Introduction
In this 21st century age, I am sure all of you have some idea about video game consoles. Even if you don’t own one, you must have seen them on TV or internet. According to Wikipedia, a game console is simply an interactive entertainment “computer” or electronic device that manipulates the video display signal of a display device (a television, monitor, etc.) to display a game. Different from PCs and PC games where users utilize the keyboard or the mouse, video game consoles use specially designed controllers for their machines to allow users to input information into the machine or interact with the game.
The first generation of consoles made its debut in 1972. Within three decades, the video game industry has reached a worth of $30billion and the video game consoles have evolved into the present 7th generation (Click here for understanding of other generations of consoles). Entertainment software sales reached $20 billion in 2004 and the industry’s total revenue, combining sales of software and hardware, is expected to reach a historic peak of $52.1 billion at the height of the next generation consoles (Fall 2005 - ITP 280 Video Games Production).
Read here for a study done by Nielson Company on “The State of the Console” (4th quarter of 2006 - Study on gamers’ demographics).
The present 7th generation of consoles is characterized by the use of Blu-Ray discs or HD-DVD, networking capabilities and innovative design of using motion sensors as a form of controlling. Here are examples of the 7th generation top selling consoles manufactured by major console makers:
Xbox 360
• Manufacturer: Microsoft
• Released Nov 22, 2005
• Worldwide sales: 9.68m units
• Americas sales: 5.3m units
• Top selling games by sales unit:
o Gears of War
o Halo 3 Legendary Edition
PS3
• Manufactured: Sony Computer Entertainment
• Released Nov 11, 2006
• Worldwide sales: 3.15m units
• Americas sales: 1.37m units
• Top selling games by sales unit:
o Resistance: Fall of Man
o Grand Theft Auto IV
Wii
• Manufactured: Nintendo
• Released Nov 19, 2006
• Worldwide sales: 6.40 units
• Americas sales: 2.54m units
• Top selling games by sales unit:
o Legend of Zelda: Twilight Princess
o Super Paper Mario
(I totally recommend Raving Rabbits, it’s so fun and funny!)
Source: Wikipedia, VGChartz, EBGames. Sales figures as of Apr 2007.
The present success of the video game consoles and games is attributable to a number of different players in the industry such as the console makers, the game developers and game publishers. The game developers are the ones responsible for designing and writing programs for the games. A developer may specialize in a certain video game platform such as Wii or develop for a variety of systems. The game publishers are the ones responsible for marketing and distributing the games.
Here is the ranking of game publishers in 2006 by Game Developer Magazine. Companies were ranked based on six factors: annual turnover, number of releases, average review score, quality of producers, reliability of milestone payments and the quality of staff pay and perks.
Competitive Dynamics
Many of the companies in the video game industry are playing multiple roles. They can be developers of the game, designers, publishers, and at the same time, console makers. Take Microsoft for example, they are the manufacturer of Xbox 360, but they also have an internal game studio to develop games for their console. They can either develop the console games internally or contract with other external game developers. Companies such as Electronic Arts which also develops games internally, is generally regarded as a game publisher since their major source of income comes from game publishing.
Playing multiple roles is especially important to console makers as it allows them the flexibility to strategize for their consoles and ensure some kind of revenue stream. A good game contributes to the success of a console, just as a good console contributes to the success of a game. Quoted from a friend of mine who is a fan of video games, “a game console is like the body while the game that plays on it is the soul.” The downfall of Atari caused by its disappointing E.T. game produced in 1982 proves this point: it just takes one bad game to bring down the company. On the other hand, a good game can help boost the sales of a console. Final Fantasy 7, a revolutionary RPG game in the industry which brought RPG games to mainstream, help boost sales of Sony PlayStation in 1997, two years after PlayStation was introduced. Halo 2 developed exclusively for Xbox also help saved the sales of Microsoft’s console in 2003, after it reported lower than expected sales.
With companies playing multiple roles, this meant that many of them need to compete at multiple different levels with one another – at the console level (who can produce the best machine that gamers enjoy with a multiple integrated functions), game developing level (developing games that gamers enjoy with innovative features, picture/sound quality) and publishing the games (who is able to market the games most successfully to sustain profits).
Along these lines, Microsoft, Sony and Nintendo are having a serious fight in the video-game console industry with their newly designed consoles. Each of the consoles has its own different features. The Xbox 360, offers HD-DVD drive, and is the first console with the ability to use wireless controllers out of the box. The Xbox Live service is the trademark of the system, and the console can connect to the service via the Internet through a built-in ethernet port or a wireless accessory. Sony‘s PS3 comes with a hard drive for 20GB or 60GB and plays Blu-Ray video discs and games. Controllers connect to the console through Bluetooth (up to 7) and possess tilt-sensing capabilities. Wii, though with the simplest processor among the three, attracts the crowd with its motion sensing controller.
Unlike the other two systems of the seventh generation, Wii plays a very different strategy. Different from Sony and Micrsoft’s strategy of attracting avid gamers to purchase their consoles, Nintendo is tapping into new markets to increase market share and consumers. With its simple controller, easy to play games that a six year old can play, and low price point of $250 compared to the other two consoles, (which ranges from $300 to $599), Wii is targeting a whole new group of people, young & old, avid or non-avid.
Presently, Nintendo’s Wii sales have surpassed that of PS3. 3 out of 5 top selling games by units sold are for Wii and Nintendo DS. Wii certainly has revolutionized the video game industry. It enables people, old and young, to join the pool of gamers who they now can relate with. Unlike a lot of the other games played on Xbox or PS3, Wii builds on the idea of having multi-players paying simple yet fun games. After all, games are more fun when played with more people. (Thanks to Wii, I can finally enjoy playing games, without having to invest a lot of time trying to understand other complex games).
Business & Revenue Models
Besides playing for pleasure, people have already used PC games and online games in a variety of ways. For example, video games are used in the medical field to help educate autistic children through video modeling. Video games have also been used to simulate emergencies and operations so as to train doctors and enhance their skills. In the business setting, companies have used them as team and knowledge building exercises and also to train their employees. These types of videogame training tools have proved to be effective and have saved companies some money. Here is a Business Week article about “On the job Video Gaming.”
(Side note, me and my group of friends together finished “Raving Rabbits” in two days although the story mode was for a single person. We took turns to conquer each level, which really was good for team building).
With the invention of Wii, it opens up more uses for console based games since the uses that I have mentioned are more for PCs and online games. Fitness clubs have started to make use of Wii to increase their revenue by planning classes around Wii Sports. In fact, studies have shown that you can burn around 125 calories in 15 minutes, and 12.2 hours a week of active gaming on the Wii can lead to a potential 1,830 calories burned. That just gives you more reason to play video games.
Currently, a bulk of the revenue for console makers and game developers comes from the selling of their games. (Hardware makers are losing hundreds of dollars on every console sold). However, it has become increasing difficult for game developers and publishers to sustain profits with rising development costs. This rise in costs is caused by the increasing complexity of the games and their underlying technology. The other important reason is the increasing trend to produce exclusive games for each platform. This means that the average user bases will be lower with longer return on investment.
To resolve this issue, game publishers are seeking other sources of revenue from government sectors and private industries where they are seeking game-based tools for the classroom and workplace. Another major source they are seriously looking into is in-game advertising. In-game advertising offers companies a new way to reach their customers. In May 2006, Microsoft spent a few hundred million dollars to purchase in-game advertising startup company, Massive. In-game advertising offers advertisers a way to market to a highly desired demographic, to hopefully increase revenue.
Future Trends
Looking at the increased capabilities of the 7th generation consoles, it is not difficult to predict where the future of console is going. Digital convergence, as seen with the mobile phones nowadays, is going to be the next big trend for game consoles. Console manufacturers are increasing the functions and capabilities of their machines. Initially, it was the ability to play movies and listen to music, now it has evolved into a computer where network capabilities are incorporated. Consumers will be able to chat, play, and download television programs with just one single machine. And this is not just in America. According to an Xbox spokesperson, Kerry Parkin, Microsoft’s Xbox Live currently connects people from over 25 countries and its community has over 6 million people. Their service will have the potential to reach 200 million worldwide in the near future.
Just this week, Sony has announced that it will have offer a camera for its PS3 that will enable video chats, recording and interaction with games. The PS3 camera will allow new types of games to be played.
With all these increased capabilities, the line between online gaming and console gaming is gradually blurred. What is the difference between online gaming now since what you were able to do with online gaming can be done on the consoles? The new generation of consoles will become the center of the living room, with the capability of being a multimedia entertainment system. Digital convergence is going to create intense competition among console makers, and also other electronics manufacturers. It will increase competition outside the traditional domains, and pull more and more people into this industry and competition.
With all the major consoles having networking and chatting capabilities and Wii’s innovative technology of motion sensing, it is mind-blowing how technology such as gaming will affect our lives. It has drastically changed the way how games would be played on video game consoles in the future. Games and game consoles would need to be even more innovative or posses more capabilities to attract both the avid gamers and non-avid gamers.
7 comments:
With digital convergence, would consoles be even needed? I commented on other blogs about this too, but once TV and Computer converges, do you think there is still room for consoles? For example, the chatting ability you talked about is quite an interesting addition to consoles; however, chatting is something that is widespread with PC's. The only possible advantage consoles' chatting ability is that you can do it on TV, but once TV and PC becomes one, I don't think that many people will turn on their consoles to chat. What do you think about it?
With regards to digital convergence, I think that game consoles can become somewhat obsolete in the future. Console has become a similar device like a PC, which offers multiple functionalities. For now, digital convergence is still in the process of taking off, and we are still not sure about the future it will have. Consoles, like any other devices, will face a similar challenge of being replaced. I am sure that resistance from people and companies are going to be a plenty since convergence means taking away their businesses. More often than not, we are forced to accept the evolution of technology and embrace it. Console makers have to have this mindset to prevent a major fallout from the inevitable digital convergence.
While I was reading your post I agree with you about the great innovations that the Wii currently has, but I'm wondering if its sustainable. A case in point that ties in your fitness application was when the game Dance Dance Revolution first came out. Originally an arcade favorite, it was a PS only game and had attributed to the sales of many PS consoles and dance pads, but now you can find this game (as well as many clones) and the dance pad for Xbox also. So while the Wii may have the upper hand now, I think over time if the Wii doesn't continue to innovate (and it going to get harder given its weaker hardware), then the more robust gaming consoles of PS3 and Xbox360 will eventually catch up and destroy the Wii first mover advantage.
i hadn't heard about the PS3 camera before, but that sounds pretty cool...I wonder what other uses could be found for such a gadget, besides video interaction during game play? Maybe one day in the future the camera will be built with a highly reactive sensor that will allow players to act out their actions (full body motion) in game play, going one step further than Wii offers now...how about that?!
What I am thinking is the opposite of Brian's comment, I am thinking maybe we don't need telephones and PC in the future since the game consoles seem to move to a direction that is more capable for communication worldwide.
Anyway, I do think Wii is changing the mindset of many people since it's not like a nerdy thing to do, but instead, it's as "healthy" as working out and sweat. Moreover, it's a good form of training for athletes and professionals.
You know,
I think that I made this point in my own blog. It does appear that there is a relative threat to the console gaming industry. However, I don't think that they will exactly go away. But for some time its been a big part of the gaming world. My point is that they will probably not have the same influence as in years past. Why? is it that I don't think they will go away. Well, people like Bill gates are not unaware of this problem. And I think that console manufactures have already caught onto the problem, and rather than competer are coming up with ways to harness the power of the web and avoid being shut out. Take the live version of x-box.
Thank you for reading.
You guys have a point. However, sometimes it's probably not necessary the case that digital convergence will make something obsolete. PCs have been around for sometime, it can play game, and it's capabilities way surpassed that of the consoles, but why are people still buying consoles?
What I am thinking is that the main thing about this digital convergence is that consoles still has its core purpose of existence which is to provide a common platform for gammers. Digital convergence just provides greater bonus to own a console.
As seen from Benson's blog, the downside of playing games on PCs is that there is a lack of standard in the games. This problem has existed for several years, and one of the solution was to create a platform for the games. Consoles have their advantage, and I don't think it will become obsolete.
Post a Comment