A Marketing Battle for Dominance of 7th gen video game consoles.
The battle for dominance in the 7th generation of home gaming consoles has been fierce since the end of 2005. As many may know the next generation consoles are the Microsoft Xbox 360, Sony Playstation 3 (PS3), and the Nintendo Wii. The Xbox 360 was the first console to the market on November 22nd, 2005 in North America for $399. The next console released on November 17, 2006 was the PS3 for $599. Shortly following the PS3, two days later the Wii was released on November 19, 2006 for $249.
A brief description will explain each of these consoles history in the video game console generation.
The Xbox 360 is one of the latest products to join the video game console generation. Microsoft had only entered into the 6th generation of the video game console market in 2001 when they released their first console, the Xbox. The competition at the time was the Playstation 2 (PS2) and the Nintendo GameCube. The Xbox did very well in the market as they released many top selling games and sold millions of consoles.
The Playstation 3 is in its 3rd generation of consoles, hence the name. Previous consoles released were the PS1 and PS2. Playstation has had many loyal customers ever since there release in the 5th generation of the original Playstation in 1994. The main competition in that generation was the Nintendo 64. The 6th generation Sony released their Playstation 2 in 2000. The Playstation 2 to date is one of the best selling consoles. In 2007 the PS2 had reached a total of over 120 million units sold. The competition for the PS2 in the 6th generation was the Microsoft Xbox and the Nintendo GameCube.
Nintendo, the grandfather of gaming consoles, entered the market in the 3rd generation and released their first 8-bit console in 1985, the Nintendo (NES). The previous 2 generations included consoles such as the Coleco Telstar, Pong, Magnavox Odyssey, Atari 2600, Colecovision, Sega SG-1000, and a couple other similar consoles. In the 3rd generation Nintendo’s main competitors included the Atari 7800 and the Sega Master System. In the 4th generation Nintendo created the 16-bit Super Nintendo (SNES). The main competition in that generation was the Sega Genesis and the Neo Geo. Moving on to the 5th generation Nintendo releases a 64-bit console, the Nintendo 64. The only main competitor at that time was the Sony Playstation. Then in the 6th generation Nintendo released the 128-bit GameCube which competed against the PS2 and the Xbox. Finally during the 7th generation Nintendo released the Wii. As stated before the competition in this generation was the Playstation 3, and the Xbox 360. Nintendo has been around a long time and has a large community of loyal fans.
Now that a bit of history has been laid out on each of these consoles we will move into some marketing strategies of the 7th generation consoles. The following paragraphs will explain the strategies in the releases of the Xbox 360, PS3, and the Nintendo Wii.
We’ll start off discussing the Xbox 360, the first console to the market. The 360 had the market all to themselves with no threat of competition for almost a year. Since the 360 was released many customers flurried and plugged their minds into the first next-gen console of gaming. Hitting the market first was a big plus for Microsoft; Not only did Microsoft have many consoles purchased from their already loyal fans, yet they convinced many Nintendo and Playstation fans to purchase the console. In the first year on the market the 360 had been released in 36 countries, the most countries ever distributed for a console in the first year. Microsoft’s strategy attempt was to capture consumer surplus by offering many different versions of the Xbox 360. This means that more consumers can purchase their product at a price that is less than they would be willing to pay. The different variations of their product included the “Xbox 360 Premium”, “Xbox 360 Arcade”, “Xbox 360 Core”, and later released the “Xbox 360 Elite”. An image and breakdown of these variations are shown below:
When the 360 was first released the only console available at the time was the premium console sold for US $399. Microsoft had the market all to themselves and could hold this price without a price deduction for quite sometime. A couple months after the release of the Playstaiton 3 and the Nintendo Wii, Microsoft slashed their prices of their console by nearly $100. This new price made the console more affordable to more consumers. Xbox seemed to be on the rise; but, unfortunately with all good luck comes a little bad. Due to Microsoft getting to the market first they may have not done as much testing on their console as their competitors. Near the release of their competition some consumers began having difficulty with their consoles. One problem consumers starting noticing were that their consoles were getting too hot and overheating. The coolant system in some consoles did not cool the hardware as expected. The overheating of the console would cause more hardware problems and eventually would make the product defective. Another problem consumers experienced was the 360 would not turn on, yet display an error. The light on their console would blink a red ring. This was a big downfall for Microsoft. Microsoft approached this problem by offering a three year warranty on all affected consoles and repairing them free of charge. It seemed like a fine solution which secured consumers with their console. The only problem is that consumers would have to send Microsoft their product and wait nearly a month until they received their repaired console.
The 360 is still a leading console in this 7th generation. Despite the problems and conflicts Microsoft has had, they still have a large fan base of consumers.
Okay, lets move on to the Sony Playstation 3. The Playstation 3 was the second console to enter the market of the next generation. Sony launched their two variations of their console. The two variations were the Playstation 3 with a 60 Gig Hard Drive at US $599 and the PS3 with a 20 Gig Hard Drive at US $499. The Playstation 3 had many more features than the 360. These features included a blue ray DVD player, HDMI ports on all models, USB ports, and a WiFi connection. The Playstation 3 had just as much capability, if not more, for displaying phenomenal graphics. Sony may have thought that by adding all these features would make consumers immediately want to purchase their product, this was unfortunately not the case. The cold hard truth is that $599 for a premium release of the Sony Playstation 3 is drastically too much money. The price of the console was higher than people wanted to spend. Playstation, however, did receive an enormous amount of purchases from their loyal fans. When the PS3 was released in Europe, Australia and New Zealand there were 600,000 consumers who purchased the product within the first two days. This may sound like a lot but I’m sure Sony had anticipated a lot more purchases from consumers through the release of their product. Another reason that the high price was so devastating to Sony was that consumers knew that the Nintendo Wii would be releasing two days later. The expected price was US $249 for the Nintendo Wii. A consumer could purchase two of the Next-Gen Nintendo Wii consoles for less then the price of the Premium Playstation 3. Playstation 3 has been on the market since November of 2006 and they still have not had any major signature title games. After Playstation 2 had been one of the best selling game consoles in the previous generation, this drop of sales for the PS3 must have been devastating to Sony. Sony has to come up with a better marketing strategy to get their consoles sold to many more consumers. These problems could have a long term effect on future Playstation consoles. If Playstation loses too many loyal fans they could face a loss of sales in consoles in the future. To date, the Playstation 3 has fallen, in sales and market shares, to third place. Sony’s Competitors, the Xbox 360 and Nintendo Wii, have taken the lead. A smart move for Sony was to offer even more variations of their product in an attempt to capture consumer surplus. Sony did just that. As of October 2007 Sony has released four variations of the Playstation model. The four variations include a 20G hard drive, a 40G hard drive, a 60G hard drive, and an 80G hard drive console. The variations of these consoles has been broken down and shown below.
Sony Playstation 3 model variations:
|Feature||20 GB (NTSC)||40 GB (PAL, NTSC)||60 GB (NTSC)||60 GB (PAL)||80 GB (NTSC)|
|USB 2.0 Ports||4||2||4||4||4|
|Colors||Black||Black, White (Asia)||Black||Black||Black|
|802.11 b/g Wi-Fi||No||Yes||Yes||Yes||Yes|
|Flash card readers||No||No||Yes||Yes||Yes|
|First Availability||Nov 2006||Nov 2007||Nov 2006||Mar 2007||Aug 2007|
|All PS3 models include: Blu-ray/DVD/CD drive, HDMI 1.3, Bluetooth 2.0, and Gigabit Ethernet.|
The Playstation 3 has definitely not been doing as well as they had in the 6th generation. A strategy was in dire need. How about a price cut? Well that’s exactly what Sony has done. On October 18, 2007 Sony Computer Entertainment America (SCEA) announced that on November 2, 2007 there will be a major price reduction. Sony cut the price on the 40 GB console to $399; however, some features will not be included in this model as shown in the above table.
Perhaps the model variations and price reductions will create more consumers for Sony. The major game titles that Sony has released in the past have provided them with a large fan base. Hopefully there will be more major game titles for the Playstation 3. The Playstation 3 has the capability of great gaming entertainment, but only time will show how this battle will end.
Finally the last console to hit the next-gen market was the Nintendo Wii. Although the Wii did not have stunning CG art like its competitors, it had a new feature of interaction that made a name for itself. The Wii had a new interactive controller where moving, swinging, and turning the controller would be displayed through the game. The Wii was released on November 19, 2007, two days after the PS3, and had a big audience waiting to try the new interactive generation of gaming. The Wii console was released in North America for a substantial lower price than its competitors for $249. The marketing strategy for Nintendo was to start with a low price and grab a big fan base. Nintendo succeeded in doing this. Nintendo already had many loyal consumers; although, with the release of the Wii, Nintendo captured many more game enthusiasts. The Wii is Nintendo’s 5th gaming console. They had many signature game titles that were offered exclusively on their console. Due to the low price, interactive game play, and signature game titles the Wii has globally sold more consoles than their competitors. The Wii sold more units mid 2007 in North America than the Playstation 3 and the Xbox 360 combined.
Due to the high response Nintendo received from their consumers there was no real need to target consumer surplus. The Premium Nintendo Wii is the main console that is sold. And although the Wii does not have DVD playback, high end graphics, and Wi-Fi like the other consoles, their console was still extremely popular. The Wii took a chance and stepped away from the ‘sit down and mash buttons on your controller’ game play. Instead they focused more on interactivity with the user and the game.
The Nintendo Wii proved to be the true winner in sales and market shares. The Wii may not be the best of the three consoles, yet they have just sold more consoles then their competitors. Only time will tell if the Wii will keep its current reputation. With the new interactive game play that Nintendo has shown to audiences the future of gaming may change in upcoming generations of gaming consoles.
The type of product a company sells will determine the amount of consumers they will receive; however, having the best product will not always mean selling the most. Many factors can change how well a product will do in the market. As shown above Playstation 3 had a lot more features than their competitors; unfortunately, having a lot of features meant the price of the product would be higher. The marketing strategy of a company has a considerable amount of effect on how well their product sell.