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Video Game Console Wars: In the past “console wars” was originally used to describe the competitive rivalry between Sega and Nintendo in the video game market during the 1980s and 1990s but the modern usage of the term refers to the battle for supremacy between the PlayStation and Xbox brands. There are three main competitors in the market for video game consoles: Sony (with its PlayStation), Nintendo Wii, and Microsoft (Xbox). Microsoft is a relatively new entrant. Sony took over as market leader from Nintendo.
Every so often, with more powerful computing capacity, new generations of gaming consoles are produced, which shakes up the market. With the consoles, there have to be attractive games to enthuse customers to trade up. Key factors in winning this battle are getting the product out to market, the games the consoles support
and functionality.
In 2006, Sony announced it would be launching its PlayStation 3 console in November rather than May. It
would be more expensive than its competitors’ products. Sony appeared to have borrowed some ideas,
such as motion sensors, from Nintendo, and some ideas, such as enabling users to download extra content from the Internet, from Microsoft.
According to The Economist (13th May 2006): ‘Having been the industry leader for many years, Sony
suddenly looks like a follower. It will have to catch up with Microsoft in sales: by the time the PS3 is
launched, Xbox 360 will have been available for over a year. The stakes are high for Sony: it is banking on
the success of the PS3 not just to maintain its dominance in video gaming, but also to boost the fortunes of its Blu-Ray technology, one of the two rivals to become the high definition successor to DVD’.
Current Market Scenario of Video Game Console
Nintendo Switch was the best-selling video game console worldwide in 2021, selling over 25 million units across the globe. One of the latest entrants to the market, the Sony PlayStation 5, sold about 12.6 million units in 2021.
The modern-day video game console wars
While the term “console wars” was originally coined to describe the competitive rivalry between Sega and Nintendo in the video game market during the 1980s and 1990s, the modern usage refers to the battle for supremacy between the PlayStation and Xbox brands. The most recent battle between these console giants has been fought out between their eight-generation consoles, the PlayStation 4 and the Xbox One.
However, while PlayStation 4 sales in Europe reached more than 48 million units alone, Microsoft’s global Xbox One Sales are yet to reach 50 million units worldwide. This duel has also turned into a three-way battle thanks to the enormous success of Nintendo’s hybrid video game console, the Nintendo Switch. Despite being released over three years later than its rivals, Switch global sales have already reached over 78 million units worldwide, with approximately a third of the regional console sales occurring in North America.
The future of console gaming
This fight for supremacy shows no signs of slowing down with the next battle of the console wars upon the horizon. Following years of speculation, both Sony and Microsoft released their next-generation consoles in the lead up to the 2020 holiday season as PlayStation 5 and Xbox S respectively. Forecasts already suggest that Sony may continue to have the upper hand, as sales of its PlayStation 5 are due to hit 50 million by 2023. In comparison, estimates have Microsoft’s Xbox Series X sales reaching 3.3 million units in 2020 and just 30 million by 2023.
Factors that Affect Strong Competition in Video Game Console Market
Not all industries are equally competitive. Factors which encourage strong competition include:
(a) The presence of many equally-balanced competitors which continually ‘jockey for position’ by advertising or innovating. The Internet may increase rivalry by making price comparisons easier and
facilitating faster innovation and new product development.
(b) A slow rate of growth in the industry, which means that companies must compete by attracting each
other’s customers rather than new customers (the slow growth may be as a result of maturity in the market).
(c) High fixed or storage costs, which encourage fast turnover of inventory.
(d) A lack of differentiation, which reduces customers’ brand loyalty.
(e) When capacity can only be increased by large amounts. In this case companies will fight to protect their share, or compete aggressively to increase it substantially.
(f) High ‘strategic stakes’ are tied up in capital equipment, research or marketing.
(g) High exit barriers such as redundancy payments, penalty clauses or tax losses.
