Page 179 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes By 1999, Sony had captured 56 per cent of the video game market, followed by Nintendo
with 42 per cent. Sega’s share had fallen to a low of 1%. Hence, Sega had two options, either
to concede defeat or introduce an innovative video machine that would bring in huge
sales. And Sega had to do so before either Nintendo or Sony could bring their next-
generation console to market. The Sega Dreamcast arrived in stores in September 1999
with an initial price tag of $199. Anxious gamers placed 300,000 advance orders, and initial
sales were quite encouraging. A total of 1.5 million Dreamcast machines were bought
within the first four months, and initial reviews were positive. The 128-bit system was
capable of generating 3-D visuals, and 40 different games were available within three
months of Dreamcast’s introduction.
By the end of the year, Sega had captured a market share to 15 per cent. But the Dreamcast
could not sustain its momentum. Although its game capabilities were impressive, the
system did not deliver all the functionality Sega had promised. A 56K modem (which used
a home phone line) and a Web browser were meant to allow access to the Internet so that
gamers could play each other online, surf the Web, and visit the Dreamcast Network for
product information and playing tips. Unfortunately, these features either were not
immediately available or were disappointing in their execution.
Sega was not the only one in having the strategy of adding functionality beyond games.
Sony and Nintendo followed the same approach for their machines introduced in 1999. Both
Nintendo’s Neptune and Sony’s PlayStation 2 (PS2) were built on a DVD platform and
featured a 128-bit processor. Analysts applauded the move to DVD because it is less expensive
to produce and allows more storage than CDs. It also gives buyers the ability to use the
machine as CD music player and DVD movie player. As Sony marketing director commented,
“The full entertainment offering from Play Station 2 definitely appeals to a much broader
audience. I have friends in their 30s who bought it not only because it’s a gaming system for
their kids, but also a DVD for them.” In addition, PlayStation 2 is able to play games
developed for its earlier model that was CD-based. This gives the PS2 an enormous advantage
in the number of compatible game titles that were immediately available to gamers.
Further enhancing the PS2’s appeal is its high-speed modem and allows the users easy
access to the Internet through digital cable as well as over telephone lines. This gives Sony
the ability to distribute movies, music, and games directly to PS2 consoles. “We are
positioning this as an all-round entertainment player,” commented Ken Kutaragi, the
head of Sony Computer Entertainment. However, some prospective customers were put
off by the console’s initial price of $360.
Shortly after the introduction of Neptune, Nintendo changed its strategies and announced
the impending release of its newest game console, The GameCube. However, unlike the
Neptune, the GameCube would not run on a DVD platform and also would not initially
offer any online capabilities. It would be more attractively priced at $199. A marketing
vice-president for Nintendo explained the company’s change in direction, “We are the
only competitor whose business is video games. We want to create the best gaming
system.” Nintendo also made the GameCube friendly for outside developers and started
adding games that included sports titles to attract an older audience. Best known for its
extra ordinary successes with games aimed at the younger set, such as Donkey Kong,
Super Mario Bros, and Pokemon, Nintendo sought to attract older users, especially because
the average video game player is 28. Youthful Nintendo users were particularly pleased
to hear that they could use their handheld Game Boy Advance systems as controllers for
the GameCube.
Nintendo scrambled to ensure there would be an adequate supply of GameCubes on the
date in November 2001, when they were scheduled to be available to customers. It also
budgeted $450 million to market its new product, as it anticipated stiff competition during
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