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INTRODUCTION
A console manufacturer is a company that manufactures and distributes video game consoles. It is also known as a first-party video game publisher. Historically, some of
the most recognized console manufactures include:
- Atari - now a 3rd party publisher
- Nintendo - historically the best known console manufacturer
- Sega - now a 3rd party publisher
- Sony - became the market leader with its first console - the Sony Playstation
INDUSTRY
The fact that out of the list above only two remain as console manufacturers demonstrates the volatility of this industry.
Each new console generation, which typically lasts 5-7 years, experiences significant changes in the market share. For example
although the Nintendo NES enjoyed a 90% market share during the 8-bit era, this dropped to approximately 60% after the 16-bit
era, with Sega being responsible for the majority of this change with their Sega Megadrive. Likewise, during the 32/64-bit era,
Sega's market share plumetted with the Sega Saturn, and Sony - a newcomer in
the industry became the market leader (Nintendo took second place with their Nintendo 64). As of 2004, the most significant console manufacturers in the industry during the 128-bit era are Sony (Playstation 2), Nintendo (Gamecube), and Microsoft (Xbox).
Out of the three, Sony is the current market leader with Nintendo and Microsoft contesting back and forth for second place.
PRICING
An interesting strategy that many console manufacturers take is to sell their console at a low price (respective to the
production costs) with the hopes that this will entice more consumers to purchase the hardware, which in turn will generate
additional profit through extra software sales. For example, although a bit extreme in terms of "normal" pricing strategies
within the industry, it has been reported that Microsoft was losing $US 300 with the sale of each Xbox unit.
BACKWARDS COMPATIBILITY
Recently console manufacturers have began considering backwards compatibility as an important feature in their future
consoles. Nintendo has had much success making their Gameboy
Advanced compatible with the regular Gameboy and Gameboy Color handhelds, and Sony did the same making their Playstation 2 backwards compatible with their Playstation. Sony has mentioned that they will continue with this strategy and make their Playstation 3 backwards compatible with the Playstation 2, and Nintendo has
hinted that they will do the same with their next-generation console: N5 (code-name: Revolution) as well as their new handheld
Nintendo DS which will be compatible with the Gameboy Advanced.
FIRST-MOVER ADVANTAGE
The "first-mover advantage" that certain console manufacturers experience on the other hand is a somewhat risky strategy.
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 Megadrive 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 a lot of consumers decided that they would rather wait for the Playstation 2 to
be released instead. Interestingly enough Microsoft is reportedly considering using the first-mover strategy with their
next-generation Xbox (code-name: Xenon) which may be released in late 2005.
THIRD-PARTY SUPPORT
It has often been said that when it comes to a console's success: "its all about the games" and this is certainly true. 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, 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 Sony Playstation VS 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. Lack of third-party support is seen as one of the reasons why the Nintendo N64 and GameCube experienced poor market
share relative to the NES and SNES.
Former console manufactuers
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