Competitors Analysis.

Main competitors for Microsoft in game console industry right now are Sony and Nintendo. A comparison of their newest products is given in Table 2.

SONY is currently the market leader in game console industry (Figure 2). Its PlayStation has taken a lion’s share of the console market. This makes SONY a household name in the industry. PlayStation 2, its sequel, rides on top of this wave and has been on the market a year ahead of similar products from Nintendo and Microsoft. Sony’s strong brand name in both game console and home electronics industries makes it well positioned for the market for future game consoles, which will be “all-in-one” devices supporting gaming, home entertainment and web browsing. Sony has partnership with AOL, Real networks (to include real player in PS 2) and almost every major game publisher.

Nintendo has always been a strong player in console industry. It is second to Sony in terms of total game console unit sales from 1995 to 2000 (Table 3). It’s GameCube, released this spring (about the same time as Xbox), is priced at £129.99, £100 below PS2 and Xbox’s prices. The big difference in prices allows Nintendo to target at low end of the market: young kids from 7 to 16, who can not afford more expensive models, and who don’t require as many features as the more mature age groups.

Microsoft’ Xbox is Microsoft’s first entry into game console market. But aggressive marketing by Microsoft has resulted in a wide awareness of this product in gamers’ community. Xbox tries to beat PlayStation 2, released a year ago, in every feature, hoping to compensate for its late entry and grab some market share from Sony. But during the past year, Sony is also adding new features to PlayStation 2 to defend its market lead. For example, Sony has added hard disc drive bay and expansion unit for broadband connection to its PS2 North America models. So Xbox is not very differentiated from PS 2 in terms of features. Furthermore, gamers are more interested on content, rather than hardware specification. Microsoft is also notorious for over using hardware resources in its operation systems, which leads to users to suspect that the use of more advanced hardware in Xbox doesn’t necessarily result in higher performance, and is more likely due to Microsoft can not do the same thing Sony does with same simple hardware. The fact that Microsoft follows the price set by Sony makes it vulnerable as well. Sony, who has been in this industry much longer than Microsoft, and whose PS2 has entered market one year before Xbox, has much higher operation efficiency. Microsoft is in quite an awkward position when competing with Sony. But a good move made by Microsoft is to partner with Sega, who has just abandoned new console development.

All the tables & Graphs can be found on the next page 

Table1: (source: PC Data)

Dec 2001 market share of games  

PC games                        23%                $30 million

Console games                77%                $110million

Table 2: Products Comparison:

Fig 2 2002 market share of game consoles in Europe by vendor (Source: UBS Warburg LLC)

Table 3: (Source: In-Stat January 29, 01)

1995-2000 game console unit sales

Sony                         47%

Nintendo                28%

Sega                        23%

Other                         2%

Table 4: Source: Forbes        8/6/01

2001 Sales of consoles (world wide)

Sony playstation 2        20 million units        $65billion

Xbox                        1.5million units        $24billion        

Table 5: Source: PC Data   20/2/01

market share of game consoles by vendor

As of Dec 2000,

Playstation                  37%

Nintendo                 23%

Game boy color         21%

Dreamcast                 11%

Playstation 2                 8%

Table 6: Source : In-Stat (8/4/02)

Forecast market for video game consoles  

From $4.1 billion in 2000 to $7.8 billion in 2004.