Gaming Industry: Subcategory- Console

Indian Gaming Market

The Indian gaming market is still in its nascent stage in India but is growing rapidly.
Compared to the developed world India is a small contributor and its usage is
mainly restricted to urban areas.
The Gaming market is estimated to be a 4 Bn INR in 2008 and will rise to 14Bn INR
by 2012. The gaming market is further divided into 4 sub categories namely the
Mobile Gaming, Console Gaming, Online Gaming and PC Gaming with Mobile
gaming consisting of the largest amount at 63% followed by console gaming at 18%
(Refer Chart 1) and the mobile gaming is expect to keep on growing well into 2012
with the console market falling.
Mobile gaming seems to be the major driver of the industry mainly due to easy
availability and inexpensiveness of phones. With the huge potential in mobile
marketing, a huge amount of start ups and companies have come together to build
studios to cater to this demand.

Console Market
The console market in Globally and in India is mainly dominated by 3 players
namely Sony Corporation with the PS3, Microsoft Corporation with the Xbox and
Nintendo with the Wii. It can be seen that Playstation is mainly popular in Asia
countries while the Xbox is popular in American and European countries. In India the
Playstation is the leader in the niche market with the ~60% of the total market.

Competitor
The main competition is Sony with the Playstation, Microsoft with the Xbox,
Nintendo with the Wii. The average generation of a console lasts 5-10 years, in
these intermittent years only variants, add-on systems and games are launched.
Playstation Launches
PS3 Slim- It was a new variant of the PS3 featuring slimmer models, reduced power
consumption and a quieter cooling system. Apart from the hardware factors, the
system was rebranded with a more traditional logo and the removal of the Sony
Entertainment logo from boot screen.

Move System- The move system is a motion control system launched for PS3. While
the Wii used an accelerometer in the Wii remote to discern motion, the PS move
uses a combination of a wand and a camera to provide the motion capturing
technology. This combination is more accurate than the Wii though.

Xbox Launches
The Xbox has launched with a huge amounts of retail configurations and different
brandings. However, the only variant launched in India was the Xbox 360 elite.
XboX360 Elite- The console came with a premium black finish and signature metallic
detailing. Apart from the 120 GB hard-disk it also supported HD multimedia
interface thus allowing the owner to view games in HD video and surround sound all
from one cable.
Kinect System- The Xbox got its own version for motion controlling with the
introduction of the Kinect system. Unlike the Move or the Wii, the system does not
use any wand and instead relies on the players body movement and voice
commands to move. Additional, the system can also be used while streaming
content to give voice commands like Play, Stop..etc. On launch, the Xbox positioned
itself as a platform for Yoga and Dance lessons.

Wii Launches
Wii Family Edition- A console similar to a normal Wii except it removed backward
compatibility with the previous generations Gamecube.
Wii Mini- The Wii Mini (stylized as Wii mini) is a smaller, redesigned Wii which lacks
YPBPR (component video/D-Terminal), S-Video, RGB SCART output, Nintendo
GameCube compatibility, online connectivity, the SD card slot and Wi-Fi support,
and has only one USB port unlike the previous models' two.
Wii Balance Board- This Wii accessory consisted of a pressure sensitive board
which uses Bluetooth technology and sensors to discern the users weight and
center of gravity. The main usage of this system was to be used in collaboration
with Wii Fit system to help people become slimmer and healthier. This add-on was
well received by the public.
Wii Accessories- Unlike other systems, Nintendo allowed third parties to create
accessories for their products. This not only improved the enjoyability of their
games but also game them an alternate source of revenue.

Category Hierarchy
Structure of the category-The Hierarchy for gaming is pretty straightforward with
Sony and Microsoft occupying the top space and Nintendo the bottom.
Stability- Due to the huge amount of investment required, Intellectual property
associated with this industry (Intellectual property in terms of game titles from the
past generations) there is less scope for new players to enter the market at least in
2007.Thus, considering that the category is pretty stable and competition is clearly
defined, the category seemed ripe for disruption. In fact, Nintendo actually analyzed
these factors and decided to disrupt the market specifically because it knew it
couldnt compete with the top players in the market. In the words of the Nintendo
game designer Shigeru Miyamoto "The consensus was that power isn't everything
for a console. Too many powerful consoles can't coexist. It's like having only
ferocious dinosaurs. They might fight and hasten their own extinction."
Homogeneity- The Ps3 and Xbox 360 fall into one competitive cluster with both of
them offering a similar graphic and hardware experience. However, even within this
cluster there are differentiation factors like system exclusive games (Xbox 360 has
Halo, Gears of War while the PS3 has Uncharted series, Metal Gear Solid series),
multiplayer options (Xbox Live is subscription based while PSN is Free) and ancillary
features (Ps3 has blue ray player while Xbox has streaming content).
The Wii used to have a good differentiation factor in the motion control system but
that has been negated with the introduction of motion control systems by other
players.
However, now there seems to be a lot of players interested in launching gaming
consoles with many reputed companies putting out their own version. Thus, the
global gaming market is expected to experience a huge amount of churn in the
ninth generation of gaming.

Console Gaming Conventions

1) Joystick- Both the Playstation and Xbox use a joystick as a main userinterface. None of the other sub-categories of gaming make use of such an

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interface. Thus, inorder to truly master the console the user must invent huge
amounts of times learning how to use the joystick and developing the
dexterity inorder to successfully use the product. In a country like India where
social gaming is popular and the customer enters the gaming market through
PC/Laptop gaming, this is a big barrier preventing adoption.
Cost of Gaming- Although the console costs less than a top of the line gaming
laptop, the games cost a lot. (This is intentional as Sony and Xbox sell their
systems at a loss and instead charge a premium on the CDs inorder to make
profit). Considering that the scope of piracy is none existent with many
consoles being jail-break proof, the customer is looking at a very expensive
long term investments. The cost of a PS3 at launch was Rs 39,900, the XBOX
launch price was Rs 23,900 and The Wii was released for Rs 19990.
Long Life span- The console market is split into generations with all firms
releasing the latest iteration of their console within a year of each other. The
time gap between generations is around
5-6 years. Normally, the
company which first enters the market has a significant advantage over the
others but this is not set in stone.
Storyline and Graphics- With advancements in technology, the latest console
is expected to always have improved graphics and power compared to the
previous generation. There is a rule that the latest console will always be
more powerful than a top of the line gaming PC at least for 6 months. To give
an example of the usual increase in power, just the character model of a
game on the PS3 could not be rendered on the PS2 due to insufficient
memory.
Niche Segment- The gaming scene in 2007 was limited mainly to hardcore
gamers among the youth. Due to the time and cost involved the console
market was limited mainly to gaming fanatics who appreciated the graphics
and story-line.
System as a media hub- The console is not meant only to pay games but can
also double as a dvd player, music player, browser and social media
connector. Thus, the console is meant to serve a variety of ancillary purposes
and not be limited only to gaming.
Fixed hardware- Unlike a Pc, the hardware is expected to remain fix for a
period of around 10 years with all future games built around the consoles
specification. This contrast the PC where generally players have to keep
upgrading their computers every 3 years in order to play the latest games
with better graphics.

Customer Image

Consoles are a good way to relax, have fun and are challenging
Consoles are advanced and cutting edge.
The console is for rich kids and is unaffordable for many.

The Console game is mainly for Hardcore gamers

If the parents buy a console for their child , their child will start ignoring them
and fall into deep immersion over the game.
The gaming console is addictive and the console may cause the player to
forgo studies and chores to play the game.
The gaming console is a very sedentary toy and if they purchase one the
player will sit indoors and play and will eschew going outside and thus
become lazy and dull.

Customer Survey
According to the surveyors, consoles are high technological but fun machines
that offer a unique experience. Many used words like Fun, exciting and an
experience to have once in a life. However, most of the customers find that the
product is either too expensive or is redundant since the person has a laptop.
When asked what features would appeal to them, most favored better immersion
in the form of better graphics, augmented reality or an integrated experience. A
few even mentioned an integrated experience with mobile phones. Based on the
survey we can see that the main customer pain point is the price. However,
interestingly, most still hint that graphics is important to them and only a few are
willing to think of a new experience.

Is the market open to be disrupted?

Yes, the market is open up to disruption due to the following reasons
1) Organized Players- The console market is well organized with business
behemoths like Sony and Microsoft dominating the market at the top. Thus,
the bottom of the market was left for Nintendo to appeal to.
2) The market is stable- A normal console generation lasts between 5-10 years.
That is more than enough time to do research and development for a
revolutionary new product and due to the complexity of the product, the
competitor cannot easily copy your feature. Interestingly, although the Wii
was introduced in 2006, MS and Sonys version of motion control did not
appear till 2010, leaving Wii to develop the market for 4 years.
3) Routinized- The customer had come to expect the next generation to have an
improved graphics and processor speed and the gameplay innovations to be
limited to within the game. They didnt expect any radical changes in
gameplay outside the game.
4) In the surveys conducted, none of the surveyors regarded the system as
anything other than a gaming console. Considering that in developed
countries consoles are positioned as media systems rather than console

exclusively, this shows that Indians still havnt evolved the concept of a
console as anything other than a fancy game system.

Disruptive Positioning
Based on the above category analysis, we can see that during this time frame the
console market mainly catered to high income urban people who were willing to
invest the time to learn how to operate the joystick and who value immersion and
story. Thus, the market is positioned mainly to the Hardcore gamers.
However, there exist a market for console which Sony and Microsoft didnt see when
they were building their next gen console. Namely, the market for a stripped down
inexpensive console with lesser quality graphics but a new and unique playing
method.

Nintendo
So how did Nintendo disrupt the gaming market? Nintendo realized that competing
on graphics, features and Intellectual property wasnt sustainable for them, they
needed a totally new way to differentiate themselves from the herd.
In terms of product circle, the graphics and multi-media features were fast
becoming a core product rather than an augmented part of the product and thus it
didnt make sense to compete on graphics alone.
There was also the fact that consoles were fast reaching the declining state of the
PLC. Why would people pay a premium for a device with a highly specialized
function specifically when most games are becoming multi-platform (I.e released
across all consoles and even on the computer).
With this mind, Nintendo decided to go in a revolutionary new direction and
introduce a totally new console previously unseen.
Breakthrough in Positioning
Nintendo tried to disrupt the market by removing all non-essential features of the
consoles namely the graphics and joystick and building a low cost offering around

them, namely the motion control and paraphernalia. Thus, they were able to
introduce a new product offering that was cheaper than competitors but provided a
novel user experience that appeal to both the top and middle segments of the
market.

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Their Disruptions included

Focus on graphics- While other companies focused on huge leaps in graphics,
the Wii was notable underpowered for its generation. To give an example, the
Ps3 and Xbox had HDMI support and the ability to go up to 1080P resolution
while the Wii did not have HDMI capability and was stuck on 480P resolution.
Remote Control-Both the PS3 and Xbox used the two hand joystick with
thumbsticks that had become standard amongst consoles. However, Wii did
something different, it introduced a control (Wii Remote) which could be
used one handed and who aesthetics looked Archaic for its generation.
However, the Wii Remote came with motion-control which greatly augmented
the experience and the remote was expandable, thus allowing customers to
choose paraphernalia to suit their games. Thus, the customer could attach
the Wii Zapper for shooting games, the Wii Tennis for tennis and so forth.
Constraints on Hardware- In order to keep the cost under control Nintendo
had to skimp on various features like Blue Ray, Memory..etc. This means the
Wii is underpowered and cant do much apart from playing games.
Different Positioning- They focused their positioning on the casual gamers
and gaming as a family rather than on the pure hardcore gamer. Thus,
instead of competing ferociously in a shrinking market, they instead
expanded their market and become one of the best-selling console of the
generation
Health Positioning - On release the Wii was touted not only as a fun device
that can be enjoyed by the causal gamers but also the motion control had the
added benefit of allowing people to work up a sweat. Thus, the product
turned out fun and healthy. Following this revelation, Nintendo created a Wii
balance board, an accessory which allowed people to exercise and play
fitness games (Dance Dance Revolution Music Fitness).

XBox
However, Nintendo wasnt the only player to disrupt the market. Xbox disrupted the
market by positioning itself as a gaming console and a media consumption hub.
Xbox launched the Xbox video marketplace, which allowed customers to access
over 12000 stream able movies and TV episodes over their Xbox through a
partnership with Netflix. This instantly repositioned Xbox from a gaming platform to
a media center and gave Xbox a good boost in sales at the beginning of the
generation. However, due to the nature of the streaming system, this service is

available only in US. However, it deserves some felicitation for having the foresight
of merging two categories together.

Conclusion
However, even though the Nintendo Wii was able to disrupt the global market, it
didnt make any headway into India. Playstation still maintains the lead in the
market since the console market is still underdeveloped in India and is considered a
niche product mainly for hardcore gamers. Most Indian gamers still prefer graphics
and cinematics over motion control (as can be seen from the survey) and thus the
Wii didnt make sense for the Indian audience. Add to the fact that in India casual
gaming represents Pc or mobile and one can see why the Wii never picked up
steam. Additionally, the high price associated with the console(after tax) coupled
with the additional expenses on gaming, meant that the Wii wasnt a sustainable
option for casual gamers who were used to playing pirated games on their Laptop.
Thus, the reason the Wii failed in India is because of the simple fact that they were
not able to convert casual gamers to the system and at the same time they
alienated the hardcore gamers by introducing a underpowered system.

Annexures

Chart 1: Segment and Share% (2008)

PC; 9%
Online; 10%
Console; 18%

Mobile; 63%

Chart 2: Segment and Share % (2012)

PC Gaming; 9%
Online; 10%

Console; 18%

Mobile; 63%