Gaming Brand Management Project - Essay Example

?Brand Management Project s [IDs Number Prof Every generation of gamers sees “console wars” wage in Europe, Japan and America. Beginning with the Atari competing against numerous imitators and knockoffs, moving to the NES and the Master System, the Sega Genesis and the Super Nintendo, and then onto tripartite wars such as the Playstation/Nintendo 64/Saturn era and the Gamecube/Dreamcast/Playstation 2 era (which saw Sega disappear and Microsoft enter with the XBox), there have been numerous brand conflicts between software and entertainment giants (PBS, 2009). The present console conflict is between Nintendo's Wii, Sony's Playstation 3 and Microsoft's XBox 360. As it is now nearing the end of that This project will not look at the handheld market, but it is important for readers to bear in mind the handheld market. At the present, the handheld market does not even have one of the main competitors, Microsoft, as anything more than a blip on the radar (Dalrymple, 2010). Prior to the release of the IPhone and IPod Touch, the market share had the DS beating out the Playstation Portable by several times the number of units sold (Wilson, 2007). More recently, the score has shifted thusly: The DS has 40 million units worldwide and the PSP 25 million (Wilson, 2007). The IPhone hasn't broken extensively out of the European and American markets, while the DS has the advantage of being found all over the globe (Stang et al, 2007; Wilcox, 2009). The iPhone has been basically marketed exclusively at the US, instead of emerging market like Russia and India, despite Apple's ballyhoo: “Emerging markets and Apple's flawed strategy in India and Russia top my reasons for questioning how high the platform will ascend before falling back to earth...The 70+ countries is something that looks good on paper, but in terms of volume it doesn't address the regional dynamics. One of the reasons why Nokia and Samsung are so good in developing markets is because they have mastered the art of effective manufacturing and distribution. They can make devices/services that suit the market” (Wilcox, 2009). Thus, though hard global data is difficult to find, it's clear that the global distribution is more like 2008 than 2010 above, with the IPhone being the third player. The takeaway story from the handheld market is this: Nintendo leads the most lucrative market by anywhere from close to a two-to-one to a three-to-one ratio against its competitors. Apple is moving up, but will likely not overtake the behemoth. Apple took 9% of its near market share from the PSP and 5% from the DS, meaning that the fight can be more meaningfully described as a battle for second place. Sony is also announcing a new second-generation PSP (Brown, 2011). The new Nintendo 3DS has many titles in the Japanese top ten, showing good penetration (Jenkins, 2011). This seems to suggest that Apple will have a brutal fight for second place, dealing with a new PSP challenger, while neither will be able to challenge Nintendo's entrenched advantage stemming from being the only handheld challenger to stay in the game from the Game Boy to the GBA to the SP to the DS. Also note that, in the handheld market, it is proper to include any other cell phone, which typically have games like Bejeweled or Tetris available for them, with the cell-phone gaming industry being an oft-ignored but serious source of gaming hours. In any respect, it is important when analyzing the success of the major three consoles to bear some lessons in mind: 1. Nintendo's success with the Wii is complimented as a “one-two punch” with the DS (Wilson, 2007). The DS has sold more than the three non-portable consoles combined. 2. Sony is being beaten by a large margin in the handheld market. Even if they were to do substantially better near the end of this generation's life in their Playstation 3 offerings, such as with the announcement of the Move, they would still be behind in a major arena. 3. Microsoft is not even a competitor in the handheld market. They have ceded the market to the IPhone, though it is important to bear in mind that any smartphone that ends up using Microsoft technology could end up licensing Microsoft games: Microsoft's advantage in the PC market must also be noted. It is also important for analysis to take note of the fact that Nintendo is exclusively a video game company (producing both first-party titles and software and the underlying hardware) whereas Sony produces numerous electronics and Microsoft has powerful (indeed arguably near-monopolistic in some segments) presence in the operating system, enterprise solutions, word processor, Internet browser and numerous other software markets. Nintendo Wii The success of the Wii can be summed up in two words: Disruptive strategy (O'Gorman, 2008; Farhoormand and Joshi, 2009; Malstrom, 2008; Anthony, 2009; Alan and Juliet, 2009; Leavy; Kohlbacher and Hang, 2011). A disruptive strategy involves going downmarket from one's competitors, either finding people who use one's product less or not at all: It is also known as competing against non-consumption (Malstrom, 2008; Anthony, 2009). It is often called a “blue ocean” strategy because, instead of competing in the safe green waters near the shore, one goes into the blue ocean where there are untapped potentials (Malstrom, 2008; O'Gorman, 2008). What the Wii did was very simple. They looked at whether people were not playing games because they weren't interested or because they were being systematically deterred. What they found is that video gaming has immense and universal appeal. Most people can see the advantage of being able, when relaxing, to do so in a safe, electronic setting, not having to worry about the outside weather, having a mode of entertainment that can involve the whole family from children to the elderly, etc. But there were several factors that would deter people from playing. 1. Marketing. The whole marketing enterprise of prior competitors was oriented towards the “hardcore” gaming group. Violence, increased graphic potentials, more sophisticated gameplay, etc. First person shooters are the emblem of this market, yet they have almost no appeal to non-hardcore gamers. 2. Control schemes. By the time the Playstation 3 was announced, it was common for controllers to have dozens of inputs. The Playstation 3 has two shoulder buttons, two additional buttons underneath two analog sticks, direction controllers, and four face buttons. These face buttons, to make it even harder for beginners to map out where the buttons are in their mind, are X, Square, Triangle and Circle. These shapes have no logical progression or order, unlike A, B, C, Z, etc. The XBox 360 controller is similarly complicated. For someone who is just getting into games to master using upwards of ten input types simultaneously is extremely daunting. 3. Aging gamers. Many older gamers had been deterred by various factors. People with arthritis, carpal tunnel or other bone, joint, nerve or muscular degeneration find it extremely painful and exhausting to press dozens of buttons at different configurations. The whole appeal for video games was oriented at children, mostly male children, and 18-35 year old men. But Nintendo's market research showed that there were an incredible amount of non-gamers and former gamers who would be interested in gaming, and indeed probably “gamed” on Flash games and Solitaire, if given a hook that would appeal to them. They went downmarket, and that is where they found explosive success. Nintendo's design is approachable and simple. The console is small and technically underpowered compared to its competitors. It is not a multimedia platform, recent and prominently advertised cooperation with Netflix aside. It is a gaming system, but it does so elegantly and well. The themes are accessible to non-gamers. The controls are intuitive: They use motion controls or a very few buttons. The system is backwards compatible with Gamecube games, increasing the effective library and deploying the wisdom that Sony learned when they made their PS2 backwards compatible (Wilson, 2007). Even better, beginners and hardcore gamers are roughly equal when it comes to the Wii: Since the controls are motion-based and not based on speed and dexterity of controller inputs, it makes all beginners start roughly at the same place. This means that, for once, a family with a hardcore gamer in the 18-35 demographic can compete fairly with their younger niece, mother and father. A disruptive strategy, when successfully executed, is immensely difficult to counter. The firm moving downmarket has gotten there first: They can lay the groundwork, establish brand recognition, achieve penetration, and get customer loyalty. It is particularly daunting to compete with Nintendo in a world where it is likely that most UK, US and European families do not want to own all three consoles and are likely to choose only one or at most two. When the Wii became the must-have Christmas item when it was released, for many families it became that one console. Competitors moving against a disruptive strategy do not have easy options. They can ignore the downmarket, which seems fine: Their competitor still hasn't changed anything in the upmarket, so they still have that brand control. Indeed, for Sony and Microsoft, selling to the hardcore gaming market is profitable enough. But the problem is that the disruptive strategy moves the market upstream (Malstrom, 2008). Nintendo began with games that didn't even use their beloved mascots, like Wii Sports, designed to almost be a proof-of-concept, showing people the potential power of the console and getting them used to the inputs. They then moved upwards, to Twilight Princess, Mario Kart Wii, Super Mario Galaxy, and so forth, to the more conventional platforming and adventure titles. In a disruptive strategy, the downmarket becomes the upmarket. Competitors can also attempt to go downmarket and compete, and as we shall see, this is the idea for Sony and Microsoft with the Move and Kinect respectively. The problem is that competition can often follow a “birdman fallacy” effect (Malstrom, 2008). Like people looking at birds and assuming that wings grant flight rather than deeper underlying mechanics, competitors with the Wii kept assuming that it was about “casual gaming”, whereas Nintendo knew that there is no such thing as a casual gamer, only a non-or-former gamer. Nintendo never intended to stick exclusively with the “casual” market, but to bring the casual market upstream. Indeed, the “casual” market is basically an indictment of the entire marketing success of the main companies: When people fritter away their time on Flash games, that is untapped market potential going to waste. Nintendo's brand positioning is family-oriented: They are not known for first-party titles that are considered very dark, bloody or violent. Franchises like Mario, The Legend of Zelda and Metroid are beloved pillars of gaming, but they are not very adult-themed, though they can certainly have relatively dark symbolism: Twilight Princess and the Metroid series can be famously dark. Nintendo marketing mixes are also designed to be family friendly: “Wii Want to Play” was a successful campaign that made the company seem inviting and gregarious, kind hosts to the process. It is important to note that most console games are loss-leaders, selling razors cheap to sell blades dear (Seeking Alpha, 2006). But the Wii's relatively cheap components help reduce the cost on selling the console itself. This is a major competitive advantage. The value of the Wii band, then, can be summed up thusly: 1. Successful appeal to a broader set of gamers 2. Family-friendly, all-ages appeal 3. Quality control: First-party games are uniformly excellent (however, the Wii does have some problems with third-party shovelware that try to put their fourth-to-sixth best teams onto Wii projects; Malstrom, 2008) 4. Cheap: $200 At the moment, the Nintendo Wii is unquestionably the number one console, and Nintendo, combined with the aforementioned success of the DS, is the leading video game producer. But it is possible that the Playstation 3 and XBox 360 are catching up, or are successes in their own right. Sony's Playstation 3 The Playstation 3 is the third in the explosively successful line of Playstation consoles, with the Playstation 1 and 2 having one of the largest, well-established libraries of games. It was reasonable to expect that, when it sold the Playstation 3, a gaming system that was almost more of a Blu-ray multimedia platform, nominally backwards-compatible with a gaming library including such amazing successes as Final Fantasy VII, it would be the unquestioned market leader. However, upon release, things went so badly that many were wondering if Sony would collapse (Seeking Alpha, 2006). Part of the problem was the Playstation 3's cost. $725 to $905 on components were being spent, and when it had to compete with a much cheaper (and more profitable per-unit) Wii, there were fears of bankruptcy if they didn't sell enough games (Seeking Alpha, 2006). Sony has not collapsed, but they are not the market leader: They are competing neck-and-neck with the XBox to move the Move versus the XBox's Kinect, two very similar motion control additions to the library to attempt to compete with the Wii (Yin-Poole, 2010). And the Sony gaming division did fall into some extremely hard times after having excellent years from 2001 to 2005. The following Sony-produced profit chart shows that, in 2006, 2007 and 2008, the company lost money on the gaming division. Even though the PS3 has sold a respectable number of consoles, it is true that Sony ended up making a losing bet for years on the PS3. Sony's brand image is well-established since they did produce two highly successful and beloved consoles. They no longer have a special relationship with Square-Enix, the producers of industry-standard titles like the Final Fantasy and Dragon Quest series, as that company now produces DS and Wii titles. Their console is home to Killzone, Little Big Planet and other franchises. They were well-known for more adult games (more violent, more sexual imagery, etc.), but that advantage declined with the rise of the XBox which has similar branding and imagery. It is finally vital to note that, while the PS3 may have been a failure, its bundled-in Blu-Ray player may have won them the format wars against HD-DVD (Knufken, 2008). “In 2006, when Sony released the much-anticipated Playstation 3, people literally climbed over one another to acquire one. Then the console fell flat. High prices, bugs, a disappointing selection of games, and the Nintendo Wii’s runaway success placed the PS3 at a miserable third place in the console wars. But Sony had a not-so-secret weapon. Its name was Blu-Ray. If you remember, for a short time there was a format war between Blu-Ray and HD-DVD. Blu-Ray won the war in short order. And many analysts believe this was due to the PS3 along with heavy marketing from Sony” (Knufken, 2008). The loss of the PS3 may pay off in the long term for the company, as they now produce the proprietary media format. Recently, the blitzkrieg success of the Wii has waned, with the PS3 achieving 20% market share. They are thus in third place amongst the three competitors, but the PS3 has not lead to the collapse of the company, as early anticipations expected. The PS3's brand value is Connection to two consoles' worth of brand names and titles Value for the hardcore gamer Built-in BluRay player and value thereof Numerous solid games The Move controller which offers innovative experiences Price drops have reduced it to $300, tying with the 360 (ConsumerSearch, 20110 XBox 360 Microsoft's surprise announcement that they would be in essence taking Sega's place as the third competitor in the tripartite market shook things up, and with the success of Halo, the XBox was well-established in the prior market cycle. The XBox 360 did well enough when first shipped, but it never had a season like the Wii's first Christmas season. The brand image of the XBox is similar to the PS3: “Hardcore” shooters like Halo (undoubtedly the most successful console first person shooter, eclipsing previous classics like Goldeneye and being more well-established than competition like Sony's Killzone), fighting games like Marvel vs Capcom 3 and Street Fighter IV, etc. The appeal to the 18-35 male demographic, the traditional gamer demographic. However, after the success of the Wii, Microsoft announced the Kinect, a motion control device (Yin-Poole, 2010). The Kinect is neck-and-neck with the Move, after an erroneous announcement that the Move was ahead that included shipped, not retail, units (Yin-Poole, 2010). As the above chart shows, the XBox is second in the console wars, and in fact has made headroads, alongside the Playstation 3, against the Wii. “[T]he industry has undergone a significant shift in the past year. In particular, the Xbox 360 and PlayStation 3 together account for a larger proportion of hardware sales over the past 12 months than did the Wii” (Matthews, 2011). This doesn't include prior performance, so the Wii is still unquestionably the winner of this console cycle, but the XBox has managed to make a respectable offering. Its brand advantages include Hardcore gamer favorites like Call of Duty, Halo The XBox Live service, which is a solid multiplayer service Downloadable games (though the Wii and the Playstation also have a store) The backing of giant Microsoft A cheap, no-hard-drive version Works Cited Alan S., Khade, and Juliet, G.2009, “How to successfully compete with well established firms in hi- tech industry”, Osmania Journal of International Business Studies, vol. 4 no. 1. Anthony, S.D. 2008, “Nintendo Wii's Growing Market of 'Nonconsumers”, April 30, Innosight. Brown, R. 2011, “Skyhook puts location tech in Sony’s new NGP handheld”, MassHighTech, March 3. 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Matthews, M. 2011, “ Analysis: Xbox 360 Capitalizes On Wii Contraction Through February In U.S.”, Gamasutra, March 11. O'Gorman, P. 2008, “Wii: Creating a Blue Ocean the Nintendo Way”, Palermo Business Review, No. 2. PBS. 2011, “The Video Game Revolution”, Available at: http://www.pbs.org/kcts/videogamerevolution/history/ SeekingAlpha. 2006, “Why the PlayStation 3 will Bankrupt Sony”, Available at: http://seekingalpha.com/article/17605-why-the-playstation-3-will-bankrupt-sony Stang, B., Osterholt, MA., Hoftun, E., and Kirkstaeter, J.2007, The Book of Games Volume 2: The Ultimate Reference on PC & Video Games. Book of Games. Wilcox, J. 2009, “iPhone's global success is more marketing myth than reality”, Beta News, October 1. Yin-Poole, W. 2010, “Move and Kinect sales 'neck and neck', EuroGamer, December 1. Read More