Microsoft Xbox: How Microsoft challenged the dominance of Nintendo and Sony
MarketLine, June 2012, Pages: 21
Introduction
The Xbox was released in the United States in November 2001, followed by Japan (February 2002), Australia and Europe (both March 2002). This put it in direct competition with Sony’s PlayStation 2 and Nintendo’s Gamecube. The launch of the Xbox was the result of a longstanding plan to enter the highly lucrative video games market and challenge the dominance of Sony and its PlayStation platform.
Scope of this research
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Microsoft decided to enter the market as it is highly lucrative and growing. The ever-evolving nature of the machines means that there are growth opportunities beyond games including the use of apps, payments related to online content and partnerships with television broadcasters.
The decision to become a games console manufacturer has paid dividends. The Xbox 360 has outsold Sony’s PlayStation 3 and Microsoft’s Entertainment & Devices division has become a major growth driver and a real profit center for the company. In 2011, this division generated revenues of $8,913 million and net income of $1,324 million.
Microsoft does face challenges. Nintendo is launching its new console, the Wii U, in 2012 and while the development of the console into an all-encompassing entertainment system increases its appeal, Microsoft must be careful that it strikes a balance between its primary function as a games console and multimedia applications.
Key reasons to purchase this research
What is Microsoft's position in the games console market? How has Microsoft become a serious contender to Sony and Nintendo in the games console market? What challenges lie ahead for Microsoft and its Xbox product line?
Overview 2
Catalyst 2
Summary 2
Analysis 6
Microsoft entered the games console market in 2001 6
The software giant’s entry into the market had been planned for some time 6
Microsoft was eager to enter a growing and highly lucrative market 6
With the Xbox, Microsoft established a foothold in the market 6
Microsoft has made waves with the Xbox 360 8
The Xbox 360 was launched in 2005 8
The Nintendo Wii has outsold the Xbox 360 and the PlayStation 3 8
The Xbox 360 benefitted from an earlier release date than the PlayStation 3 9
The Xbox 360 was cheaper upon launch than the PlayStation 3 10
The success of the Xbox 360 has translated into huge revenues and profits 10
These factors were supported by a strong and innovative marketing campaign 11
Microsoft has exploited Sony’s network issues 11
Exclusive content has been a key component of the Xbox 360’s success 12
The Xbox line owes much of its success to partnerships and Sony’s own goals 13
Microsoft faces some significant challenges going forward 14
The Xbox 360 is now seven years old 14
The Xbox 360 has evolved into a multimedia entertainment system 15
This innovation has, in part, been triggered by competitor movement 15
Microsoft must continue to strike a balance between entertainment hub and gaming 16
Microsoft is eager to build on its position as a market leader in what is a growing and highly lucrative market 17
Microsoft’s entry into the video games industry has been highly successful, and it is now a genuine competitor of Sony and Nintendo 18
Definitions 19
Sources 19
Further Reading 19
Ask the analyst 20
About MarketLine 20
Disclaimer 20
LIST OF TABLES
Table 1: Xbox 360 and PlayStation 3 release dates by region 9
TABLE OF FIGURES
Figure 1: Worldwide shipments of sixth generation games consoles (million units) 7
Figure 2: Worldwide shipments of seventh generation games consoles (million units) 8
Figure 3: Xbox 360 sales by region 9
Figure 4: Microsoft's Entertainment and Devices division revenues and net income, 2007–11 11
Figure 5: Xbox 360 dashboard 2005 compared to the Xbox 360 dashboard June 2012 13
Figure 6: Xbox SmartGlass and Kinect with Kinect Adventures 15
Figure 7: Global games console market values 2007–16 ($bn) 17
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