Competitor Intellegence

Competitor Intellegence

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Industry summary

The industry I have chosen to conduct my research on for this assignment is the “home console” industry. The home console industry is reported to be worth an estimated £2.7 billion in the year 2008 (up £0.3 billion on 2007) with the industry estimated to rise to the £3 billion mark by the time the “next generation” of consoles hit the shelves.
The history of the industry is broken down into stages called “generations”, with a “new generation” being born with the arrival of a newer and usually more powerful machine. The first “generation” of home consoles began in the early 1970’s with the Magnavox Odyssey. This first generation of home gaming lasted up until 1976 which saw the launch of the “second generation” with the arrival of the Fairchild Channel F and Radofin 1292 Advanced Programmable Video System. This generation’s dominant console was the Atari 2600 which was released in 1977 and had an estimated 30 million units sold as of 2004.
The second generation of gaming end in 1984 after the industry endured a crash, which almost resulted in bankruptcy for many companies producing home consoles.
It was in the third generation that home video consoles began to sell in massive numbers. It also saw the arrival of two of the industry’s most powerful companies (SEGA/Nintendo). Nintendo launched the Nintendo Entertainment System (NES/Famicom) in 1986, while SEGA launched the Master System in 1987.
The rivalry of Nintendo and SEGA continued into the fourth generation as they both battled for supremacy within the industry. SEGA launched the Sega Mega Drive in 1990 with Nintendo launching their Super Nintendo Entertainment system (SNES/Super Famicom) in 1992.
This generation also saw a trend appear, which has continued to this day. That trend was the creation of “mascots” for each console. These mascots would be first party created (made by the company that created the console) and would therefore be exclusive to that specific console. SEGA’s mascot consisted of a small, blue, super fast hedgehog called Sonic. Sonic’s first appearance came in “Sonic the hedgehog” in 1991.
Nintendo’s mascot or mascots came in the shape of two Italian plumbing brothers called “Mario & Luigi”. These two brothers featured in the SNES main title Super Mario Bros.
These mascots where the focus for both companies advertising campaigns, with SEGA pushing sonic as a cooler alternative to Nintendo’s Mario.

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SEGA also marketed its console as a more mature system whilst Nintendo was considered to be more family orientated, and this was clearly evident when the game Mortal Combat was released. The game was released on both consoles; however SEGA decided to keep all blood and gore in the game, whilst Nintendo decided to censor them out. SEGA’s gamble paid off with it receiving more critical praise and also higher units sold on their system. When Mortal Combat 2 was released Nintendo decided to leave all blood and gore in their version.
The fifth generation also saw the emergence of huge industry trend. This trend was the process of using discs instead of cartridges for storing the information on for the games. It also saw games moving from 2D games to more realistic environments in 3D. It also saw Sony arrive into the home gaming market when they released the Sony Playstation in 1995. The Sony Playstation was the first home console machine to reach over 100 million units sold (102 million as of July 04).
Nintendo also released the Nintendo 64 this generation, although it was released after the Playstation Nintendo did not follow Sony and kept creating their games on cartridges. The reason Nintendo did not want to use disc for its games was because they felt they were easily pirated and consumers would not pay the full RRP when they could easily copy the games themselves.
The arrival of Sony saw the arrival of a whole host of new trends within the gaming industry. The first trend Sony created was to have an official gaming magazine, also by having the magazine and the ability to use discs then allowed companies to create demos of games which were then sold along with the magazine. Sony also introduced the Memory Card into home gaming. This allowed gamers to save their gaming content and restart back at the point of the save. It also allowed gamers to swap content between each other. The arrival of the Playstation also saw the arrival of the Dual Shock controller. This controller featured analogue stick for more precise control, and also a rumble feature within the pad to give a more realistic feel to gaming (these features still in use on controllers today). Another trend pioneered by Sony was to not only use the console just for gaming, but to use it as a multi functioning entertainment system for the household, by allowing the Playstation to be used as a CD player and later the Playstation 2 for DVD playback also. This trend has had a huge impact on other competitors with Microsoft following the same idea by allowing using their Xbox console for CD/DVD playback.
The sixth generation of consoles saw Microsoft’s late venture into the home console industry with the release of the Xbox. This generation began in 1998 with SEGA’s last production of a home console called the SEGA Dreamcast. All consoles in this generation used discs for their games, however Nintendo still wary of the threat of pirated games decided to use a much small disc for their console the GameCube, called the GameCube game disc. Although this didn’t stop GameCube Games being pirated it was much more difficult to copy the games.
Another trend in this generation was to use DVD discs for games to be stored on. This allowed for more information to be stored on the discs thus making the gamers bigger and better. Both the Xbox and the Playstation 2 also incorporated DVD playback facilities within the console.
Another two major trends that came into use in the generation was the ability to play other gamers around the world with the introduction of Xbox Live. This was a subscription based option that Microsoft utilized for their console. Those that had the Xbox live service where able to play anybody in the world from their own home. Xbox Live is estimated to have had 250,000 subscribers within the first two months of launch.
The second major element that Microsoft introduced into to home consoles was the Hard Drive. This eliminated the need to have memory card/cartridge/unit, as all information could be stored directly to the console. The Xbox did also have a slot for a memory unit so if consumers wanted they could still take their game saves to their friends. The hard drive was also a very important function for Xbox Live, as it would enable gamers to download extra game content at a selected price (often called micro-transactions), and save it to the hard drive.
The current generation of gaming consoles consists of just three consoles
• Xbox 360
• Playstation 3
• Nintendo Wii
Whilst Microsoft and Sony have both focused heavily on appealing to so called “hard core” gamers with High Definition graphics, on-line facilities and multimedia applications such as downloading the latest television programs, gaming content and HD DVD viewing for the Xbox 360 and Blu-Ray compatibility with Playstation 3, Nintendo has focused appealing to the “Casual Gamer” with the Wii. Nintendo’s gamble seems to have paid off, with the Wii out selling its two competitors on a monthly basis.
Porters Five Forces

Since console manufacturers suggest retail prices over entire countries or regions, individual customers have no bargaining power. Software purchased for one console cannot be played on other consoles so switching costs are high; if an individual wants to play a particular game, he or she is usually locked into the console that plays it. Relatively few games were produced for the larger demographic of "casual gamers".
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