Carolyn Black's List: Nintendo Analysis

• Console is the largest segment in the industry, but online, mobile and broadband are some of the fastest growing segments.
• There are several strategy-shaping business and economic characteristics of the console segment. These include the intensity of competition, the relationship between console manufacturers
• The major business characteristic that shapes strategy is the competition, combined with the large size of the industry. The market is dominated by three global firms - Microsoft, Sony and Nintendo. They are all locked into the same technology cycle, and the dawn of each cycle provides an opportunity for tremendous gains or losses in market share. The strategies of each of these firms are heavily influenced by the competition and the technology cycle.
• Description of Economic characteristics
   
   1) Market size & growth rate: More than $35 billion was spent on video games consoles, game software etc. Industry is expected to have more than $51 billion sale by 2010.
• 2) Number of rivals: There are a lot of game consoles worldwide but there are only 3 leading video game consoles appeal to generate large-volume sales of new units: namely, Microsoft’s Xbox 360; Sony PlayStation 3; and Nintendo’s Wii.

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• This week, as the industry gathers in downtown Los Angeles for its annual E3 extravaganza, some experts are questioning how significant those boxes of electronics really are in a rapidly changing video game business.
• After dominating the market for decades and making their way into 1 out of every 2 U.S. homes, consoles are beginning to face serious competition as teenagers and adults increasingly play games designed for smartphones, tablets and online social networks.
• "Consoles are now only a segment of the video game industry,"
• "The rest of the industry is growing faster and outpacing consoles."
• A recent report from Deutsche Bank Securities Inc. projected that through 2014, spending on "social games" on networks like Facebook would grow 46% annually, other online games 23%, and mobile games 19%.
• Meanwhile, spending on console-game discs is projected to drop 6% a year.
• Overall game sales in the U.S. are expected to mushroom to nearly $30 billion over that time period from about $20 billion last year.
• Many in the industry attribute the Nintendo 3DS' disappointing launch to the popularity of iPhones and Android phones. Although most consumers buy smartphones to talk and email, they discover they can also use the phones to play games that typically cost less than $5, as opposed to $40 for 3DS titles.

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• Nintendo is the one of the key players among three big giant in the industry and Sony and Microsoft both fall in to the latter category. Thus, safe in a fairly differentiated position, Nintendo is in a dominant position in the marketplace paying off the Nintendo’s sales of the Wii far outpacing original expectations. Sony is no longer dominating the market, and compared to the previous distribution of demand for gaming consoles is losing significant ground.
• In contrast, Sony and Microsoft court the hardcore gamer and expect console sales to trickle down to more casual gamers. Therefore, the fight in the console industry traditionally was based on the technology, features, graphics and games sophistication to attract the hardcore gamers. For example, Microsoft X-box which exceeds all the areas of Sony Play station before Sony introduced its PS3 and later Sony responded with an improved PS3 incorporating a Blu-ray drive within every S3. To win the competition, Nintendo introduced Wii targeting a new group of customers segment and carve out a niche for itself. In its new console system Nintendo designed a wireless controls which allows players to mimic life like actions for gaming control.
• In my opinion some of the major strategies used by the gaming industry is differentiation, low cost and focus strategy by different players.
• Microsoft also created a service, known as the Xbox Live.
• This differentiation strategy has proven extremely successful, and even in the recession has a record number of sales.
• Microsoft’s approach to Porter’s four competitive strategies for the Xbox would be focus in the video game industry (focus strategy), and differentiation of their product from others.
• Xbox is labeled under focus, because it is only dealing with one section of the technological world which is the video game industry.
• Sony, on the other hand differentiates its Play station 3 incorporating Blue ray DVD functions and finally Nintendo differentiate itself from the Microsoft and that of Sony in terms of target market.
• With its differentiation strategy, Sony creates a console and games that appeals to people who had been ignored by Microsoft and Nintendo. Furthermore, its key feature was a new form of player interaction and a wireless controller that could detect its position in space.
• In addition to this, Nintendo Wii had price leadership strategy.
• As a result, the system was more accessible to more people. Nintendo has always been the cost leader, and this time that advantage really helped the Wii take off in sales. Beside this, Nintendo innovated with new controllers that included motion control, the nun chucks, using the remote as a pointer device, a wireless, motion-control steering wheel, a wireless light gun, and a balance board. They also released innovative games like Brain Age, Wii Play, Wii Sports, Wii Fit, and Wii Music etc.

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• LOS ANGELES (Hollywood Reporter) - The video game industry is expected to shoot from $41.9 billion in global sales last year to $68.3 billion in 2012, a compound annual growth rate of 10.3 percent and better than all other media sectors except for online advertising and access.
• The data comes courtesy of the upcoming "Global Entertainment and Media Outlook: 2008-2012" from PricewaterhouseCoopers.
• Console games, the largest category, will grow by 6.9 percent annually, from $24.9 billion last year to $34.7 billion in 2012.
• Online and wireless games will grow the fastest at 16.9 percent and 19 percent, respectively. Online will jump from $6.6 billion last year to $14.4 billion in 2012, while wireless games go from $5.6 billion to $13.5 billion in the same frame.

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• Threat of Substitutes:
• Threat of New Entrants:
• Many new companies tried to enter the market, some, like Microsoft, succeeded, others, like Sega, did not fare as well.
• The cost required to develop and manufacture a product that could be a decent a competitor in this market is too great for a non-established company in this industry to be able to compete.
• The technology that is needed to be successful at this point is too advanced for new competitors   to achieve.   Although at times the threat of new entrants might have been a concern for this industry, in 2008, the three current competitors had much to strong a hold on the industry.
• Bargaining Power of Suppliers:

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• Mobiclip

  Merger/Acquisition
• Nintendo Co. Ltd. (OSE: 7974) acquired Mobiclip on September 30, 2011. James Robinson of Herbert Smith LLP acted as legal advisor for Nintendo.
• NTDOY's price was unchanged after the transaction was announced on 12/9/11.

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• Sony makes mobile gaming push with handheld Vita
• Sony is intensifying its push in handheld gaming with a gadget aimed at hardcore players looking for something with a bit more punch than "Angry Birds," "Words With Friends" and other smartphone pastimes.
• The PlayStation Vita, already available in Japan, debuts in the U.S. and Europe on Wednesday. A basic, Wi-Fi version will retail at $250, while one that can access 3G cellular networks will go for $300 plus monthly service fees from AT&T.
• Why buy a gadget that does only one thing?
• "Ultimately, if you consider yourself a gamer, you are going to find yourself migrating up the food chain to dedicated gaming consoles and the Vita," Tretton said.
• The Vita launch is an important one for Sony, although it likely won't be as big as the debut of a new gaming console. Sony has not announced the next PlayStation, but Nintendo Co. is planning to come out with its Wii U late in the year.
• That said, he believes the market has "largely moved beyond this type of experience."
• Another handheld system, the Nintendo 3DS, has been a disappointment. The gadget, which lets players see 3-D images without special glasses, hasn't sold as well as expected and was one of the reasons Nintendo reported a net loss in the last nine months of 2011. Though the machine is starting to see sales pick up following a price cut, Nintendo last month lowered its forecast for 3DS sales.
• "It's a little strange, using both the touch screen and controls," he said. "I have been playing with it for half an hour and I'm still figuring some things out."

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• Sony has posted a loss of $1.2 billion for the quarter ending December 31, 2011, citing floods in Thailand as a major contributing factor for the disappointing result.

• Redmond, Wash. – Oct 28, 2010
• During the quarter, Microsoft saw year-over-year growth across all business segments. Among the highlights are these:
   
  • Office 2010 is off to a fast start with revenue growing over 15% in its first full quarter in market.
  • Microsoft continues to see a healthy and sustaining business PC refresh cycle.
  • Xbox 360 consoles grew 38%, outselling every competing console in the U.S. for each of the past four months.
  • For yet another quarter, Bing continued to grow market share, while achieving major milestones in implementing Microsoft’s partnership with Yahoo.

• Sony brought in $23,370 million in revenue, a 17.4% year-on-year decrease.