Newzoo Gaming Indsutry Case Study

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Table of Contents

Gaming Industry:        2

Determination of Market structure of Gaming industry:        2

Company Selected:        4

Marketing Structure        5

Price        6

Market Share        9

References:        10

Gaming Industry: 

Market research firm Newzoo revealed today that it expects the global gaming market to be worth $99.6 billion in 2016. That’s up 8.4 percent when compared to last year. It also expects 2016 to be the first year that mobile overtakes PC and console, with Newzoo expecting that market to make $36.9 billion in 2016, up 21.3 percent from 2015.Forty-seven percent of that $99.6 billion will come from Asia, as you can see in the chart below. China is seeing exceptional growth. Mobile in that country will be up 41 percent from 2015 to reach $10 billion. Newzoo notes 58 percent of total gaming growth in the worldwide market in 2016 will come from the Asia-Pacific region.

Determination of Market structure of Gaming industry:

        The parameters to decide the market structure of gaming industry are number of  suppliers, number of Buyers, Entry and exit barriers existence, Standardization of products sold by gaming companies, Market shares of companies ,Non-price competition, Interdependence and Mergers.

Market share[pic 7]

In gaming industry there are lot of small and large scale suppliers, small scale suppliers generally sell flash games or mobile based games where are large scale producers usually are concentrated in the field of PC Gaming and Console Gaming, infact the large scale suppliers are the ones who produces the consoles too. For example, Sony is involved both in the sale of PC & Console games as well as producing Playstation consoles. The market shares of companies in the gaming industry are shown in Figure 1. The other companies just occupy a market share of 1% and the rest all is occupied by the three giants Microsoft, Nintendo and Sony. From this we can conclude that there are a few amount of large suppliers and smaller companies have to shut down their companies simply because they cannot compete in the gaming industry such as Sega being a very popular game producer, it shut down its production in 2015 even though there are sales, but the costs incurred is just too much [Wired, Susan Arendt].[pic 8]

Non-price competition

Brand loyalty is very strong amongst consumers when it comes to brand consoles. Among western countries as there is a higher console per person ratio, the two producers Sony and Microsoft are both aware of this and have tries various methods from large advertising campaigns to even posting the specifications of the consoles online to try and sway away consumers loyalty.

Entry and Exit Barries

There are indeed high barriers to entry in the gaming industry, creating the hardware and software to compete with the current gen consoles and games it is hard enough for aspiring developers to enter into the market , as investment for game development is very high and the competition is also too high. An example of which is the Ouya- a games console that was supposed to be a platform for the indie developers which fell flat on its face. Even though it costs only 100$ in America; with few original games, no audience, and limited capability the console failed to sell over 160000 units at lunch.

Interdependence

Interdependence between the competing firms is when business have to take into account likely reactions of rivals to any change in price and output. It’s very early in the lifespan of these products to judge whether the companies will act in accordance with independence. Due to successful release of both Xbox one and ps4 there is also little indication of favor among fans. However, once the PS4 is released in the UK and other remaining countries then the success of the remaining sales may cause Microsoft to follow suit and drop their prices in the hopes of boosting sales before Christmas.

Mergers

Microsoft has a history of coming up with new and better technology, but failing to profit on them. For example, they created their own operating system for Xbox,but have failed to profit in the video game industry the way they’d like. Nintendo has a history of profiting in the video game industry. In 2016 there is 30.3 billion dollar in gaming mergers. (Games Report 2017, Digi capital)

Conclusion of Market structure

From the above observations we can conclude that the gaming industry is an oligopoly market which means that in a market structure like gaming industry, there are a very few number of firms which have the large majority of market share. To be precise it is a competitive oligopoly in which a market that is dominated by only a few large firms who  prefer not to compete via price wars and therefore compete in various other ways, such as advertising, product differentiation and barriers.

Company Selected:

XBox :

About Xbox:

The Xbox is a video gaming company which produces game consoles developed by the Microsoft Company in an attempt to tap into the lucrative global gaming industry. The Xbox 360 is an updated version of the original Xbox. It was launched in 2005 and was completely sold in all major public outlets. In a fast developing gaming market, it was crucial for the Xbox to be continuously improved upon. So, Microsoft decided in the year 2010 to introduce another different version of the Xbox 360 that would be slimmer and with more features than the former. A crucial feature added was the online connectivity option that allows gamers to compete with players across the globe in real time. In addition, users can access TV shows and music using the new multimedia feature of the Xbox (Voets 2010)

Xbox and it’s competitors

Some of the older versions of the Xbox 360 are fading from the market as more people embrace the newer version which has more features like the storage capacity that has been increased and more ports to accommodate other accessories that are compatible with the new version. The rise to fame of the products has not been easy due to stiff competition they have faced from other companies like Sony which is known for its version of a game console referred to as the PlayStation. Another company that has been competing with the Microsoft’s Xbox 360 is the Nintendo Company which is known for the GameCube console that was brought into the market towards the end of the year 2001.Sega, another gaming company gave a stiff competition to Microsoft in 1999, when it was first introduced into the market its product named Dreamcast.