1. To the rescue of
Analysis and Strategy for survival in the consoles
video game industry

2. About the Industry
 $65bn worldwide revenue in 2011.
 High penetration in developed markets, low in emerging.
 Expansion towards all the global market.
 Target audience is getting broader: more women, adults, families.
 Change in the use of consoles: more and more people see consoles as home
entertainment hubs, with a social purpose.
 Console makers sale their products with an implicit loss, but the revenue is
recovered by the games, accessories, etc.
 Although it usually runs in 5 year cycles, the last consoles were launched
more than 5 years ago.

3. Porter’s 5 forces
Threat of Entry
Heavy investment in product development, branding and marketing communications necessary
Suppliers Competition Consumers
Several external suppliers, from 3 main competitors in the video Small cost of change
hardware providers to software console market: Sony, with
programmers PlayStation 3, Microsoft, with X Very strong and loyal core market,
Box 360 and Nintendo with
Risky and costly to change suppliers less likely to switch
Small, but extremely competitive
market
Substitutes
PC
Portable gaming devices, such as the Nintendo DS and the PSP
Mobile phones

4. PESTEL
Political Technological
 Enforce regulations on material sold  Advances in online technology
 SOPA and ACTA  Consoles become media centers
 Hacker attacks
Economic
Legal
 Recession
 User data protection regulations
 Piracy and lack of proper regulation
Social
 Content restriction and classification
 New demographics: older and female.
Environmental
 New niche markets: education and health
 Energy usage
 Composition of devices

5. All three companies are declining in their
global results...
Source: Sony, Microsoft and Nintendo Annual Reports (2008-2011)

6.  Although the immediate forecast suggests a decrease in sales, the
gaming console market is expected to grow in 2014-2015, with the
launch of new products and the continuing growth in market.

7. The UK Market
Demographics of the UK gaming population:
gender, age and social grade
Source: IAB, 2011

8. UK Market share (by value)
Source: Mintel, 2011

9. Competitors
 Launched Move and failed  Reboot sales with Kinect
 Sales have been declining  Large sales growth
 Good video game offer  Impact in final profit
 Online services with problems  Market leader in 2012
and hacking
 Complete online service package
 Has a good brand positioning with console
 Launch of next gen: 2014  Wide range of games
 Launch of next gen: 2014
Both used to target the core video gamer, now aiming at
becoming a family center hub and trying to get Wii’s consumer
Price war + bundles

10. 2006
 Highly traditional games
 Decline in sales for 2 years
 Lost market leadership
 Profit affected by price cuts (2009)
 Accessories were successful at beginning
but fail to keep up 2012
 No additional features in wii: failed to
deliver services
 More appealing to women
 Innovation/ new market

11. Our SWOT analysis
Internal
STRENGTHS WEAKNESS
• Important heritage in video games • Behind in offering online experience
• Strong global brand in video game market. • No disc player and home entertainment hub
• Innovation (first motion –sensitive) • Not good at services for console
• Good at simple friendly family games • Cut-price strategy
• Peripherals available in gaming market • Old product (Wii) launched in 2006
• First console to approach casual gamers • No HD display
• Large player basis • Knowledge and focus only on videogames
• Production in Japan: high cost
Negative
Positive
OPPORTUNITIES THREATS
• New product launch Wii U in 2012 • Games in smart phones and social networks
• More people interested in game consoles • Competitors launched peripherals
• Leading game console brand image • Microsoft and Sony are large corporations
• Internet connection for new services • Consumer spend has lowered
• Ageing population in developed markets • High competition for price
• Growing consumer base in emerging markets • The Wii U will compete in another market
• Largest market in the world remains the US. • The strong Yen cause loss in exchange rate
• Maturity of consumers towards consuming online
services through game consoles.
external

12. Our recommendation…
Focusing on the target’s wants and delivering
through the new launch…

13. Objectives
 Recover current loses in year 2010 and 2011.
 Achieve a 20% increase in market share over the next 5
years.

14. Strategic approach
Nintendo Wii U New Targets
launch
New marketing
Strategy
communications
Nintendo
Network
New services

15. Strategy 1
 Big momentum for launch of
 Large marketing communication campaign:
 PR
 Advertising
 Events
 Activation/trade activities
 Highlight differentiators
 Offer new services
 Strategic alliances with top brands

16. Strategy 2
Attack new target audiences:
 Schools
 Parents
 Special services
 Different channel
 Different positioning
 Alliance with government
 New marketing communications and PR campaign

17. Strategy 3
 Wii for senior citizens:
 Population ageing – longer life
 Retired people have a lot of time and money
 Activities and services through the Wii
 Use the abilities of the Wii for this target
 Develop health and exercise capabilities
 Advertising of products and alliance with pharmacy companies
 Marketing communications and alliances campaigns for this
target

18. Strategy 4
 Wii woman:
 Increase usability of women
 Shopping
 Beauty apps and advise
 Alliances with brands
 Large marketing, branding and
 communications campaign targeted
at women, mostly focused on social networks

19. Strategy 5
 Transform Wii into
an entertainment hub:
 Online resources
 Targeted at families
 Alliance with Disney and other networks
 Activities for the family
 Advertising and sponsorship trade with family products.

20. Questions?