Introduction The home video game market is a 30 billion dollar booming industry. Technology and en tertainment have been combined together to create a world wide phenomena. The year 2001 marked the thirtieth year anniversary of the home video game. Where did it all begin. History, Development, an d Growth of the Industry The year of 1972 was a period of innovation for Norman Bushnell. Bushnell vision was to create a video game. Past experience required that the game had to be as simple as po ssible. Pong was the product that resulted based on the concept table tennis. The game was placed in a bar and soon generated revenue. Norman Bushnell received a line of credit from a local bank an d founded his company Atari. The employee's would soon go on to be innovators in their own right, S teve Jobs and Steve Woziak.. Capital was provided by Don Valentine, a successful venture capitalist . The company's first year sales were 3.2 million dollars. Competition began to enter the market a nd Sears soon came to the rescue. Sears provided a much needed push and sales were reached of 450 m illion dollars. Atari was sold to Warner Brothers for 28 million dollars and became Atari Inc. Succ ess followed with the Atari 2600 in 1977. The company floundered and in 1984, Warner Brothers sold the rights to Jack Tramiel. The home video game industry fell into a decline but was soon to be revi talized. The industry rescuer was no other than Nintendo. Nintendo was in 1984 a company that had made its mark developing playing cards. The Kyoto based company was led under Hiroshi Yamauchi. Ya mauchi believed that the market could be brought back to life. Engineers and Nintendo's talented em ployee, Sigeru Miyamoto developed an 8-bit system that became the (NES), Nintendo Entertainment Syst em in 1984. The design and creation also was possible due to an agreement with Ricoh, an electronic firm that specialized in microprocessors. Furthermore, games that for the first time included a st ory line intermixed with graphics was developed. The software games were to become Mario Brothers a nd Donkey Kong. Yamauchi shrewdly realized that the software would drive sales on the consumer end. The licensing program created and utilized. Companies had to agree to certain terms if they wante d license the software. The term was to be five years and the companies in no uncertain terms were to write platforms for other titles. Companies jumped on board bringing a profit and earnings that they did not experience before. The American division of Nintendo was the next mark. Minoru Arakaw a was the head of this division, known as Nintendo of America. Nintendo of America utilized researc h to ensure the product would be a success in America as well. Arakawa in his drive to dominate the market, had engineers to install a chip in the (NES) to make certain only a Nintendo game could be used. The CEO proved skeptics wrong as the (NES) became a major success, revitalizing the defunct m arket. Nintendo of America made $100 million dollars in the first year of operation. The next conten der on the scene was to be Sega. Sega is ran under the guidance of CEO Hayao Nakayama, a former empl oyee. Nakayama was familiar with the video arcade business and wanted to use his skills to dominate the market. The CEO vision knew this goal could be obtained by developing a game that employed gre ater graphics than employed at Nintendo and be more advanced in technology. The vision became a rea lity with the making of Genesis,a 16-bit game system. Genesis was marketed to compliment its arcade games. The company also had a licensing program. The two companies began a fierce rivalry. Ninte ndo came back with Super NES. Sega came back with a multitude of software games such Sonic the Hedg ehog, John Madden, and Mortal Combat. Sega emerged the winner in the early 1990's to beat Nintendo. The pattern of rise and fall permeates the home video game industry. The always evolving technolo gy brought new changes and new challengers into the field. The mid 90's introduced the world to the CD ROM's and Personal Computer Games. These companies were the likes of 3DO, Sanyo, Toshiba, and Sa msung. 3DO poor forecasting and overestimating the market need dropped out of the race. The next dominate force would be Sony. Sony already had an established market in the entertainment arena and decided to jump into the fray of the home video game industry. The Playstation was born. The Plays tation system was a 32-bit processor and utilized a powerful CD ROM system. Strong advertising and marketing combined with a quality product was a success with the public. The first year sales in th is market were at a astounding 1.3 billion dollars! Microsoft is coming on strong with the introduct ion of the Xbox. Sega is still a contender with Dreamcast and Nintendo cannot be forgotten with thei r Game Cube. The rise and falls of the home video game industry has many factors. These factors ar e based on the companies internal strengths and their weaknesses. Internal Strengths and Weaknesses Atari was at its strongest as a company when it agreed to let Sears sell their game systems. The pu sh from Sears garnered one in a string of substantial profit for the home video game industry. Atar i also was a pioneer of the "third party" concept. The third party concept allows for third parties to create games for other proprietor systems. The sale of Atari to Warner Brothers and the develop ment of the Atari 2600 allowed the company to be a dominating force for seven years in the industry. The company experienced a downfall. Bushnell stayed on at Atari Inc. after the sale to Warner Bro thers. Bushnell parted ways due to disagreements of strategy. Atari also had other factors that led to its demise as a company. The alienation of the game designers caused by top management. Bushne ll's successor as CEO was Ray Kassar. Kassar came from the rug industry. The CEO did not know anyt hing about his company that he was running or electronics. Kassar key function was to add stability and structure; which were not apparent under the umbrella of Nolan Bushnell. However, Kassar did n ot appreciate the importance of the game designers. Kassar believed the game designers to be overpa id and not manageable. This created a tension atmosphere with many game designers resigning to go t he competition. The products were of poor quality that were created at Atari. The aggressive advert ising and marketing Atari launched only emphasized the lackluster quality of the game systems and so ftware. The poor sales soon provided proof of this. Jack Tramiel became the next CEO when he was sol d the rights to the company by Warner Brothers. Tramiel was not able to steer the company on the co rrect course either. The company was sold for only 5 million dollars. Nintendo was able to bring th e sagging home video game market to life with the launch of the Nintendo Entertainment System combin ed with the games Donkey Kong and Mario Brothers. The company was able to do surveys pinpoint speci
fically what the public wanted from their games. The company was able to sell the units and have a first year of sales in America alone of 1.1 million dollars. The end of 1988, Nintendo sold 1.7 bil lion of the 2.3 billion dollar business. Nintendo was in the leader in the video game industry. Th e company controlled 80 percent of the market but by 1994 only held 45 percent of the market. There are many factors in the decline. Nintendo began to have a lack of innovation. Sega was stepping int o the market with the 16-bit Genesis as Nintendo was still selling the 8-bit (NES). It also charged paying a fee for others to write exclusively for them. Nintendo also did not sale games to the video rental dealers, they wanted to collect royalties on that market as well. The company also did not t o utilize the multimedia technology. The company did not respond to ads by Sega stating that Ninten do games were tame in comparison. The major factor was the alienation of the retailers. Nintendo s tarted to have a practice holding back games to the retailers. Nintendo management calls this inven tory control but this was the companies way of trying to control the market and insure a high demand of the games. Another factor was the security key chip that was installed by engineers at Nintendo . Nintendo also made numerous deals which made it impossible for other companies to produce games f or competing companies. Nintendo alienated the industry using intimidation tactics to dominate the market. Sega took advantage of these factors. Sega offered a licensing program but with lower loyal ty rates. Sega also took advantage of the Multimedia by incorporating it into the Genesis system. The strong, strategic leadership practiced by Nakayama is a great advantage. Sega eclipses Nintend o by reaching more of a market. Nintendo only has the home video game market but Sega reaches the a rcade and the home video game markets. Sega also puts vast amounts into Research and Development. T he Research and Development make their goal of "being first at all cost" possible. Nevertheless, Se ga has a vast amount of games that include violence, sex, and gore. The disparagement campaign that was conducted towards Nintendo "Nintendo's games being made for children only made this more of a n egative factor. Sony has the advantage of already encompassing the entertainment field. The playsta tion had greater graphics and faster technology in its 32-bit system. This created more of an advan tage for the entertainment giant. Sony strength can also be seen in its launch of the playstation sy tem. The marketing was done separate from the electronic division, this gave the new market its own identity. Sony also targeted the launch to the eighteen to thirty-five year old male market evident in such games as Tombraider; the character Lara was created to appeal to the older market. Sony red uced the price of the playstation which made the Sony product more appealing to the consumer. Sony also has built an extensive catalog of games through networking and licensing agreements. Fiscal ye ars 1995 through 2002 the company has garnered 35 billion dollars compared to Ninteno's 32 billion d ollars. Sony's internal battles on strategy could be a factor as Atari discovered. The threat for Sony is the emergence of the PC games. There are no licensing demands and it is easily and cheaply developed. In 1998 there were 4,704 PC titles available, Nintendo had 44 for the Nintendo 64, and P laystation had 344 game titles. External Environment The media sends the message that the home video game is owned by young male children, but surveys show this is not the case. 54 percent of the hom e game users are men over 18 and the PC game user is in his mid thirties. The home video game indus try does tend to ignore women. However, sales among women increased 38 percent in 1999. 60 percent of women play games on their PC. The leaders in the industry Sony, Nintendo, and Sega will have to set high standards to target that market that grew up with one of their systems. Strengths/Weaknesse s/Opportunities/and Threats Nintendo and Sony dominate the market at this time. Sega made the mista ke of overestimating the market. The Sega company was unable to capture enough users with its Dream cast system. Sega restructured itself as a company in 2001 and now is a development company for ol d competitors. Nintendo has been able to come back strong with the N64, a 64-bit game system. This game is targeted towards children. Sony has been able to hold its own in the competitive market an d has launched the Playstation II. The new challenger is Microsoft. Microsoft is a strong competit or with the Xbox. Nintendo has also introduced the Game Cube. The three key players which are Nint endo, Microsoft, Sony continue to have closed standards. The closed standards include reluctance of the owners to release upgrades when needed and a small catalog. Nintendo has their own developers, however, games will be slow forth coming due to the time it takes. This may work against them. Th e new threat is the PC market. The PC market is growing by leaps and bounds. This new market is al so much easier and cheaper to develop. The companies proprietor stakes on their product may also be their undoing with the PC market taken over. Corporate Level Strategy The players in the home video game industry have followed the same pattern. The company that became dominate soon mishandled th e power they held over the market. The structure that has swept over this industry was by choice. T he choice to keep out as much of the competition as possible. The companies have all made systems th at are not compatible with anyone else's. The consumer is left with being a long time customer due to the pricing of the game. The consumer would pay more money to switch than to stay as a Microsoft , Sony, or Nintendo customer. There also does not seem to be a strong relationship with the develope rs that make the game. There is a tug of war over marketing and pricing constantly. The home video game industry has lost leadership. Business Level Strategy The console was marketed two years ago a s the answer of the PC game market. Sony and Microsoft have incorporated Web-access and entertainme nt features into their consoles. The consoles also seem to be relatively inexpensive. Sony has deci ded that they will be coming out with products that are just not in the audiovisual category. The c ompany is restructuring itself and shrinking the size. The CEO Idei Noboyuki expressed interest in 2000 in online banking and possible joint ventures in the future. The Industry Structure and Control Systems Match its Strategy The structure and control systems do not match the overall strategy for all of the firms in the industry and that is to dominate the market. The industry has matured but t he "no new entry attitude" creates an atmosphere of tension, bad and poor management, and a monopoly attitude taken by the firms. This led to Atari failure in the 1970's, Nintendo was the next in lin
e with bad results in the late 1980's and the next in line was Sega which like Atari, is no longer i n the running. Unfortunately, the developers do not hold that much power. However, the firms shou ld realize that good working relationships lead to innovation. Recommendations Sony has distinguishe d themselves by not showing the abuse of power as have Atari, Nintendo and Sega. The industry has h ad a change to mature and the key player are now companies such as Microsoft, Sony and Nintendo. Wa rner Brothers suffered in the beginning of the home video game industry with the disastourious resul ts of Atari Inc. However, this entertainment has proved that it can sustain itself. Companies such as AOL/Time Warner and Disney would have a chance to cross promote themselves. This would add a wh ole new outlook. The threat of the PC market also brings a chance of failure to the home video marke t. Joint alliances would be very beneficial to the remaining companies that have matured to find su ccess. introduction home video game market billion dollar booming industry technology entertain ment have been combined together create world wide phenomena year marked thirtieth year anniversary home video game where begin history development growth industry year period innovation norman bushne ll bushnell vision create video game past experience required that simpleEssay, essays, termpaper, t erm paper, termpapers, term papers, book reports, study, college, thesis, dessertation, test answers , free research, book research, study help, download essay, download term papers