Hello world and welcome back to the battlefield. Today I will be looking at the impact of format wars on the video game industry. This is a phenomenon that has shaped the fame and fortune of many game console companies today. There are two format battles that I would like to highlight in respect to the video game industry: Cartridges vs. Discs and the recent Blu-Ray vs. HD DVD. The latter has been thoroughly discussed in the last blog, so I will spare you the details and focus on the match between the consoles themselves (Playstation 3 and XBOX 360).
If memory serves me right, it was the year of 1996 when the dominating Playstation was challenged by the emerging Nintendo 64. With a release one year earlier in 1995, Sony’s Playstation definitely had the advantage of capturing the sixth generation console market.
The Playstation was definitely viewed as a system more suited for mature players while the Nintendo 64 still holds a family-oriented image. Playstation came with the optical disc (CD) format while Nintendo 64 had a built-in cartridge format. Herein lays the main difference between the two systems and how Sony was able to bowl through Nintendo.
First of all, we need to see what is inside of these two formats. Here, we have some basic information and identify why the CDs would be preferred than cartridges. Since cartridges have been the standard for most video game consoles until that point, it is not Nintendo’s fault to stick with it. CDs are much lighter, compact, and store more data than cartridges. As a new entrant in the video game market at that time, Sony had done its due diligence very carefully and was able to dominate the sixth generation market despite competitions from established players such as Nintendo and Sega. In fact, Sega pulled out of the video game hardware industry in 2001 and started focusing on software only.
As such, Sony and its Playstations (1 and 2) continued to dominate until Microsoft came in the picture and gave it some competition with the original XBOX. Things started to get interesting as people are demanding more high-definition products. In come the Playstation 3 (PS3) with Blu-Ray and XBOX 360 with HD-DVD.
What goes up must come down. Sony’s worst nightmare came true when they released the PS3 in 2006. Blu-Ray, still new to people’s tastes, did not help the sales of PS3 at all during its launch. Microsoft, with XBOX 360 released a year earlier in 2005, had done what Sony did to Nintendo with the Playstation ten years earlier. This video discusses whether the PS3 is a failure.
The outcomes of the high-definition format and current game console market are still uncertain as it is still too early. However, I do believe that the two will be positively correlated. It is either PS3 and the Blu-Ray or XBOX 360 and HD-DVD.
I think that the lesson learnt here is the importance of early customer exposure to the game systems and formats introduced by these various companies. Those who get first exposure are going to get an advantage while the competitions have to catch up. It is also important to do your due diligence before launching your consoles. Some people, including me, are still comfortable with the PS2. Who could blame them? The unpredictable factor of technology is still one thing that we have to consider before jumping ship to either the PS3 or XBOX 360.
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Well, I don't quite agree that early customer exposure to the game systems and formats will lead to a success. If that's the case, then Sega Saturn (released couple months earlier than the PlayStation) should have won in the fifth generation of the video game consoles. Sega Saturn plays CD too, so it should have an advantage over PlayStation. In fact, it didn't.
I think what leads to a success in the gaming industry relies on the hit game titles and the price of the console. For example, Final Fantasy fans might buy a PS3, and some Mario Kart fans might buy a Wii. Formats don't seem to be the prior concerning factor for buyers (but maybe backward compatibility). If gamers know that their favorite games will be played on a new game console that will be released soon, they will wait until then. If a person is just a casual gamer, he/she might just want to buy the console at most reasonable price and that holds game titles they like.
Without up-to-date sales figures in hand, I don't know who's winning in the 7th generation of game consoles yet, but I do think Nintendo's Wii might lead in the battle because of its reasonable price and with the WiFi and Bluetooth technology equipped. If this happens, then we know that format war does not really exist in the gaming industry (because people consider about the price and game titles rather than the format it runs). Instead, it's just going to be a side effect of the console sales war.
First mover advantage is only that,a first mover advantage. Eventually you have to come up with a different way of staying in front of the competition. If PS3 is really that great it will eventually catch up. And it's not an issue of price either. Remember what happened when the system came out? It's not like the system was cheap, yet people were lining up to buy it.
I also have to disagree that success of the systems is driven by the games they carry. In fact, I think it's the other way around. The reason X-Box has better games is because game developers aren't stupid. By that I mean- why make games for a system that isn't showing any promise?
And it's not the Blu-ray/Playstation 3 versus HD/X-Box. It's only the X-Box versus Playstation 3, and X-Box is just about ready to lift up the trophy. Playstation may have just as well shot themselves in the foot with that move. Let me tell you why.
I think that Microsoft may have created lock-ins; lock-ins that go far beyond the the look and feel of the console. Computing power, apps, graphics, a control that vibrates...they matter don't get me wrong. But I think what X-Box has done, in my opinion set a standard that may not be so easy to reach.
If it were only the specs I think PS3 would not be in as deep as it is. The Branding may have had a lot to do with their early succes, but it just hasn't lived up to the expectations. Why? because they've changed and X-Box is responsible. The games are following the trail of money, and every body else is follwing them. X-Box is imposing its will. And it's no wonder after all its Microsoft. They have a history of doing the exact same thing.
They've created the platform, changed the processes, and made them so attractive that people just can't help being captivated. With X-Box live you can do a number of things online that, at least right now the PlayStation hasn't been able to match. This is just my notion, but it's still to early to tell whether they have a sustainable competitive advantage. And don't count out the Wii...it just may surprise us. I mean it's held up this long.
Albert, you may want to take another look at the video you posted.
I personally think this is a case of bad communication on Sony's behalf.
As far as HD goes, it is heavily advertised on TV and elsewhere, so people are well aware of how it is worth the investment.
This is different for Blu-Ray. First, the name. HD stands for High Definition, which is pretty self-explanatory. Blu-Ray is...blue..ray? What-the-foosball is a blue ray. Since (I personally blame Sony Marketing Division for this one) Sony did a pretty horrible job on letting the public know what blu-ray was, I think people didn't value Sony's new console as much as people should have.
This is very typical in a new technology that is hard for normal people to understand. Right now, the market view of blu-ray is probably similar to Techron. We know Chevron put some magic formula in their gas which betters our car; nevertheless, Techron is just a minute addition to the core product of gas. Similarly, Sony has this new item called Blue Ray. Probably the LED flashes in blue and provides additional benefits; however, the market probably doesn't understand that Blue-Ray is a completely new product that is superior to High Definition.
As we've seen through Windows OS and Mac OS, the inferior but better marketed OS wins the battle. Hopefully Sony realizes this and acts fast.
I think the success of Sony depends on Sony's ability to market Blu-Ray.
Also, the ability for common people to tell apart Xbox and PS3 plays a huge role. The difference between PS3 vs Xbox and PS1 vs N64 is that PS1 was easily distinguishable from N64. However, as far as PS3 and Xbox or Blu-Ray and HD or whatever you want to compare in the market right now, the difference is minute.
Therefore, the ability to really market your product by increasing awareness of the capabilities becomes so much more important.
I think.
Here's a news article that I just read. Wii is leading in the Console race.
Some reasons are:
1) Price
2) Availability of the consoles
3) Marketing of Nintendo
4) Interactiveness i.e. the sports title and sports bundle
Read more:
http://news.yahoo.com/s/nf/20070405/tc_nf/51279;_ylt=Al1X_Cg4HxtzX13C3HzlLzAjtBAF
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