Contemporary Strategy Analysis, 10th Edition

Case 13Video Game Console Industry in 2018*

In 2018, the video games consoles—dedicated hardware devices for playing video games in the home—were in their eighth generation. Yet, although this generation had begun six years previously with the launch of the Nintendo Wii U followed by Sony's PlayStation 4 and Microsoft's Xbox One, uncertainty remained over the future direction of their industry and the strategies to pursue.

The first six generations of consoles had established a clear consensus as to key success factors in this industry. The strategies of all the leading players were focused upon establishing market leadership that would then generate network effects in gaining support both from users and game developers. To establish early market leadership, the key was to target early adopters—the “hardcore gamers,” who were primarily males aged between 12 and 35.

However, the conventional wisdom had been upset by the outcome of the last round of competition. Among seventh‐generation consoles, the winner had been Nintendo. Its Wii was a technologically unsophisticated, easy‐to‐use console targeted at the casual user. It had outsold the more technologically‐advanced machines from Sony and Microsoft. Moreover, while Sony and Microsoft had focused upon turning their consoles into multifunctional home entertainment devices, the Wii was a dedicated games console.

At the same time, the home video game console was under threat. Increasingly game playing was shifting to mobile, multifunctional ...