Page 181 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes years after the introduction of original PlayStation, it was being sold in retail outlets for
a mere $49. It had a significant lead in terms of numbers of units in homes around the
world with a 43 per cent share. Nintendo 64 was second with 30 per cent, followed by Sony
PlayStation 2 with 14 per cent. The Xbox and GameCube each claimed about 3 per cent of
the market, with Sega Dreamcast comprising the last and least market share of 4.7 per cent.
Sega, once an industry leader, announced in 2001 that it had decided to stop producing the
Dreamcast and other video game hardware components. The company said it would
develop games for its competitors’ consoles. Thus Sega slashed the price of the Dreamcast
to just $99 in an effort to liquidate its piled up inventory of more than 2 million units and
immediately began developing 11 new games for the Xbox, four for PlayStation 2, and
three for Nintendo’s GameBoy Advance.
As the prices of video game consoles have dropped, consoles and games have become the
equivalent of razors and blades. This means the consoles generate little if any profit, but
the games are a highly profitable proposition. The profit margins on games are highly
attractive, affected to some degree by whether the content is developed by the console
maker (such as Sony) or by an independent game publisher (such as Electronic Arts). Thus,
the competition to develop appealing, or perhaps even addictive, games may be even
more intense than the battle among players to produce the best console. In particular,
Nintendo, Sony, and Microsoft want games that are exclusive to their own systems. With
that in mind, they not only rely on large in-house staffs that design games but they also
pay added fees to independent publishers for exclusive rights to new games.
The sales of video games in 2001 rose to 43 per cent, compared to just 4 per cent increase for
computer-based games. But computer game players are believed to be a loyal bunch, as
they see many advantages in playing games on their computers rather than consoles. For
one thing, they have a big advantage of having access to a mouse and a keyboard that
allow them to play far more sophisticated games. In addition, they have been utilising the
Internet for years to receive game updates and modifications and to play each other over
the Web.
Sony and Microsoft are intent on capturing a portion of the online gaming opportunity.
Even Nintendo has decided to make available a modem that will allow GameCube users
to play online. As prices continue to fall and technology becomes increasingly more
sophisticated, it remains to be seen whether these three companies can keep their names
on the industry’s list of “high scorers”.
Questions
1. Considering the concept of product life cycle, where would you put video games in
their life cycle?
2. What are the implications of each product’s life cycle stage?
3. Should video game companies continue to alter their products to include other
functions, such as e-mail?

Self Assessment

Fill in the Blanks:

10. The stage at which the product stays for the longest period is the …………………… stage.
11. During the introduction phase, the profits accruing from product are generally
……………………….

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