2. Agenda
Market History: Ainsley Quiohilag
Platform v. Software: Bei Wei Li
Current Market Conditions: Henry Steinberg
Conclusions & Recommendation: Dana Kelman
3. Market History
Periods Defined by Two Major Platforms
Atari v. Colecovision
Nintendo v. Sega
Sony v. Nintendo
X-Box new entry
Atari, Sega, & Colecovision failures
5. Platform v. Software
Platforms
Loss Leaders
MSFT expects to lose $150 per unit
Gillette business model analogy
Profits derived from software
Platform makers develop software for their consoles
Royalties from third party software developers
6. Platform v. Software
Software Only Companies
Ability to make software for all platforms
No losses to recover
High profit margins/low marginal cost
Lower fixed costs than companies that make both
consoles and software
7. Current Market Conditions
Major Platform Makers
Sony Playstation 2 debuted last year
Microsoft Xbox and Nintendo Gamecube new introductions
November 2001
Intense competition
More platforms more players
$1 billion marketing blitz for video game industry
Increased size of market (44 million consoles today to 70 million by
2003)
New platform technology facilitates improved game quality
8. Conclusion
Who wins battle of platforms?
Who cares?
Value added comes from games
Examples: Movie theaters, Sega Dreamcast
Real winners are software makers
Capture whole market regardless of platform
9. Recommendation
Electronic Arts
Industry leader
Use clout to negotiate deals with celebrities & sports
figures
Hedged against platform standard problem – make
software for all platforms
Stability
Survived past industry shakeouts