Case 7 Video Game Industry

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Case 7 1. What are the defining business and economic characteristics of the video game console industry? The video game industry has currently had seven generations of consoles released and is gearing up for the eighth generation. As of the time this case study was written Nintendo’s WiiU had not yet been released. Nor has Sony and Microsoft released there next consoles. When this case was written there weren’t some of the major changes that are currently shaping the industry today. Companies like Valve are developing their own consoles. There is even a Kickstarter funded system that is based on the Android OS called the Ouya that is set to release into the market now. Given all these factors, as well as the growing popularity of the mobile gaming market on the smart phones the industry has indeed taken some interesting turns from its original trinity of offerings, namely the Wii, Xbox360, and PS3. As of this case study the characteristics of the industry are as follows: * Intensity of competition: The competition in the video game industry is fierce. There are three large companies in the industry, which are Nintendo, Sony and Microsoft. * Market size: The target market for the products cover all over the world, however, the highest sales are in Europe, Japan and the U.S compared to other regions. * Influenced by global recession: A video game is not considered a necessary product. It can be described as a luxury, hence, the global economic recession have influenced the sales of video games, consoles and accessories. The industry revenues declined 6% in 2010 compared to 2009, and have continued decreasing into 2011. * Growing rapidly: Despite the recession, and the initial decline in sales, the video game industry has been growing rapidly, and also is expected to continue growing in the future. What is the industry like? The industry is

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