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Lorenzo Pellizzari | Ludovic Beauvois | Soong Kah Weng

Video Gaming Industry . Lorenzo Pellizzari | Ludovic Beauvois | Soong Kah Weng. Agenda 1. History of Video Gaming 2. Sources of Innovation 3. Types and Patterns of Innovation 4. Timing of Entry Patterns 5. Porter’s 5 Forces Framework 6. Standard War Dynamics

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Lorenzo Pellizzari | Ludovic Beauvois | Soong Kah Weng

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  1. Video Gaming Industry Lorenzo Pellizzari | LudovicBeauvois | Soong KahWeng Agenda • 1. History of Video Gaming • 2. Sources of Innovation • 3. Types and Patterns of Innovation • 4. Timing of Entry Patterns • 5. Porter’s 5 Forces Framework • 6. Standard War Dynamics • 7. Lessons from the Past

  2. History of Video Gaming 1

  3. Sources of Innovation 2

  4. World First video gaming console • In 1972, this was available to the public • Evolve a lot • Exponentially faster • Wireless controllers or even no controllers • Online capabilities • Multiples players • 3D Games • Colour output and surround sound ……

  5. Individual as Innovators • Ralph H. Baer • Tasked to develop the best Television in the world • Idea is to include some interactive game • But the management did not pursue • Developed the first console, Magnavox Odyssey in 1968

  6. Innovation Value Chain • Technology push, Initially • Market pull, Now

  7. Innovation Value Chain • Creativity • Technology push • The creativity of Ralph H. Baer to have games played on television • When the initial purpose is to develop the best television

  8. Innovation Value Chain • Creativity • Invention • Technology push • After beginning with the supportresearching interactive television games of defence contractor, Sanders Associates • Lead to the invention of gaming console “Brown Box” in 1968

  9. Innovation Value Chain • Creativity • Invention • Innovation • Technology push • The invention is then licensed to Magnavox • The video gaming console was in production and sold to the public as Magnavox Odyssey

  10. Innovation Value Chain • Technology push • Technology push because the creativity led to new products which the market has yet to demand for it • New knowledge was transform into new product

  11. Innovation Value Chain • Market pull • With 3D television gaining popularity, video gaming console need to have 3D capabilities. • Controller-less demands from the market has push Sony and Microsoft Xbox to come out with video gaming console that support gaming without a controller. • Higher video games requirements push for newer gaming consoles with more powerful hardware. • Online technology

  12. Porter’s Diamond • Magnavox (U.S Co) • Atari, Inc. (U.S Co) • Sony Playstation (U.S Co) • Microsoft Xbox (U.S Co) • Sega (Japan Co) • Nitendo (Japan Co) • Why are U.S so innovative in the video gaming industry ???

  13. Porter’s Diamond

  14. Porter’s Diamond • Factor Conditions • During 1980s, US has a large amount of computer science graduates • Excellent telecommunication infrastructures

  15. Porter’s Diamond • Related and Supporting Industries • Triumph of the Arcade • Computer hardware getting cheaper and at the same time improving

  16. Porter’s Diamond • Related and Supporting Industries • Developers and publishers coming out with greater varieties and newer games • Television technology is advancing with better video and audio outputs • Newly available video-gaming magazines in the early 1980s

  17. Porter’s Diamond • Firm Strategy, Structure and Rivalry • Game cartridges or disks can only be used by the gaming console of the respective company • The gaming console is also backward compatible with games, meaning that old game cartridges or disks can be used on the newer version of the gaming console

  18. Porter’s Diamond • Demand Conditions • The home markets demand for gaming console after the triumph of the arcade in early 1980s. • Demand for faster gaming consoles from 8-bit, 16-bit, 32-bit to 128-bit so that greater processing power is available for performance-intensive games. • Demand to play games online with the rapid growth of faster broadband.

  19. Types and Patterns of Innovation 3

  20. Different dimensions of innovations • Product Innovation • New consoles are more powerful, better graphics, closer to reality than their previous versions • IncrementalInnovation • PS2 is a PS1 with some adjustments (DVD player) • Rumble not in PS3 • Radical Innovation • CD-ROM • Wii’smove remote

  21. Different dimensions of innovations • Competence enhancing innovation • Xbox 360 build on technology of Xbox • PS2 still in use, games are compatible! • Wii’smove remote radical but competence enhancing! • Competencedestroyinginnovation • CD-ROM replaced the cartridge: cheaperto manufacture and had a largercapacity than the existing cartridge technology • More Component innovation

  22. Technologytrajectory • Disruptive tech is Wii (less advanced performance, simpler system) • But cheaper than PS3 and • Xbox 360 thanks to lower development costs • Consumers switch to Wii • Both Sony and Microsoft had to create a new controller, to compete with the Wii

  23. Sony’s and Microsoft’s reaction The PlayStation®Movefor Playstation 3 Kinect for Xbox 360 yourself are the controller

  24. Timing of Entry Patterns 4

  25. Video Gaming consoles Entry timing *indicates the first mover ** indicates the most popular platforms DD indicates early adaptor and dominant design Source: ° Innovation and Competition in Standard-Based Industries: A Historical Analysis of the U.S. Home Video Game Market, Scott Gallagher and Seung Ho Park, IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT, VOL. 49, NO. 1, FEBRUARY 2002 ° Wikipedia.com

  26. What can we say from the chart ? • Out of the 7 Generations of Video Gaming Consoles • 2 out of 7 first movers managed to become the most popular • Most of the cases, early followers became the most popular video gaming platform • Why is early followers more successful? • Able to determine the market responses to the products sold by the first movers • Waiting for enabling technologies to be more established • Able to learn from the mistakes from first movers before launching the new products

  27. In the case for Sony Playstation • Was never a first mover • In the 5th Generation, Sony was the 4th company to launch Playstation • But it became the most popular platform and set the dominant design for that generation • In the 6th Generation, Sony was the 2nd company to launch Playstation 2 • It became the most popular platform the for that generation • In the 7th Generation, Sony was so far the last company to launch Playstation 3

  28. Porter’s 5 Forces Framework 5

  29. Porter’s 5 forces framework • To evaluate the attractiveness of the Video Gaming Industry.

  30. Competitiverivalry • 3 big players with changes in leadership through time • Decrease in sales of consoles (-8% in 2010) • Competition on differentiation and prices • Moderate barrier to exit => Overallstrongcompetition

  31. Threat of substitutes New platforms and new business models Highthreat of substitutes

  32. Threat of substitutes

  33. Threat of entry • Space for only3 players(ex: Sega) • Importance of « killer apps » and network of developers • Backwards-compatibility • High developingcosts • Entry of Apple? => Threatquitelow

  34. Power of buyers • Software marketdominated by large developers(ex: Electronic Arts) • Locked-incustomersin a console type withspecificgames • High pricesensitivity • But standardized consoles and pricesensitivity => Moderatethreat

  35. Power of suppliers • Sony, Microsoft produceother types of electronics • Nintendo mainlydevelopsitsowngames • Nintendo (>< Sony, Microsoft) outsources the manufacturing of hardware => dependent of certain suppliers • Somelimited components in consoles (ex: blue laser diodes in PS3) => Moderatethreat

  36. Porter’s 5 forces framework • Unattractive Industry to Enter • Apple is the most likely candidates to enter

  37. Standard War Dynamics 6

  38. 3 dominant designs

  39. Lessons from the Past 7

  40. most important lessons of the past for the present strategic position • History of Video gaming seems to be following the evolution of the vehicle where games appear most — Television and ……….. • Black/White to Colour • Colour to Flat Screen • Flat Screen to LCD/Plasma • LCD/Plasma to HDTV • Next Step: 3D TV and Virtual Retina Display for greater realism and details

  41. most important lessons of the past for the present strategic position andalsoEnabling Technologies • From 8-bit, 16-bit, 32-bit to 128-bit • Cartridges to CD to DVD to Blue-Ray Disk • From multiplayer to online gaming • From Wired controller, to wireless controller to action sensor controller … • Next Step: 4G gives 100mb/sec connection anywhere • No hand gaming, brains will do it

  42. The End Q&A

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