Console Market Analysis

Introduction

The console market is the segment of the video game market where customers must purchase a gaming system (console) in order to play the video games. The home video game market has grown substantially from its very humble beginnings to the entertainment industry juggernault that it is today. From the starting point as a pasttime for children the gaming industry has enjoyed seeing all age barriers breaking down and people both young and old not being afraid of taking part in the enjoyment of video games. Once relegated to simply a niche market the video game industry as a whole is now seen as one of the movers and shakers of pop culture leaving an indelible market on the psyche of today. The following statistics further illustrate the current situation for this impressively growing industry:

• Total Video game sales for 2006 were 13.5 billion dollars
  
  
• In 2006, 42% of Americans purchased at least one video game
  
  
• Today's gamer has an average age of 33 (44% of gamers are 18-49) years old



• 25% of gamers are over 50 years old



• 12 years is the average number of years that adults have been gamers



• 121 separate titles were introduced in 2006
  
  
• The top game of 2006 (Madden NFL) sold 6.5 million copies
  

Who's in the Gaming Market

The gaming market can be summed up into two neat categories of software and hardware. Between software and hardware there is a push and pull that creates great tension but also catalyzes the growth and expansion of the industry as a whole. The industry is cyclical in the sense that there is a cat and mouse game between hardware and software with the role of cat or mouse switching intermittenly between the two factions. When a revolutionary new console comes out the software giants are there to provide the most cutting edge and exciting new software for the console. There is a certain threshold though where software makers heighten the bar and need new hardware to support the new plateau of gaming. This is when the console makers come out with a new system that blows the previous one out of the water which then calls for the software makers to have to catch and close the gap. This exchange spells better game playing for the gamer but also more money

Biggest Player in Each Category

Hardware: For 2006 six surprisingly the biggest player was Sony but not for the brand spanking new Playstation3 but for the 6 year old Playstation 2.

The heiarchy is as follows. The Wii outsold the playstation 3, The X box 360 outsold the Wii, and the Playstation 2 outsold EVERYBODY. Industry insiders surmise that the modest $130 price tag as well as the fact that the #2 game of the year (Guitar Hero) made this blast from the past the console to beat last year.

Software: For 2006 there are no surprises here as EA takes it once again for there indominable Madden series Madden NFL 2007.

America's fascination with the sports is ever evident in the fact that Madden has been the best selling game for several of years back to back to back and it show no signs of letting up

Competitive Dynamics

In the video game industry the competition is just as fierce as any gridiron clash from madden or duel to the death of Mortal Kombat. Today's market is fairly tame as opposed to yesteryear's; today we can confidently say that Microsoft, Sony, and Nintendo are the only players in the console market. They fight long and hard to be at the top of the console heap at years end and they make no qualms about it at all. It seems as if almost every year brings on of these companies either rolling out a revolutionary new console or some kind of add-on to an old system that will blow the competition out of the water.

Current Generation Hardware

Microsoft's XBOX 360

Its only fitting that from Microsoft we get a computer that happens to play video games. The 360 is a CPU with 3 core processors running at 3.2GHz each, 512MB of RAM, and a 500MHz ATI graphics processor to offer the most lifelike graphics and advanced gameplay yet. the X Box is best positioned as a between the middle of the market and the higher end mostly due to its price point. As previously mentioned XBO 360 was the best selling new generation console of 2006.

Sony's Playstation 3

Sony has created a monster to be reckoned with, by unleashing the onslaught that is the PS3. The PS3 boasts a 60GB hard drive and a is wifi compatible. Added to the fact that the system plays Blu-Ray DVDs and you've got a whole lot to contend with. The PS3 is probably the highest end (and highest price) machine with all of its capabilities and features. Sony played the book ends of the console wars with the PS3 taking the bottom and PS2 taking the top.

Nintendo's Wii

Just when things where looking a little dim for Nintendo they change the game with the introduction of the Wii. Priced at the most frugalpoint and least wallet damaging there is no secret to why the Wii isn flying off of the shelves. Now the Wii isnt some supercomputer monstroid sent to destroy the world but is instead a simple and dangerously fun and addictive new version of playing an old favorite. The wii's weapon of choice is its nifty new game play of using a controller to act as a guide for everything from bowling to boxing. The Wii enjoyed a middle ground position in the console wars in 2006 but has already shown growth by leaps and bounds in early 2007. You could easily work up a sweat playing your favorite video game.... cool!

Current Generation Software

The video game industry is truly a unique one where the people that you align most closely with (i.e. design house and hardware merchants) are also out to get you. Not only do companies like EA have to worry about software designers but they have to worry about the hardware manufacturers themselves. Sony would love nothing more than to create a game that could eclipse Madden in the sports arena, and I'm sure that Microsoft wouldn't mind snatching the crown (with the head attached of course) of Grand Theft Auto in the role playing department. It's this dichotomy of friend and foe that makes sure that the player is always the victor because no one is safe to rest on their laurels.

Business Models and Revenue Streams

I believe that Video Games can serve many purposes other than simply being a fun diversion.Advertising has slowly but surely seeped its way into many video games create cash opportunities for game developers. There have been studies that have shown that video games cause children to maintain more knowledge than when they are presented with the same information in written form (see Valid Learning Tools). This study commissioned by PlayStation is contradictory to the notion that video games serve little to no educational purpose. According to John Beck at the USC Annenberg School Center for the Digital Future Video Games effects don't only reach the learning environment but the working environment as well. To even further illustrate the confidence in the capacity of gaming we can see that even the pentagon is joining in on the notion. First person shooter games are becoming more and more prevalent as simulators for the use of training soldiers in the army and other armed forces. All of these different outside uses of Video Games could be nurtured into revenue streams. Developing a long term deal with the government to provide simulators for troops or working with the brightest schools to offer live playable versions of lessons for school children..... the possibilities are endless. In terms of revelance (i.e. dollar signs) to the industry, the yankee group consulting firm believes that the in game advertising market will leap to $733 million dollars by only 2010

Future Trends

The future for console video gaming is indeed a bright one. I wouldn't be surprised if in my lifetime we see a lightweight portable version of 3D virtual reality game play where you truly are in the games that you love. Just at the tender age of 21 I've seen the video game market go from 16 bit to 60 GB in little less than the blink of an eye (in technology years of course). Consoles will start to try and take away customers from online games by offering what they call casual games which will take patrons away from the computer screen and back to the console. We've already seen internet play but I can forsee a VOIP/chess match where you are actually playing while on the telephone.

In the age of digital convergence we've already seen our consoles become internet accessing, dvd playing, blu ray formatted super machines but I doubt it will stop there.I can easily forsee a soon to be overlap of our consoles with our computers (even more than there already is) to the point where they can be deemed interchangeable. Now I don't see Sony Playstation supporting Microsoft Vista 4.0 but I can see the machines coming closer and closer to looking and functioning like the life support systems that we call computers.

Globally video games will continue to be almost as important as the air we breathe (almost). People will be able to break geographic, social, economic, language, and time difference barriers as the market flourishes and expands to meet the needs of an ever hungry public. Outside of the US regions have clung on and clamored for Video Games just as hard and loud (if not harder and louder) as we have. While we are at home watching Sanjaya masterfully master a pop classic, the South Koreans are getting early morning calls about their feudal town ships. It seems that while we have a bevy of diversions Video Games in all its shapes and forms will alway have a special place in our ram....loading.....loading....loading!!!!!!