Console manufacturer

A console manufacturer, also known as a first-party video game publisher, is a company that manufactures and distributes video game consoles in addition to permitting third-party publishers to produce games for its platform in return to licensing fees.

Industry

Atari 7800
Xbox
PlayStation
Wii

The games console market is a volatile industry with changes of market leadership happening frequently as new consoles and games are released. For example, although the Nintendo Entertainment System (or NES) largely dominated the gaming market in the 1980s, their market share was challenged after the 16-bit era, with Sega introducing their Mega Drive/Genesis as a major competitor.[1] Likewise, during the 32/64-bit era, Sega’s market share plummeted with the Sega Saturn, and Sony – a newcomer in the industry – became the market leader (Nintendo took second place with their Nintendo 64).[2] As of 2005, the most significant console manufacturers in the industry during the 128-bit era were Sony (PlayStation 2), Nintendo (Nintendo GameCube), and Microsoft (Xbox). Of these three, Sony remained worldwide market leader with Nintendo and Microsoft roughly equal in second place, each dominating the competitor in its home territory. Two years into the seventh generation era, Microsoft has grabbed an early lead with the release of the Xbox 360 in North America on November 22, 2005, and the continuation of its revolutionary Xbox LIVE service. The release of the PlayStation 3 in Japan on November 11, 2006, and Wii in North America on November 19, 2006, saw gamers snub the pricey PS3 in favor of the more accessible Wii, despite its inferior graphical capabilities compared to the other two. The Wii remains in high demand (outstripping supply in some areas) and has surpassed the Xbox 360 while PS3 lags behind with less than half the worldwide sales of either competitor. Industry analysts caution that it is too early to call for final standings, with all three consoles anticipating new titles from major franchises for the holiday season of 2007 and Spring of 2008. In addition, the inclusion of a Blu-ray Disc player and the end of the hi-def format war has given the PS3 a recent boost, vaulting it past the Xbox 360 in the North American, European, and Japanese markets in monthly sales, although it has yet to catch the Wii's sales or either of the other two console's total sales numbers.

By contrast, in the related handheld console market, Nintendo has remained the market leader since the establishment of its wildly successful Game Boy line in 1989. In spite of its technological inferiority, the black-and-green Game Boy easily staved off competitors, including color-display systems made by Atari and Sega of the above-mentioned manufacturers. With backward compatibility and a continued emphasis on battery life and quality games, the Game Boy Color, though short lived, proved sufficient to maintain Nintendo’s lead and brand awareness until the release of the Game Boy Advance, which had all the same features and more, and again brooked no competition, including the Nokia’s phone/console hybid, the N-Gage. The first significant challenge to Nintendo’s handheld gaming dominance arrived in 2004, in the form of Sony’s PlayStation Portable (PSP). Despite superior graphics technology and a wide array of non-gaming capabilities, however, the PSP has failed to overcome Nintendo’s DS system, which, with its addition of a second, touch-sensitive screen, remains the fastest-selling console worldwide and in most territories.

Pricing

Microsoft and Sony currently use a loss leader strategy, pricing their consoles lower than the production cost to increase the market for more profitable sales of related software.[3] Competition between the two companies in 2002 has caused them to further reduce the prices of their consoles, the then prominent Xbox[4] and PlayStation 2[5] respectively. The latest Xbox One and PlayStation 4 consoles still use this strategy.

Nintendo's Wii console, despite being several hundred dollars cheaper than the Xbox 360 and PlayStation 3, generates profit from every sale because of its lower production cost compared to its counterparts.[3]

Backward compatibility

Recently console manufacturers have begun considering backward compatibility as an important feature in their consoles. Nintendo has had much success making their Game Boy Advance compatible with the regular Game Boy and Game Boy Color handhelds, as well as their new handheld Nintendo DS which is compatible with games made specifically for the Game Boy Advance. Nintendo’s Wii is compatible, after a fashion, with all four of its previous consoles, in that it can play games from its immediate predecessor, the Nintendo GameCube, and users may download select games released on all of Nintendo’s older home systems (and those of some defunct competitors) using the Virtual Console feature. Sony employed the same making its PlayStation 2 backward-compatible with its PlayStation, and continued with this strategy by making their PlayStation 3 backward-compatible with PlayStation 2 and PlayStation games, although many games had serious problems until a firmware upgrade 3 months after launch. The Xbox 360 is backwards compatible with 394 Xbox games as of the July 12, 2007, update; fewer titles are backward compatible in European markets (295), Japanese markets (101), and Australian markets.

First-mover advantage

The first-mover advantage that certain console manufacturers experience can be a great boost, on the other hand is it a somewhat risky strategy. Though it may attract early adopters by providing an advanced alternative to current offering, this strategy leaves room for competitors to copy the hasty company’s successes and learn from its mistakes. While there have been cases of consoles becoming successful partly because they were the first ones released within a specific era (most notably Sega with their Mega Drive during the 16-bit era), success from being the “first-mover” is not always guaranteed. Sega tried once again but failed to reap benefits by being the first-mover during the 128-bit era with their Dreamcast. Unfortunately for Sega, many consumers decided that they would rather wait for the PlayStation 2 to be released instead. Other console manufacturers have also attempted this strategy, such as the 3DO and Jaguar, all failed miserably. Nearly every console manufacturer who released their console first to the market by a significant margin, permanently exited the race soon after. Despite this trend, in releasing the Xbox 360 before its competitors’ products were released, Microsoft hoped to benefit greatly from the first-mover advantage – and its gamble paid off, shipping around 6 million units before the others launched. As many gamers decided to buy a cheap, novel Wii, and only one of the expensive, high-end, traditional alternatives, Microsoft’s early launch allowed it to firmly trounce Sony in the first years of the seventh generation. However within a year of the Nintendo Wii launch it had already beaten Xbox 360 sales which had been available for 2 years already.

Third-party support

It has often been said that when it comes to a console’s success: “It’s all about the games”. A console manufacturer needs to have ample third-party developer support in order to have a steady stream of quality video games being released throughout the year. Although brand loyalty, technical capabilities and price certainly plays their part, people tend to purchase the console that offers the games that they enjoy most. Without games, there is no reason to buy a console. It is the very reason why people doomed the Nokia N-Gage to failure before it was even released. Therefore, console manufacturers need to establish good relationships with third-party developers, otherwise they risk losing the support that they need to another competitor. A lot of this revolves around management, business decisions and partnerships, as even Microsoft occasionally publishes games for Nintendo handhelds, having no handheld of its own at present or planned for the near future. However, a console manufacturer can also help promote third-party support by making their console easy to develop on. Part of the reason for the success of the PlayStation against the Sega Saturn was that the PlayStation was considered an easy platform to develop games, while the Sega Saturn, with its dual processors and overall complexity, frustrated developers instead. In the sixth generation, Nintendo was perceived to be comparatively lacking in 3rd-party support, and relied mainly on their own 1st-party games, a situation since the Nintendo 64, since at the time, many third party developers opted for the PlayStation due to the ease in making games for it. Many top-selling Nintendo games are critical franchises that are well recognized in the video game industry at large, like The Legend of Zelda, Mario and Metroid. In the current seventh generation, this is reversed: the PlayStation 3 is perhaps the most difficult (and the Wii the easiest) to develop for.

On the other hand, third-party developers and publishers are themselves responsive to sales numbers, and the surprise success of the DS and Wii has prompted companies like Electronic Arts and Square Enix to shift more focus and resources toward Nintendo projects.[6]

List of console manufacturers and licensees

Current console manufacturers (home, handheld, microconsole)

Former console manufacturers

Notable former licensed console manufacturers

References

  1. ↑ "Nintendo Company, Ltd". Retrieved October 6, 2011.
  2. ↑ Cohen, D.S. "The History of Nintendo Part 3 – Dominating the Video Game Industry". About.com. The New York Times Company.
  3. 1 2 Bangeman, Eric. "Wii no loss leader, says Nintendo", September 15, 2006. Retrieved October 5, 2011.
  4. ↑ Becker, David. "Microsoft trims Xbox Price", May 15, 2002. Retrieved October 5, 2011.
  5. ↑ Becker, David. "Sony shaves price of PlayStation 2", May 14, 2002. Retrieved October 5, 2011.
  6. ↑ Wingfield, Nick (2007-04-19). "Wii and DS Turn Also-Ran Nintendo Into Winner in Videogames Business – WSJ.com". Online.wsj.com. Retrieved 2012-01-23.
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