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					  MICROSOFT XBOX:
THE BATTLE FOR GAMING
      SUPREMECY




      Michele Della Briotta
      Yeganeh Mashayekh
        Stephen Stokols
         Steven Sesar
        Charlie Zhong
                Introduction

What is Xbox? Product Description
Gaming Market
Competitive Landscape
Microsoft‟s Current Marketing Strategy
Recommendations
                             What is XBOX?
Xbox is an entertainment hub that provides users:
– High Quality Video Games
– DVD Player
– Internet Support
    - Online gaming
    - Web surfing, Checking E-mail, etc.

– Audio/Video System
    - Create soundtracks
    - Supports HDTV and TV resolutions up to 1920 x 1080.
   Product Specifications

Release Date          November 15, 2001
Cost                  $299
CPU                   733 MHz Intel Pentium III
Memory                64 MB of RAM
Hard Disk             8 GB
Online Capabilities   Broadband Capability
GPU                   300 MHz Custom 3D
Storage Medium        5 x DVD
                           Market Size
 Total Gaming Market Size: $50 Billion, 2001
 2001 total market served by Xbox: $18.5 Billion
 2006 total market served by Xbox: $47 Billion
                             MARKET SERVED
                      2001          2006
Video Game software   9B            18B
Video Game Console    8B            14B
Wireless games        1B            11B
Online games          500M          6B
                Market Share
The console market has few players
– Sony owns 45% of the console market
– Sega exited the console market this year
              Gaming Value Chain
  The value chain in the game industry
   – A few strong incumbents are leading the market
   – Content companies and console makers are creating
     the capabilities to control the consumer
   – Content companies are creating platforms and
     consolidating to create economies of scale

Create        Select        Sell &          Provide      Provide
Content       Package       Distribute      Access       Game Play
(developer)   (publisher)   (distributor)   (retailer)   (console)
                    Top Competitors
Sony PlayStation 2                Nintendo GameCube
  Sony is the market Leader         GameCube is $199 only
  PS2 has entered market a          Nintendo has historically
  year earlier than Xbox and
                                    successfully game brands
  GameCube
  PS2 has achieved critical         Nintendo has most
  mass                              advantageous royalty
  Sony has the largest              structure
  selection of video games          GameCube is targeted at 7-
  PS2 is targeted at 18-34 year     16 year old consumer market
  old consumer market
                    Product Comparison
Competition        Microsoft            Sony                 Nintendo
Basis              Xbox                 PlayStation 2        GameCube
Video game         Numerous game        Over 200 titles,     In-house + heavy
variety (most      developer            winning this basis   3rd party support
important basis)   partnerships                              (due to new royalty)

Price              $299                 $299                 $199
Differentiation    Broadband, DVD,      DVD                  Strictly gaming
                   733 MHz
Marketing budget   $500 million ($111   Comparable           Comparable
                   million this year)
Graphics quality                                             Best among the
                                                             three
                               Competitive Landscape

                High


    Technology
   Sophistication

      (based on                                                           Gamers Ages 18 - 34
functionality such as                                                                                  Approximately
 DVD offering and                                                                                       60% of total
                                                                         Sony Playstation 2               market
   online gaming
capabilities as well as                                             Sony Playstation
  graphics quality)
                                                                   Gamers under 18
                                                  Nintendo Game Cube                       Approximately
                                                                                            35% of total
                                                                                              market

                   Low

                          0                                                                    300+
                                                 Number of Games Offered


               Source: Global Equity Research, USB Warburg, “The Global Video Games Monthly”
         Current Marketing Strategies
  Target Market
- Sophisticated gamers
- Men, ages 18 to 34
- Consumers who want more than just games
  Pricing
- Console is priced at $299
- Bundling issues
  Distribution
- Sell 1 to 1.5 million consoles by the end of the year
- Xbox will be available at most major retail outlets
- The product will be launched in Europe and Japan next year
        Current Marketing Strategies Cont.
  Supply
- Flextronics: regional Xbox manufacturing operations in Mexico
- Retailers started taking advanced orders in early September
  Partnerships
- The company has signed more than 200 of then world„s top game
  developers and publishers to create Xbox games
- Marketing partnerships have been formed with Taco Bell and Sobe
  Communication
- $500 million worldwide marketing budget
   - $111 million domestic this year
   - Primarily print and television advertising
   - Only $500k spent on online advertising
                   Long Term Strategy
                    Convergence of Console & PC
 Generation I:             Generation II:           Generation III:
Just plays games         Entertainment hub         All-Encompassing
    (1990’s)                   (2003)              unit like PC (2005)



  Competing consoles run on different OSs
  Microsoft must ensure that Xbox, and more importantly,
  its OS, is the dominant standard.
  Keeping Xbox at the forefront of migration to PC
   – Introduce new features closely related to PC to accelerate
     the console‟s transition to a PC
                                     Positioning Strategy
            Xbox is positioned as possessing higher quality and more
            functionality than existing consoles
                High


    Technology                                                  Microsoft Xbox
   Sophistication                                                                      Gamers Ages 18 - 34

      (based on                                                           Gamers Ages 18 - 34
functionality such as                                                                                  Approximately
 DVD offering and                                                                                       60% of total
                                                                         Sony Playstation 2
   online gaming                                                                                          market
capabilities as well as                                             Sony Playstation
  graphics quality)
                                                                   Gamers under 18
                                                  Nintendo Game Cube                       Approximately
                                                                                            35% of total
                                                                                              market

                   Low

                          0                      Number of Games Offered                       300+

               Source: Global Equity Research, USB Warburg, “The Global Video Games Monthly”
         Recommendations: 3 P’s
Pricing: Increase price point $50, to $349
– Aid in positioning as higher quality: “Price = Performance”
– Reduce loss per unit
– Non-Price Competitive signal to Sony and Nintendo
Positioning: Target online gaming niche by focusing on
Internet Gaming as the KEY differentiator
– Ability to improve prices as a result
– Dominate online gaming market niche
Partnerships: Increase game development network
– Tap entertainment industry for band and creativity
– Online gaming developers
        Recommendations Cont.

Distribution: Create Incentives for Retailer
– Increase margins on console and/or Video Games
– Develop joint promotion and advertising campaigns
Communication: Focus communication of
superior capabilities
– Specifications vs. Capabilities
– Co-Promote games
– More co-advertising online with e-tailors
Questions?

				
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posted:6/15/2011
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