The Gaming and Console Industry - Essay Example

The Gaming and Console Industry Introduction The video gaming industry has had a tremendous growth in the recent past, with its future being unlimited as to the extent and the expansion of, including innovations that the industry could undertake in future. The industry has undergone numerous transformations since its inception in the 1970s, with the world economies shifting their perception on its growth from focused markets to mainstream markets. Modern personalized computers are a result of the many advancements and innovations that have taken place in the in the gaming industry. Among the notable improvements in the computer world that attribute their success to the gaming industry, include sound cards, graphic cards, and 3D graphic accelerators. CD-ROM and DVD-ROM drives also base their invention in the gaming industry (Hooper 1991). Sony has been in the industry for a considerable number of years, and has been the key provider of the video games with its PlayStation devices. Regardless of the increased competition, the industry’s future is still very promising as more people buy and use games. Sony has been in the industry for a long time, but its sales and revenue from the business has been declining considerably with time. This is due to various reasons, some of which the company has control over, while others it cannot control. As more people use games, more players come to the market, increasing competition. Changing customer tastes, substitution by other forms of games and environmental factors could be a reason for the decline in the performance. However, despite this, the company is likely to remain in the business for a long time. Q 1 Porter’s five competitive forces Competitive rivalry Sony is operating in a very competitive industry, with many firms coming up with different forms of gaming. With the increase and technological revolution, many companies have started providing games via digital devices for example smart phones. Other companies have gone a step further to provide online streaming of games for their customers where people can play games online from the internet. Regardless of the stiff competition the company is currently facing, Sony’s consoles are not about to be edged out of the market any time soon due to increased innovation and inclusion of a variety of features, if the recent launch of PlayStation 4 is anything to go by. Although prospects are high in the gaming business, expectations are that in future, the profits will keep on dwindling and the next generation of games will never rake even half of what the current is making. Stakes are high, risks have increased to the point that currently, Sony is struggling to command superiority in the same market that it had previously dominated. With increased uptake of technology, research, and experiments in the industry, more and more developments are coming to place. Threat of new entry More companies are going digital in providing games to their customers. The rivalry among existing actors in the market is entry of new products in the market, which have consistently reduced profitability for Sony. New firms such as Japanese DeNA have provided “Blood Brothers” via Google play. This has transformed more people into an addictive habit of playing the game, grabbing more customers from Sony (“The Economist” 2012). Slowly by slowly, the world is gaining more popularity again on the Japanese video games. Not unless Sony devises new ways and methods to counter this new trend in the industry, its survival is not guaranteed. The likelihood of emerging companies taking over the business from big companies like Sony in the coming future cannot be over ruled. Stakes are high, risks have increased to the point that currently, Sony is struggling to command superiority in the same market that it had previously dominated. With increased uptake of technology, research, and experiments in the industry, more and more developments are coming to place. Threat of substitution Until recently, Sony has been reporting high sales with its PlayStation Sales. A fall in its income levels from the games sales has come up in the recent past, with an increased entry of games providers who offer them in different forms. Xboxes for example, a game provided by Microsoft, has been selling at a faster rate than the Wii and the PlayStation combined (Nuttall 2008). Each year, Microsoft keeps on adding more features into its Xbox, that include movie rentals, programs on fitness advice, television shows that players can still watch, motion control features, online internet searches, the ability of a person to use the phone as a remote control, and of course the video games (Annet 2007). Bargaining power of buyers Buyers themselves exert a lot of pressure in any business due to their buying patterns and changing tastes. The period it takes Sony to release the next generation of the game is long enough to cause a decrease in sales and likewise cause a decrease in the profits it realizes (Joseph 2012). PlayStation 3 is more than six years old, meaning that customers are likely to deplete the available stocks, or perhaps when everybody has had ownership of the game, they have no need for the same version of the game anymore (“The Economist”). The problems Sony face could be running deeper than just the period it takes to roll out the next generation of games. This problem is attributable to customers abandoning the traditional mode of video gaming and opting for cheaper alternatives. Games designed for smart phones applications and tablet use are booming, with 2012’s top ten grossing applications being Apple’s iPhone smartphone games. As mobile phones keep advancing in the business, other companies too are working on streaming games directly to customers from the internet. It is due to these reasons, amid speculations that a firm like Apple and Google could be working on a partnership that endangers the survival of stand-alone consoles such as PlayStation (Waters 2004). However, regardless of the smartphone invasion, the PlayStation’s advantage over this is that while a smartphone screen is tiny, it cannot be compared to a PlayStation on a 40-inch television with a powerful dedicated computer. Substitutes by themselves perform similar roles as a product in the market in various ways. Smartphones have been working tirelessly to provide gaming applications in the phones and tablets, making it easy and cheaper for customers and this makes them shun away from computer games. Implications of the Threat of substitution to Sony The biggest worry for Sony in the video gaming industry is the threat of substitution. More and more companies are coming into the industry, and with their digital version of the games, meaning that this is strength for the companies. The manufacturers are bringing up new and innovative ideas proving that existing ones are almost being rendered useless (Nuttall 2006). If people were to go the digital way, and especially use of digital devices like tablets and smartphones, the sales of PlayStation would deep significantly. Streaming of games via online sources greatly impacts on the success of analogue devices due to its added advantage of downloading and storing other forms of data like music. How Sony Could Lessen the Threat of Substitution To survive substitution, a company should keep up with the changing trends in the industry, and thus, Sony is incorporating Blue-Ray and cross-platform Vita features in its precedent devices to counter the increased competition from other manufacturers, thus cutting itself a competitive edge over other games due to super features, capacity, and performance of the consoles (Pesola 2005). However, digital gaming does not mean the end of the consoles all together. It is more likely that developers of Sony’s PlayStation will shift from the hardware versions of the games to those that can stream games via Cloud or other sources. With these developments emerging, the future for the company is likely to be alive regardless of the changes taking place in the gaming industry since a person will only have to buy a piece of hardware from Sony that streams the games directly to the hardware. This makes Sony remain in business and keep on providing the same kind of products it has been offering to its customers. The external environment Sony, in the course of providing consoles and games, certain factors arise that it cannot avoid in the business of offering games to the world. Technological and economic factors pose a big threat to the survival of hardware games. In the recent past, high technology uptake by all sectors of the economy in the world has revolutionized the world and especially communication and entertainment. Gaming has been in the front line in this technological advancement and any company that does not follow suit will face tougher times ahead to the point of being edged out of the industry completely in the wave of technological change and absorption. Technological Factors Scenario One – Decline Many companies are increasingly using applications aided games in their devices in order to make them more appealing and gain a completive advantage over other firms. Cloud computing is being used and, if Sony has to keep pace with the rising demand for online games, its hardware should be backed up with internet to enable online streaming of the games. More and more people are embracing technology more than it has been in the earlier times. Android and iOS gaming have gained a lot of popularity over the last few years, waging stiff competition to Sony’s console games, thereby causing a decline in the sales of the play station consoles . Scenario Two- Growth On the other hand, technological advancement of the company’s gaming sector would mean high returns for the corporation due to high sales of their consoles. Analysts point out that for Sony to survive the competition has to learn on how to adapt to the rapidly changing markets. Since consoles cannot keep up with power in their games, they need to invest more on their unique features. Sony can only remain in business by making sure that the features of its games are unique in comparison to other providers of the same kind of games to the people (“The Economist” 2012.) Technology uptake by organizations will keep on increasing and the only way of staying relevant in the industry, either choosing to increase in technology uptake or diversifying in features and performance of the games. Customers are lured more into buying a game which has use of improved and high technology, and more so if they have experience with the technology from somewhere else. From PlayStation 3, PlayStation 4 incorporates a “share” button, which will focus on social networks like Facebook and twitter (“Newswire” 2013.) Economic Factors Scenario One – Decline Sony’s quest to provide games for the world market is also faced by various economic factors. Allowing people to stream games live from the internet is an economic factor that the company needs consideration with chances of profiting or making losses being put into a bigger focus. Payment of internet subscription charges could not be affordable to all people who own a PlayStation. In case of a decision to offer all games in online version, many people would be locked out and thus loose customers (“The Economist,” 2005). Sony could, as it did with play station 2, decide to reduce the cost of the devices with the intention to attract more sales. The assumption of this is that the company would realize increased sales and thus more profits. However, this necessarily might not be the case when the total sales do not match the production costs for the units sold. This implication would automatically mean a dip in profits for Sony. Scenario Two- Growth Making the games available on the internet free is very attractive to customers and helps the company to retain old ones while it attracts others. Power of buyers as customers captures more value by forcing prices down through demanding of better quality or increased services and playing off participants against one another at the expense of industry profitability. Another factor that would lead to the company’s growth would also be reducing the prices of the games. As it did with the play station 2, Sony slashed the retail prices of the device in order to attract more customers and increase its sales. Increased sales automatically translate to higher profits. However, the implication of this should be a consideration too as a means of reducing its operating costs. Conclusion The introduction of digital gaming does not mean the end of the consoles all together. It is more likely that the company will shift from the hardware versions of the games to those that can stream games via Cloud or other sources. With these developments emerging, the future of the company is guaranteed, regardless of the changes taking place in the gaming industry since a person will only have to buy a piece of hardware from Sony that streams the games directly to the hardware. This makes Sony remain in business and keep on providing the same kind of products it has been offering to its customers. Sony, after being in the video gaming for a long time has started being faced by a myriad of problems arising from the business. Either the dynamics that the industry is facing can edge the company out of the industry totally, or still, with adjustments, it could mean good business for the company. 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