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Unformatted text preview: Xbox Case Background: • The Xbox was launched in November 2001 and was considered the most technically advanced console system in the market • Its' features included: DVD player, built in hard drive and modem and integrated internet access • Competed with Sony's PlayStation2 and Nintendo's GameCube • Launch price was $299, similar to the price of the PS2 Industry Overview: • The success of the consoles depended on the quality of the games designed for them. If games were not interesting, then no use for the console. • People were playing games for a longer period of time – average 11 hrs per week in 2001 • It was viewed as “fun entertainment” by 35% of the population interviewed: relieved stress and was challenging • 32% of players in the US in 2000 were 35 or older (insert the graph from page 14 with the age breakdown) • NOT KIDS STUFF ANYMORE • here I would include that 43% of gamers were women, first cause most people would think that only men are playing and 2nd in case you are presenting it would be a nice thing to mention (just an idea) and to show that it becomes a trend in all demographic segments 1. Is the video game console industry such an attractive industry at all? Pros: • Rapidly evolving industry dominated by only 2 major players: Nintendo and Sony • Total console market in 2000 amounted to close to USD 20 billion, Non US sales accounting for 52% of total revenues in 2000 and expected to increase slightly faster than the US market to 54% of total revenues in 2005 • Research has shown that consoles were occupying a central role in the home, 60% located in either family rooms or living rooms – it was now being considered part of the home entertainment complex. • The estimate was that by 2005 video game consoles would be in 70MM homes in America • Place of growth is (it is still, now :-)) was on the internet. 40 million Americans playing online games in 2000, estimated 72 million were going to be playing by 2004 • From 2000-2005 the gaming market was expected to grow to more than 5.3 million Cons: The items below are ‘features or charcteristics’ of the industry but not necessarily cons. Companies that can adapt to the below, can thrive. Agreed with other guys – analyse the features of the industry using the 5 forces (diagrammatically). And for those items that might make it unattractive, we should mention (i) the significant development costs for a new console ($2 bn – Xbox) and the games (ii) significant marketing costs (100s millions) for hardware, and the games (iii) the risks and outcomes of software piracy/IP theft (p3) and (iv) the need to build an innovative organisation and network to continuously develop games and hardware innovations • Industry is highly cyclical - bottom to peak roughly 5 years Is it really a cons ? Using the right timing, it is an opportunity to enter and to change the rules ! (agree with Guillaume her, example would be launch of PS2)...
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This note was uploaded on 02/25/2011 for the course ECON 100 taught by Professor Egea during the Spring '09 term at IESE Business School.
- Spring '09