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ENT Marketing Video Games Sector | Consoles

Presented By:

Zhi Chen | Matt Hunt | David Yao

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Agenda

History of Console Video Games
Video Game Console Industry today
The Major Competitors

Sony
Microsoft
Nintendo

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History of Console Video Games

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1972: Ralph Baer, sometimes known as “the Father of Video games” created the Magnavox/The Odyssey as the first video game home console

1977: Atari releases the Atari 2600: featured joysticks and interchangeable game cartridges that played multi-colored games

1979: The launch of Activision, the first third-party game developer (which develops software without making consoles or arcade cabinets)

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History of Console Video Games

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1983: The North American video game industry experiences a major “crash”

1990’s: The release of a wealth of popular games on both consoles, including new franchises such as Street Fighter II and Mortal Kombat, due to the raging “console wars” taking place between the video gaming powerhouses

2005 - 2006: Microsoft’s Xbox 360, Sony’s Playstation 3, and Nintendo’s Wii kicked off the modern age of high-definition gaming

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Video Game Console Industry Today

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Video Game Console Industry Today

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The games console market is effectively a triopoly, as only three manufacturers make a significant impact upon this market. Sony and Nintendo are the two largest players in Europe. Price competition between Sony and Microsoft is always strong as competition is rife between the PlayStation and Xbox franchises.

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The games console market is effectively a triopoly, as only three manufacturers make a significant impact upon this market. Sony and Nintendo are the two largest players in Europe, with Microsoft holding a smaller share in the market. Price competition between Sony and Microsoft is always strong as competition is rife between the PlayStation and Xbox franchises.

INDUSTRY: Home Entertainment sales had the highest volume in the US games consoles market in 2017, with total sales of 10.2 million units, equivalent to 61.3% of the market's overall volume. In comparison, sales of Handheld had a volume of 6.5 million units in 2017, equating to 38.7% of the market total. Handheld consoles have been significantly affected due to the increased number of smartphones and a preference for playing games on these devices due to the quick and easy access they provide. The ability to play older generation nostalgic games on computers or on newer consoles has also damaged the popularity of handheld consoles.

INDUSTRY: The market is expected to experience decline in the coming years following new console releases in 2016 and 2017. Next generation consoles are expected to be released in 2019-2020 as there is typically a seven year period between each generation, this is likely to cause strong growth in the year of release.

The games console market is effectively a triopoly, as only three manufacturers make a significant impact upon this market. Sony and Nintendo are the two largest players in Europe, with Microsoft holding a smaller share in the market. Price competition between Sony and Microsoft is always strong as competition is rife between the PlayStation and Xbox franchises.

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History of Sony Consoles

1988 Sony enters the video game market as a licensor of CD-ROM’s

1991 Nintendo breaks away from Sony partnership

1992 Sony creates PlayStation, never hits the market

1994 PlayStation released in Japan

1995 PlayStation released in US

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History of Sony Consoles

2000 Sony launches the PlayStation 2

2005 PlayStation 2 passes 100 million units sold

2006 Release of the PlayStation 3

2007 Sony announces $1.7 billion in losses from PlayStation division

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Sony Gaming Today

PlayStation 4 “A pure gaming console”

PS4 Pro (4K TV Gaming)

Over 75 million PS4’s sold to date

Virtual Reality and Motion Control

PlayStation Move
PlayStation VR
PlayStation Camera

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Core Competencies

Robust 3rd Party Support

Specialized design team (Sony Engineering Corporation)

Stellar 1st Party Content

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Leadership

John Kodera: CEO since 2017

Kazuo Miura: Deputy President and Director

Jim Ryan: Deputy President

Sony Interactive Entertainment Inc. develops, manufactures, distributes, and markets PlayStation4 computer entertainment system (https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=223116186)

John Kodera- strategic planning and business development, operation of the company’s digital service businesses and infrastructure, alignment of Sony-wide network service activities and delivery of network service to all relevant device platforms

Kazuo Miura: focuses on research, development and sales of PlayStation hardware, software, content and network services (https://www.sie.com/en/corporate.html)

Jim Ryan: Former President of Sony Interactive Entertainment Europe, has successes with the promotion of PSVR and PS4 Pro (https://venturebeat.com/2018/01/16/playstation-europe-boss-jim-ryan-gets-promoted-to-deputy-president/)

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Financials

As a result of strong PS4 sales, software revenue jumped an estimated 93.4% in fiscal 2014

SIE Generated $66.6 billion in total revenue in fiscal 2017

PS4 Sales projected to drop worldwide by end of year 2018

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Opportunities

Sony launches deals with indie developers to design exclusive content for PS4

Success of latest God of War game

New console in development (Blockchain technology?)

Declining sales of the PlayStation 4

Manufacturing center in Japan- location and pricing disadvantages

Deputy President Jim Ryan an outspoken figure-controversial comments

PS5 release timing

Challenges

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The Evolution of Xbox

2001 - Xbox
2005 - Xbox 360
2007 - Xbox 360 Elite
2007 - Xbox 360 Arcade
2010 - Xbox 360 S (Slim)

2010 - Kinect
2013 - Xbox 360 E
2013 - Xbox One
2016 - Xbox One S
2017 - Xbox One X

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Xbox One Shortcomings

According to Businessinsider:

The Xbox One would require a persistent internet connection.*
The Xbox One wouldn't play used games

You'd put in a disc, install it to the console's hard drive, take out the disc and it would effectively be useless.

Focused too much on trying to be an all encompassing device.*
Every Xbox One would come with a Kinect motion sensor

The Xbox One cost $500 at launch, $100 more than the PlayStation 4.

When it was originally released why it did so poorly

Raising up the price

Just looking at the points, this is practically a gamer’s worst nightmare, You had to be continously plugged into play video games meaning that you couldn’t go offline

Overcompensated!!!!

http://www.businessinsider.com/how-microsoft-bungled-the-xbox-one-launch-2015-8

big focus on integration with television and a digital rights management (DRM) system it was deemed by many to be anti-consumer. It was also more expensive than Sony's competing PS4 due to it requiring Microsoft's Kinect motion sensor for use with its voice activated functionality.

https://www.ibtimes.co.uk/xbox-boss-phil-spencer-discusses-mattrick-era-xbox-ones-failed-focus-tv-kinect-1583957

“A games console has traditionally filled a single role in the entertainment of the user; as of now, most video games consoles might be more accurately described as diversified home entertainment systems with once exceptional features, such as the streaming of movies, becoming more the rule.”

Marketline

The error wasn’t in thinking that these TV streaming features would be popular among Xbox users – they are, and the Xbox One really should do all those things as well. The error was in making that a part of the core focus of the Xbox One equal to and greater than gaming, instead of a bonus side feature.

Essentially they tried to change what their brand is to attract a new, additional customer base (non-gamers), and in doing so they just alienated everybody; alienated gamers because their product is now no longer devoted to playing games (while there’s a competitor that is), and they alienated non-gaming TV streamers, because why would they want to pay through the nose for a TV streaming box that’s phenomenally expensive because of the ‘gaming’ features they’re never going to use, when they can get a normal TV streaming box for a fraction of the price?

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Don Mattrick

Ex-President of the Interactive Entertainment Business

(Head of Xbox)

Ex-President of Worldwide Studios for Electronic Arts
Ex-CEO of Zynga

Known for his success of the Kinect
Also known for negative publicity

“Fortunately, we have a product for people who aren’t able to get some type of connectivity, it is called the Xbox 360”

Left Microsoft at a critical time, weeks before the release of the Xbox One

One of the Key Players behind the xbox one

He is also notoriously known for negative bpubilicty

As you can see there

WHile he does have his shortcomings, Kinect which was wildly successful at the time of it’s release

Isn’t the most popular amongst the gaming community

Overcompensated

The Xbox One would require a persistent internet connection.
The Xbox One wouldn't play used games — you'd put in a disc, install it to the console's hard drive, take out the disc and it would effectively be useless.
Every Xbox One would come with a Kinect motion sensor.
The Xbox One cost $500 at launch, $100 more than the PlayStation 4.

He has added entertainment services such as Netflix, Hulu Plus, ESPN, and YouTube, and championed the magic of the Kinect motion-controller system, all of it positioning the Xbox as a product for the whole family.

http://www.businessinsider.com/how-microsoft-bungled-the-xbox-one-launch-2015-8

https://www.fastcompany.com/3013767/don-mattrick

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Phil Spencer Leads Xbox

Changed Xbox’s Direction:

"When we came in after two-and-a-half years ago and started running the Xbox program, I centered us back on not trying to become something other than a game console"

Led the expansion of Xbox live to cross platform with PC
Oversaw the launch of the Xbox One S and Xbox One X

Current Executive Vice President of Gaming

He brought xbox back to center around gaming itself

And have been doing well so far in sales

Xbox’s subscription-based online service, XBOX LIVE, digital media distribution

http://www.businessinsider.com/how-microsoft-bungled-the-xbox-one-launch-2015-8

Became head of xbox in 2014

He’s also led the expansion of cross-platform gaming with Xbox Live, which now counts more than 50 million monthly active users.

"When we came in after two-and-a-half years ago and started running the Xbox program, I centred us back on not trying to become something other than a game console," says Spencer.

"I'll say when we look at what people do on the console today, video usage is as high as game usage, so it's not like people aren't watching YouTube and aren't watching Netflix and Amazon and anything else that's there, but I still think that we have to succeed with gamers first before we get any permission to go do anything else."

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https://www.kotaku.com.au/2016/10/phil-spencer-doesnt-want-to-sell-you-a-games-console/

"We want create a service that can reach you wherever you are. We want you to choose where you want to play."

Phil is talking about PCs, he's talking about mobile. It speaks to a secondary Microsoft purpose -- the idea of fluidity between devices. The idea that the device disappears and the service itself takes priority. Phil believes this is the philosophy that will push consoles through that glass ceiling, towards those stratospheric mainstream numbers. Then we see the domino effect of that shift. The end result: more video games and better video games.

"Instead of trying to say is there a way for everyone to need a game console -- I don't think that's true. It's a large market and it's a good market, but we can't turn consoles into something like a cell phone.

"But if we look at the people who are playing games on our service at any point. A lot of them are on consoles, a lot are on windows. More and more are coming from phone. That's when we start to look at numbers like 200 million, 300 million.

Is this a world where the console, as a fetishised product we purchase and worship, is dead?

Not exactly, says Phil.

"The device becomes the 'on ramp' to where I play," says Phil. "I want there to be multiple on ramps."

Gaming without boundaries. That's the tagline. That's the marketing schtick. It's also the end goal.

So what is the Xbox One S? Simply put it's an attempt to redefine the original Xbox One in the face of consumer feedback. What is the Xbox Scorpio? A direct response to the increased uptake of 4k televisions and a customer base desperate for games that take advantage of those increased resolutions.

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Core Competencies

Xbox’s Classic Proprietary Titles

Halo Franchise
Gears of War Franchise
Titanfall Franchise

Xbox Live as A Digital Media Distribution Tool
Xbox’s Cloud System

As for xbox’s core competencies

Provide Xbox live became a centralized services provider to purchase and download digital content f

Advanced and gaming experience

yu

The ability to play older generation nostalgic games on computers or on newer consoles has also damaged the popularity of handheld consoles. (FOR POINTS^)

MICROSOFT BEING SUCH A TECH POWERHOUSE SUPPORTS cloud...

https://kotaku.com/whats-so-great-about-xbox-ones-cloud-titanfalls-dev-563160896 (CLOUD NECK)

https://www.forbes.com/sites/davidthier/2013/11/05/the-5-best-reasons-for-buying-the-xbox-one-instead-of-a-ps4/#79de3aae6475

Sony SNE +1% may have bought Gaikai, but Microsoft MSFT +1.13%

is Microsoft. As this generation continues, we're going to see the true benefits of having the resources of one of the largest tech companies in the world backing your console. "Project Mountain" is a $700 million data center built for Xbox One and Office 365, and more games will take advantage of that computing power as time goes on. In the early days, expect to see the full benefits of Microsoft's cloud services in games like Titanfall -- the developer explains what they're capable of here.

A lot of gamers would argue that Xbox Live was the more reliable multiplayer service in the last generation, so Sony's got some catching up to do. The fact that PSN is now a paid service suggest that it's working on it, but for right now I'd bank on Xbox Live for better matchmaking and more reliable multiplayer.

IBISWORLD: with Xbox Live services outpacing its competitors in terms of user subscriptions and, in turn, software sales; according to GameSpot in June 2016, Xbox Live had 48.0 million paying members, compared to PlayStation Network’s 20.8 million. By offering legacy titles that consumers could download onto the hard drive of their respective devices, the Xbox Live service was among the first, along with the Nintendo Wii, to capitalize on classic titles that still maintained their popularity among the core gaming community. The company also recently announced a slimmed down version of the XB1, as well as a newer console with more-advanced processing capabilities expected to hit stores in late 2017.

(IBISWORLD)

NN003 - IBISWORLD: the launch of the XB1 that resulted in revenue loss in fiscal 2013, the increase in use of Xbox Live to rapidly download content increased the division’s profitability, thanks to the low cost involved in distributing software over the internet. With the release of the XB1 console, titles such as Titanfall and newer editions of the Halo series are expected to boost earnings for the company.

Consequently, industry-specific revenue is anticipated to increase at an annualized rate of 13.7% to reach $4.9 billion over the five years to fiscal 2018.

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Opportunities

Mixed Reality Ecosystem

Augmented Reality Focused

Growing 4K Television Market

Mixed reality ecosystem

Mix personal with business

Have everything that ur pc does and vieo games does and movie all under on device

Holo-Lens

They now have access to this tehcnology

Offering customers exclusive digital content has become a key way for players to establish a competitive edge.

Talk about connect and how it impacted it’s VR AR mixed reality ecostystem

Microsoft is looking to combine its business

services, consumer electronics hardware and

software division, and Xbox users into one

ecosystem centred on mixed reality, with the

HoloLens. Under the right circumstances, the

HoloLens could become the primary screen that

unifies the business and personal use that

Windows PCs and tablets are currently used for,

as well as be a dedicated screen for

entertainment, whether it be playing Xbox video

games or watching/streaming media content on

television.

2018. However, as competition heightens among eighth- generation consoles, recent studies suggest that the PS4 is still consistently outselling the XB1 by a large margin, indicating that future earnings for Microsoft’s software division may be somewhat hampered going forward if this margin increases and exclusive proprietary titles do not entice consumers to purchase an XB1 over other eighth-generation consoles. In response to heightened competition, the company released a refresh of their most recent console. Smaller by design and capable of 4K video playback and virtual reality integration, the Xbox One S was released in August 2016. Additionally, in November 2017, the company released the Xbox One X, a higher-end version of the Xbox One, in order to more effectively compete with the PlayStation 4 Pro.

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Bad Publicity

Game Developers Conference

Neck-to-Neck Competition
Declining Market Cycle

Challenges

PREVIOUS BAD PR (stripper) https://www.eurogamer.net/articles/2016-03-18-microsoft-gdc-party-criticised-for-exotic-dancers-phil-spencer-apologises

The market typically cycles around major console releases

, which have resulted in large booms of growth in the year of launch, followed by a decline in the following years as demand falls. The market is expected to experience decline in the coming years following new console releases in 2016 and 2017. Next generation consoles are expected to be released in 2019-2020 as there is typically a seven year period between each generation, this is likely to cause strong growth in the year of release.

Offering customers exclusive digital content has become a key way for players to establish a competitive edge.

Talk about connect and how it impacted it’s VR AR mixed reality ecostystem

2018. However, as competition heightens among eighth- generation consoles, recent studies suggest that the PS4 is still consistently outselling the XB1 by a large margin, indicating that future earnings for Microsoft’s software division may be somewhat hampered going forward if this margin increases and exclusive proprietary titles do not entice consumers to purchase an XB1 over other eighth-generation consoles. In response to heightened competition, the company released a refresh of their most recent console. Smaller by design and capable of 4K video playback and virtual reality integration, the Xbox One S was released in August 2016. Additionally, in November 2017, the company released the Xbox One X, a higher-end version of the Xbox One, in order to more effectively compete with the PlayStation 4 Pro.

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The History

1889- founded by Fusajiro Yamauchi
1985- Nintendo entertainment System (NES)

Instant hit: selling over 60 million units
Revitalized game industry

1989- Game Boy, the portable device

Sold over 150 million systems worldwide

1996 -Nintendo 64

World’s first 64 bit home video game system
500,000 units sold on first day

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Nintendo Today

Mainly operates in US, Japan, and Europe
Family-oriented video gaming
Wii became Nintendo’s best seller

More than 100m units
Wii sports became the best selling console game in terms of units sold

Switch, the next big idea

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Core Competencies

Unique products and services

Over 15 different video game consoles

Large pool of recognizable IP

Dynamic and adaptive

Constant updates of new entertainment device

Accumulated trust

Provide “Fun-filled world.”

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SWOT

Strengths Family friendly Simplicity Established brand image Strong and innovative R&D team	Weaknesses Few 1st party developed titles Limited 3rd party support
Opportunities Expansion to the mobile market Co-develop to expand on game titles	Threats Growing trends in online and mobile gaming PC

According to the Entertainment Software Association, 41.0% of all game players are women. Women over the age of 18 represent 31.0% of the game playing population, while boys aged 18 and younger, traditionally considered the industry’s main target market, only represent 18.0%. Consumers aged 36 and up make up the largest group of game players, followed by 18- to 35-year-olds, followed by people under the age of 18. Additionally, 81.0% of gamers play on their smartphone, while 61.0% of gamers play on a wireless device.

On PCs, strategy and role playing games are far more popular. This trend is not only due to demographic differences, but the mechanics and practicalities of using a mouse or keyboard rather than a customized controller. The point-and-click nature of the mouse on the PC is perfectly suited to strategic, real-time games;therefore,35.4% of PC games are designed to play that way, while only 2.7% of console games fall into that category. Attempts to bring real-time strategy games to console systems have consistently disappointed industry operators.

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Key Executives- Satoru Iwata

4th President and CEO of Nintendo from 2002 -2015
1980 Invited to HAL Laboratory, Inc., when he was studying in university

Developed device which helped company to obtain license with Namco.

1982- Became company coordinator at HAL

Sealed deal with Nintendo

1983- Became president of HAL

Revived the company from 1.5b debt in yen

2000- joined nintendo as general manager

Increased 20% and 41% profit w/i 2 years

Swifted Nintendo into a family-oriented console

GameBoy Advance, Nintendo DS, Wii, Nintendo 3DS

Executive producer of Best selling franchise, Pokemon
2009 -Peaked Nintendo’s sale revenue with Nintendo Wii

In a span of 3 years, Iwata went from a university study to the president of a game developing company, saving the company from bankruptcy with 1.5billion yen debt with the development of Kirby and EarthBound.

In 1980, he was invited to join HAL laboratory when he was still studying in kyoto university. He helped the company develop a peripheral device that makes old computers run the latest graphic. Which helped the company obtain a licensing agreement with Namco.

In 1982, a year after his graduation, he became the company coordinator and reached a deal with nintendo to produce games for NES, nintendo’s upcoming console that revitalizes the gaming market.

In 1983, he became the president of Hal company at a time the company was at the verge of bankruptcy. He saved the company with the gaming titles Kirby and EarthBound,

Barron’s Top 30 CEO worldwide of 2007

Honored with “Lifetime Achievement Awards” at Golden Joystick Awards in 2015 and 2016 “DICE Awards.”

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Key Executives- Shigeru Miyamoto

President of Nintendo in 2015

Representative Director of Nintendo

Chief Creative Officer

First artist of Nintendo
“Father of Modern Video Games”
Created characters that makes up Nintendo’s key intellectual properties

Mario franchise has sold over 600m units as of Dec. 2017
The Legend of Zelda has sold over 100m units
Metroid Prime sold a combined 7.15 million units

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Recent Unsuccessful Marketing Activities

Wii U

Released in Nov. of 2012, huge disappointment

Estimated sale of 14 million units; others x2 the amount in less time

No new 1st party titles or 3rd party support

Super Mario Run

Fastest mobile game to reach 10 million downloads in 1 day

Pokemon Go 7days, Clash Royale 9 days, Candy Crush Jelly Saga in 12 days…

Did not reach target revenue

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Recent Successful Marketing Activities

“Switch and Play”

Nintendo Switch

Forecasts to sell 37m units by Apr 2019.
Exceeded Wii U’s lifetime unit sale in a year
$4.44B revenue during the first half year of the console release

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Challenges and Impact of Technology

Mobile Market
Maintaining relevance without 3rd party support
Keeping up with the hardware

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Thank You!

Any questions?

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