Nintendo Case

1. What factors do you think enabled Sega to break Nintendo’s near monopoly of the U. S. video game console market in the late 1980s? There are a few different factors that allowed Sega to break Nintendo’s near monopoly of the U. S. video game console market. First, the introduction of a 16-bit system was huge. This was double the original 8-bit systems that were out and consumers were anxious to try it because of the enhanced graphics.

Second, Sega made their new system backward compatible with its 8-big Master System games meaning that anyone who already owned these games could play them on the new system as well as any of the new games that were released. Sega also produced their games in-house which saved money. They focused their attention on increasing unit sales to drive game sales instead of focusing on making a large profit on consoles.

The combination of in-house games and less focus on consoles allowed them to have over four times the amount of games as Nintendo by the end of 1991 and people ultimately flocked to where the games where. 2. Why did Nintendo choose to not make its video game consoles backward compatible? What were the advantages and disadvantages of this strategy? Nintendo chose to not make its video game consoles backward compatible because this meant that consumers would have to spend money on a new console as well as new games and thus create more revenue.

The advantages to this were that they could possibly make a lot more money because of the necessity to sell new games with new systems. The disadvantages is that many people were not interested in having to spend extra money on new games if they were able to purchase a new Sega console that allowed them to use old games as well as new ones. This lead to Sega’s ability to surpass Nintendo in sales. 3. What strengths and weaknesses did Sony have when it entered the video game market in 1995?

When Sony entered the video game market in 1995, it was one of the first 32-bit systems, and it had a decent amount of developer support. Although Sony did not have much of an image in the video game market, they did have a huge brand loyalty in other consumer electronics making it fairly easy to gain a following. Because of their previous success in the electronic market, many developers were excited to jump on the bandwagon to develop games for Sony which enabled them to have 800 game titles by the end of 2000. 4.

What strengths and weaknesses did Microsoft have when it entered the video game market in 2001? When Microsoft entered the video game market in 2001, they had the advantage of already having some experience in the online gaming world because of the line of PC-based computer games they had already produced. One downfall they did face however was a lack of experience in the arcade environment that Sega and Nintendo both had by this point. A major strength that the Xbox focused on was having more power than the PlayStation2 by offering more memory and a faster processor.

One other huge advantage that Microsoft had was the price point they offered the Xbox at originally. They marketed it at $299 which was significantly less than its actual production costs, and also less than competitor’s consoles. They also had the advantage of being able to spend $500 million on advertising which is more than they had ever spent on any advertising campaign, and more than other companies of its type could spend. Lastly, they planned to produce 30-40 percent of their games in-house to save on licensing and external costs.

5. Comparing the deployment strategies used by the firms in each of the generations, can you identify any timing, licensing, pricing, marketing, or distribution strategies that appear to have influenced firms’ success and failure in the video game industry? Atari took numerous measures to make sure that only authorized games could be played on their consoles which were a main reason for their huge success. Nintendo and Sega spent $15 million in advertising and promoting the new systems.

Nintendo made games for in-house systems as well as licensed third-party developers through strict licensing policies, and they also restricted the volume and pricing of the consoles which made the company very profitable. Sega mainly produced games in-house which allowed them to drive game sales and software developer royalties, pushing them ahead of Nintendo. Philips introduced the most expensive console to date starting at $799 which ultimately hurt their sales. They had to decrease the price to under $500, but it was too late. They would not disclose technical information about their system making software development difficult.

Because of these strategies they did not last long on the market. When Sony entered the market, they entered relying on their brand image to support them and getting support from numerous game developers. Later, Sega launched the Dreamcast around the same time that Sony launched the PlayStation2. Sega got a head start on sales by launching around the holidays, but still did not hit high sales because of the price point. Even though they ended up dropping the price, Sony’s launch of the PlayStation2 only a few months later crushed any hope for the Dreamcast due to its 128-bit system as opposed to the traditional 32-bit.

Nintendo decided to wait on the release of their 128-bit system because they did not offer a backward compatible system like Sony and did not want PlayStation2 sales to hurt the release of the GameCube. Although they targeted different demographics, they wanted to be sure the launch was successful. Microsoft was also launching the Xbox around the same time. They chose to launch it at an extremely low price point that was actually below the cost of production to make sure it hit the market hard. They also chose to launch around the holiday season to get as many initial sales as possible.