This page is part of the CRIC web archive

Digital Games Industries:
Developments, Impact and Direction

Buy or Die? Microsoft, Nintendo and Sony - The Clash for the Console Market

Hardy Dreier
Hans-Bredow-Institut for Media Research, Germany

Keywords: Inter-firm interactions, strategic alliances, strategy development, key markets, competition

The console market will possibly be the major games market in the future. At the moment three companies are dominating this market: Microsoft, Sony and Nintendo. These companies have different traditional backgrounds: Microsoft was a software company and has developed successful games for the PC, Nintendo is a "game-console-only"-company with a strong market position in the handheld-segment and Sony was a manufacturer of entertainment hardware. Meanwhile Microsoft and Sony have become "convergence-companies", they have gone through a process of mergers and acquisition to spread their profits to new business segments. A main motivation of their activities seems to be synergy, but it has not always worked like the example of Sony and Columbia Studios in the past shows. The main goal of the research is to look for the general strategies of the three companies in four different levels of the market: hardware, distribution, software and marketing.

Hardware: The technical features and options of the different platforms and the partnerships for the technical evolution of these platforms in the future are an important element of the power of the platforms in competition not online between each other but also with the PC. It looks like Sony and Microsoft try to enter the living-room of the young adults with their new entertainment platforms and Nintendo stays mainly in the kid's room and the living room of families.

Distribution: This means the distribution of hardware, software and marketing-information. There are different strategies in hardware distribution, different concepts of software distribution and a platform-specific "communication-microcosm" with web-sites and magazines.

Software: Especially Microsoft spent a lot of money in the race for popular software. The consoles of Sony and Microsoft are more than a "game-only-device", so there are interesting possibilities to combine different formats of entertainment-software like DVDs and CDs with games. A lot of publishers made contracts for the different platforms, a few of them produce only for one platform, a few of them publish their games first on one platform, so the different forms of partnerships will be in focus.

Marketing: As "Convergence-Companies" Microsoft and Sony go different ways in the marketing than the target-group oriented Nintendo. For the multimedia-platforms PS2 and X-box the combination of games and movies like "Lord of the Rings" and "Harry Potter" is more important than for Nintendo. The fans of the Game Cube and the Game Boy are younger and more television oriented, so titles like "Pokémon" and "Dragonball" are more important.

In a climate of "co-opetition" (Competition and Co-operation) all three companies try to develop the console market as the new main games-market. As a result of the different roots of the companies there are differences in the economic power, the traditional partners and the business networks of these firms. The presentation will give an overview of the development of the games-segment as part of the companies business and main strategies on the console market. One important strategy seems to be pure growth: Sony and Microsoft bought a lot of different companies (e.g. the rumours about Microsoft and VU Games) and spent a lot of money for exclusive content to become a powerful combatant and they have the economic power for a very expensive marketing-battle. Nintendo has not the money to go the same way, they have to find their own strategy between the kids-niche-Market and network-strategies. A main question is, if only the big players will survive.

References:

Porter, Michael E. (1999): Wettbewerbsstrategie: Methoden zur Analyse von Branchen und Konkurrenten. Frankfurt/New York.

Asakura, Reiji (2000) Revolutionaries at SONY: The Making of the Sony PlayStation and the Visionaries Who Conquered the World of Video Games. New York et al.

LaPlante, Alice; Seidner, Rich (1999): Playing for Profit: How Digital Entertainment Is Making Big Business Out of Childs Play. New York et al..

Sheff, David (1999): Game Over: How Nintendo Conquered the world. New York.

Zerdick, Axel et al. (1999): Die Internet-Ökonomie: Strategien für die digitale Wirtschaft. Berlin et al..

Annual Reports of Nintendo, Microsoft and Sony

Return to Workshop Programme

Top

CRIC is now proud to be part of the Manchester Institute of Innovation Research (MIoIR)
Centre for Research on Innovation and Competition (CRIC), The University of Manchester,
Harold Hankins Building, Booth Street West, Manchester M13 9QH, England
Phone +44 (0)161 275 7365 Fax: +44 (0) 161 275 7361
Site maintained by: Ishty Hussain

Digital Games Industries: Developments, Impact and Direction

Buy or Die? Microsoft, Nintendo and Sony - The Clash for the Console Market

Digital Games Industries:
Developments, Impact and Direction