To the rescue of

Analysis and Strategy for survival in the consoles video game industry

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.

Porter’s 5 forcesThreat of Entry

Heavy investment in product development, branding and marketing communications necessary

Suppliers

Several external suppliers, from hardware providers to software programmers

Risky and costly to change suppliers

Competition

3 main competitors in the video console market: Sony, with

PlayStation 3, Microsoft, with X Box 360 and Nintendo with

Small, but extremely competitive market

Consumers

Small cost of change

Very strong and loyal core market,

less likely to switch

Substitutes

PC

Portable gaming devices, such as the Nintendo DS and the PSP

Mobile phones

PESTELPolitical

Enforce regulations on material sold

SOPA and ACTA

Economic

Recession

Social

New demographics: older and female.

New niche markets: education and health

Technological

Advances in online technology

Consoles become media centers

Hacker attacks

Legal

User data protection regulations

Piracy and lack of proper regulation

Content restriction and classification

Environmental

Energy usage

Composition of devices

All three companies are declining in their global results...

Source: Sony, Microsoft and Nintendo Annual Reports (2008-2011)

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.

The UK Market

Demographics of the UK gaming population: gender, age and social grade

Source: IAB, 2011

UK Market share (by value)

Source: Mintel, 2011

Competitors

Launched Move and failed

Sales have been declining

Good video game offer

Online services with problems and hacking

Has a good brand positioning

Launch of next gen: 2014

Reboot sales with Kinect

Large sales growth

Impact in final profit

Market leader in 2012

Complete online service package with console

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

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

No additional features in wii: failed to deliver services

More appealing to women

Innovation/ new market

2006

2012

Our SWOT analysisSTRENGTHS

• Important heritage in video games• Strong global brand in video game market.• Innovation (first motion –sensitive)• Good at simple friendly family games• Peripherals available in gaming market• First console to approach casual gamers• Large player basis

WEAKNESS

• Behind in offering online experience• No disc player and home entertainment hub • Not good at services for console• Cut-price strategy• Old product (Wii) launched in 2006• No HD display• Knowledge and focus only on videogames• Production in Japan: high cost

OPPORTUNITIES

• New product launch Wii U in 2012• More people interested in game consoles • Leading game console brand image• Internet connection for new services• Ageing population in developed markets• Growing consumer base in emerging markets • Largest market in the world remains the US.• Maturity of consumers towards consuming online

services through game consoles.

THREATS

• Games in smart phones and social networks • Competitors launched peripherals• Microsoft and Sony are large corporations• Consumer spend has lowered • High competition for price• The Wii U will compete in another market• The strong Yen cause loss in exchange rate

Internal

external

Posi

tive

Neg

ative

Our recommendation…Focusing on the target’s wants and delivering

through the new launch…

ObjectivesRecover current loses in year 2010 and 2011.

Achieve a 20% increase in market share over the next 5 years.

Strategic approach

Strategy

Nintendo Network

Nintendo Wii U launch

New Targets

New marketingcommunications

New services

Strategy 1Big momentum for launch of

Large marketing communication campaign:PRAdvertisingEventsActivation/trade activities

Highlight differentiatorsOffer new servicesStrategic alliances with top brands

Strategy 2Attack new target audiences:

SchoolsParentsSpecial servicesDifferent channelDifferent positioningAlliance with governmentNew marketing communications and PR campaign

Wii for senior citizens: Population ageing – longer lifeRetired people have a lot of time and moneyActivities and services through the WiiUse the abilities of the Wii for this targetDevelop health and exercise capabilitiesAdvertising of products and alliance with pharmacy companiesMarketing communications and alliances campaigns for this

target

Strategy 3

Wii woman:

Increase usability of womenShoppingBeauty apps and adviseAlliances with brandsLarge marketing, branding and communications campaign targeted

at women, mostly focused on social networks

Strategy 4

Strategy 5Transform Wii into an entertainment hub:

Online resourcesTargeted at familiesAlliance with Disney and other networksActivities for the familyAdvertising and sponsorship trade with family products.

Questions?