How to respond to Wii - 1. What are the main challenges faced by the videogame console manufacturers PDF

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1. What are the main challenges faced by the videogame console manufacturers when launching a new console generation? How do they overcome them?
2. How do console manufacturers make money? What is the logic behind their pricing strategy?
3. What are Sony’s strategic options for regainin...

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1. What are the main challenges faced by the videogame console manufacturers when launching a new console generation? How do they overcome them? First and foremost, they address the most crucial issue of how many games consumers can play through the consoles because the consoles' attractiveness heavily depends on the varieties of games that users can play. Therefore. They implement various measures such as decreasing royalty rate to game makers to offer the number of games to users and Sony giving the third-party developer an unprecedented array of development tools and software libraries that made it easier to write plays for the PlayStation. By contrast, Dreamcast offered only four games at its lunch because of manufacturing problems, resulting in less attractive consumers. Second, another challenge is how to expand the market. One example is that Sony targeted the traditional videogame gamer and, as a consequence, could not develop new demand Nintendo attracted by creating a new type of videogame console. However, Nintendo outfitted the Wii and broke down the wall that separates videogame players from everyone with innovative, user-friendly capabilities to appeal to audiences other than the traditional gamer. Last, the videogame console manufactures face generation cycles. Competition in the videogame industry took place in five to six-year cycles or generations defined by the advancement of the underlying technology. The videogame console manufactures are required to invent technological leaps such as a slew of high-tech features, including faster chips, better graphics, and multimedia functionalities from one generation to the next generation to attract customers. One example of early game systems is that Atari introduced the videogame console that could play multiple games stored on interchangeable cartridges, although old games did not allow consumers to add other games. 2. How do console manufacturers make money? What is the logic behind their pricing strategy? The console manufacturers make money based on the razor-blade business model, targeting a network effect, which is the logic behind their pricing strategy. They sell consoles at low prices with a small margin over its manufacturing cost to increase video games' sales, complementary goods. The companies attract the number of users and compliments through the strategy. Also, the companies recoup a fixed royalty from licensees for each game. This strategy creates many possibilities for creating long-term profits. 3. What are Sony’s strategic options for regaining industry leadership? Which one would you recommend Kazuo Hirai to pursue? Sony is trying to answer this question as the video game leader struggles to figure out how to respond to recent disruptive moves by rival Nintendo. A. What should the target consumer audience for PlayStation be in the future? Considering the rise of smartphones has led to an explosion of users beyond generations, many light users such as women who never played video games before are now addicted to smartphone games these days. Therefore, Sony should not only target at the traditional core gamer audience but also light audience. B. To what degree should Sony pursue the new segments of gamers that Nintendo had unlocked with the Wii? One option would be that Sony pursue copy-cat version of Nintendo’s controller that works with PlayStation. However, following a me-too strategy validates Nintendo’s approach, which could end up helping Nintendo. Also, simply sticking a motion-based controller onto an existing system of PlayStation could result in a highly disappointing product. Therefore, Sony could seek to truly develop a category changing project. C. Should Sony continue to position the PlayStation as the ultimate hub for the digital living room by packing it with ever more features and technologies.

No. Smartphones are now pervading individuals, and they act as an ultimate hub for the digital living room. Under this situation, it is not practical to use gaming consoles as a hub, which is less user-friendly and portable than smartphones. In my opinion, Sony has a strong attachment to consumer electronics and try to put consumer electronics features on a game console, which is just overengineered, driving up the price. D. Or should it change course? If so, how? Yes, Sony should change its course. Sony could take another run at the handheld market, where there still seems to be substantial room for growth. Or, Sony switch to selling game software via the Internet by downloading. By doing so, the company will be able to reduce software manufacturing and distribution costs. In addition, it is expected to increase sales of both new and old titles by providing a recommendation function like Amazon. E. Most importantly, how could Sony reclaim leadership of the videogame industry? To compete with Nintendo, it is difficult to use a manipulative strategy, and the most important thing is to continuously keep producing high quality games with advanced technology. Sony is conglomerate company with good financial position, enabling continue R&D of game technologies and the ability to try and develop new games through trial and error. 

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For the traditional core gamer: new experiential game development using virtual reality technology attracts rising attention. Sony can invest aggressively in development to create the next generation of new game experiences. For light users such as woman: tapping into the demand of light users, the company can form a corporate partnership with The Walt Disney Company, Time Warner and other companies to produce new types of games. Also, portable consumer video games that are easy to carry around and can be played with friends are becoming popular. Sony can focus on portable consumer games, which have lower development costs than stationary types of consoles. Assuming that the above technology will be successful, Sony has to considering Network effect. the company slashed the price of its PlayStation console to boost consoles sales....