from http://en.wikipedia.org/wiki/Blu-ray_Disc
(No Author). Cover Feature – Game Consoles – Clash of the Titans. Accountancy. Dec 2001. London: Vol.128, Iss. 1300, p.30
(No Author) Gaming’s next level - Rational Consumer. The Economist. London. Sept 17, 2005. Vol. 376, Iss. 8444, p.18.
Choo KeeFong 00:46, 28 Oct 2005 (EST)
