Gaming Industry

Console Gaming market

Sarvesh Vichare

Table of Contents
1. Introduction ................................................................................................................................. 2 2. Gaming Industry Overview............................................................................................................ 2
2.1 Game Console Overview .......................................................................................................................................................... 3

3. Technology Impact on game consoles ........................................................................................... 4

3.1 Game Console advances ........................................................................................................................................................... 4 3.2 Mobile and PC gaming........................................................................................................................................................................ 4

4. Organization Analysis ................................................................................................................... 5

4.1 SONY................................................................................................................................................................................................. 5 4.2 Microsoft......................................................................................................................................................................................... 7

5. Conclusion .................................................................................................................................... 9 6. Works Cited .................................................................................................................................10

1. Introduction:
Everyones involved in playing video games at least once in their lifetime, as computer and video games have come long way since the day we started playing Mario to few recent high gaming experience once like Halo 4. As per the Entertainment Software rating Board (ESRB) carried out in 2010, the average age of a gamer is 34 yrs, and the average number of years adult gamers have being playing computer or video games is 12 yrs. (ESRB n.d.)Also, an interesting fact that 67% of US household play video games and 40% of all gamers are female. Well, we are talking about $25.1 billion revenue industry, which sold 273 million units in 2010 as per ESRB. Now, as I have your attention with numbers, we will proceed further with the overview of gaming industry and will focus our discussion to Game console market. Also, well move forward with analyzing the organizations leading game console industry, its corporate culture effecting people involved in the development process, the organization structure and the external environment.

2. Gaming Industry Overview:

Gaming industry has never being just about the game console, but a larger market share is captured by handheld game console, followed by PC game market. Now, advances in game industry has grown so strong, that few predict mobile gaming will take the industry to another level and might even end the console market, but as we know these things dont happen overnight. So, while discussing about gaming industry, specifically about game console it seems to have increasing competition from mobile gaming market. While considering the factor like Reach, Engagement and Monetization, the percentage of people who own mobile devices compatible for gaming, with the percentage of time spent on that device, and how cost effective are they compared to game consoles, mobile game industry wins big (Chou 2013). But surprisingly what I think about this two market in a long term varies a lot, console gaming is usually preferred when you plan on playing at home relaxing with your friends on a large screen, rather than mobile gaming, which involves quick casual games during lunch or break time. Well, I think it might replace hand held console gaming market but not the home-based console gaming market. Also, the PC gaming market isnt holding much to console gaming market competition. But still DRM policies always went smooth with PC gaming market, Digital rights management (DRM) is a class of controversial technologies that are used by hardware manufacturers, publishers, copyright holders, and individuals with the intent to control the use of digital content and devices after sale (Wikipedia). So, sharing games with console gaming had being an issue for a long time, but recent advances by SONY to keep DRM at bay has received a standing applause from the gaming world. Taking a reboot in our discussion, the origin of video game indust ry started in mid 70s, as the Personal computer made advances, so did the need for better gaming experience, other than faster CPU and dedicated processors innovation to the game industry started with sound cards, graphic cards and 3D graphic accelerator. Sound cards were developed for addition of digital-quality sound to games and only later improved for music and audiophiles (Wikipedia, Video game industry 2013). The console gaming market falls under sixth generation era, which includes Sega Dreamcast, Sony PlayStation 2, Nintendo GameCube, and Microsoft Xbox. Many of the consoles were discontinued few years later starting with Dreamcast who made an early exit. We will be studying two organizations, which are currently the leaders in console gaming market, SONY and Microsoft with its respective console units PlayStation and Xbox and how various technological advances have affected the corporate culture to strive for betterment in the competitive market. 2

2.1 Game console overview:

A video game console is an interactive computer that produces a video display signal, which can be used with a display device (a television, monitor, etc.) to display a video game. The term "video game console" is used to distinguish a machine designed for people to buy and use primarily for playing video games on a TV in contrast to arcade machines, handheld game consoles, or home computers (Wikipedia, Video Game Console 2013). The first generation started with the video games played by connecting to massive computers and not an analog television but the very first home video game console The Magnavox Odyssey changed a lot in gaming, it eventually even shifted from switch design to separate cartridges for each game. The video gaming industry has grown by leaps and bounds, initial dedication to PC market with major advances in technology, which later went into hand-held gaming market with sleeker and portable devices without compromising on the efficiency and the user interface. Later we saw the sixth generation console gaming market, which had big player to drive the industry forward. Now we see motion console gaming market with the Microsoft promoting Xbox with a compulsion of buying the Kinect a motion detection device used for playing on Microsofts Xbox One. So, the current consoles falls under the seventh generation, with advances in internal HDD, advance optical drive like DVD9 which could allow DVD movies to be played in the same console and even support for removable media storage in the form of Memory Sticks.

3. Technology Impacts on game console:

As we know technology plays a vital role in major advances in any industry during its lifetime. We can see the advances in game console technology itself creating a competition for console gaming market. The revolutionary controllers and the Blu-ray drive are few of those technology progresses, which are making big impact for competitive market. At the same time Mobile gaming and PC gaming are keeping up the pace with console gaming market.

3.1 Game console advances

Many technological advances we get to see with the introduction to the next generation, as we discussed earlier it all started with the video games played by connecting to massive computers and not an analog television but later home video game console like The Magnavox Odyssey changed a lot in gaming, it eventually even shifted from switch design to separate cartridges for each game. Introduction of DVD drives made a major switch from traditional cassettes. Later on high DVD drivers were involved wherein the user was able to watch movies using the same drive. Also disc drive advances were made with HDD introduction as the game was falling short on space. Memory Sticks all gained a lot of popularity among the gamers were the gamer could saved the game in progress and later attach it to other similar console to continue making it more flexible and portable of course. Microsoft did the most recent advancement in gaming technology by introducing Kinect- a motion detection gaming console.

3.2 Mobile and PC gaming advances

Even though there is a lot of speculation about these two markets increasingly getting popular, I dont feel its advances actually will drift the gamers from console to other platforms. Mobile gaming and handheld console gaming actually fall under micro-console market and comparing mobile gaming with console gaming wont be fair, even though statistics have proved more numbers falling into mobile market, it clearly doesnt effect console gaming. We are talking about games costing maximum $5 to $60-70 console gaming disc. Surely, the stats would say mobile gaming increasing its domain, but still its difficult to think about it as a replacement. Whereas PC market has really high technological advances which comes nowhere around console gaming. Moreover the high graphics and sound effect provided by console gaming are unmatchable.

4. Organization Analysis:
We will continue our study on analyzing SONY and Microsoft, their corporate culture, Organization structure and people while competing against each other. Also, well see the recent advances in the console technology, which proved either as a boon or a bane for each of them. We will try fitting each of these organizations into Computing Value Framework to illustrate in which quadrant they fall. Moreover, the corporate culture and organization structure will focus on how Hofstedes Dimensions depicts the exact scenario of national culture impacting the growth of these organizations.

4.1 SONY Corporation

Sony is one of the Japans largest corporations by revenue and one of the leading manufacturers of electronic products. Founded by Akio Morita and Masaru Ibuka in late 40s were the first to build the tape recorder. Other than electronic as we all know Sony was engaged in business through three operating segments, Motion pictures, Music and Financial services. Its being called as one of the most comprehensive entertainment companies in the world. Sony executive forms a 13 member of board with two representative corporate executive officers and six corporate executive officers. Being diversified in various field, Sony holds a strong market in Sony corporation (Sony electronic in US) but Sony picture entertainment and Sony computer entertainment are struggling to find the same success which they had in electronics market. Their main products as we know are Playstation Game, Vaio Computer, Ericsson Mobile, Cybershot - Digital Camera, Walkman - Digital Mp3, and Bravia Television. Sonys corporate strategy is to be a leading global provider of networked consumer electronics and entertainment. Its management has being concentrating on both strategy and product innovations right from bringing the transistor technology to Japan from Bell laboratory to creating Walkman a complete new portable entertainment device. Sony doesnt believe in market research for innovations, which was cited in Akio Moritos Speech - Consumers do not know what is possible, but we do, so we dont do a lot of market surveys, but we focus and constantly revise and improve the applications of the products and develop new ones, and try to lead the consumers and communicate with them, thus creating the market. The organization structure was suppose to come under serious restructuring in 2009, due to recession followed by earthquake crisis as it was said to lay off 17,000 of its employee which constitutes 10% of their total employee headcount, but such speculation never threw light on what exactly happened, if you know about the employment policies back in Japan, they dont believe in lay off its called lifetime employment policy, introducing unique-yet-friendly policy wherein employees are not terminated or dismissed thereafter on any grounds, exceptionally for serious or isolated case of serious breaches of ethics. Each employee becomes a part of Sonys big family regardless of all strata of life. Also, as we have seen in the Hofstedes Dimension on the national culture, its said to have mild Hierarchy culture and many foreigners actually think that its extremely hierarchical because of their business experience of painstakingly slow decision making process and that all the decisions must be confirmed by each hierarchical layer and finally by the top management. This explains the power distance dimension wherein the organization in the country believe that power is distributed equally and anyone can get ahead and become anything if he works hard enough. Later researching on the various traits this company follows, I came across a wonderful c-span video library in which corporate culture of Sony and Microsoft was discussed in 1999 at a Northwest Bookfest, by two authors Mr. Andrew and Mr. Pual, talking about their respective books How the web has won: Microsoft from Windows to Web 5

and Sony: The Private life. Paul mentioned about how flexible were the communication at Sony Corporation and how Innovation was supported, he recalled an instance of Akio asking his colleagues to come up with a devise to listen up to music while flying to various destination for business, the engineering group came up with so-called pressman, after playing around with the devise he was even more excited, and planned on bringing it to the market, earlier there were many rejection to this project on why would people want to buy such a product which doesnt even record and also this device would require a headset, in Japan headphones were associated with hearing impairment which is a huge taboo and people are ashamed of hard of hearing, but well Akoi was more determined and said he would bring a culture of headphones throughout the world by marketing it in a right way. When we start discussing about Microsofts corporate culture we could easily spot the difference and what lead to a change in corporate culture which later affected its innovation culture. When it came to Human resource development, Sony regards its employees as the most important asset to the company because they believe that the process of development and innovation is derived by human capital. Also, Job Rotation justifies the unique working culture of Sony; it makes employees acquaintance with the organization and develops mutual understanding among Sonys different departments functioning for the common good of organization as a whole. As far as seniority and promotions are concerned, it is said to increase each year uniformly to maintain harmony & to avoid stress & jealousy in inter/intra-group (4VenturesLegacy n.d.). As we saw the various traits about the organization, its computer entertainment did reflect similar traits during its struggling phase of playStation3 entry into the market, as we know Japanese culture scores high on uncertainty avoidance, it had to bear huge loss both structurally and economically during 2006, when the market was down and they got badly struck between both the crisis. So they have learned themselves for any uncertain situation, which backs them well in such situations. Considering the Computing Value framework, Sony clear falls in the second quadrant of having development culture, as it does exhibit Insight, innovation and adaptation, and its always being directing itself towards expansion by having a decentralized organization culture. A lot of attention is paid towards external environment and people practice much of flexibility in the working manner. To sum it all Sony has flourished with technological advances having a Flexible focus area, R&D activities strategically managed, Dynamic R&D investment and Market can be created methodology. Summing up Sonys computer entertainment market, they are the current leaders in game console market with the most recent PlayStation4 introduction, which brought in more advances. Market analysts are noting that right at the E3 presentation Sony has won half the battle, much of these speculation are followed after every other presentation of the new product. Researching about the experience of what gamers feel about new advances is rather straight, the loyalty doesnt change for hard core gamers because few games which are console specific cant just be switched overnight, also as we discussed about the DRM policies which played a vital role in specific console gaming company was a great issue, DRM policies has always being relaxed for Sony consoles, moreover the motion detection consoles arent mandatory. So, comparing the market its pretty vast difference wherein Microsoft forces on buying the Kinect motion detection console and Sony has made it optional. Also, the Microsoft presentation had a weird take with following the DRM policies, which restrains players from sharing games, but a week later when Sony presented PS4 with no DRM policies, Microsoft had to actually redefine those policies overnight. Also, surprisingly Microsofts Xbox One was priced at $499 whereas Sony PS4 was priced at $399. Well, I wont conclude on the discussion here as we are going to analyze Microsofts organization culture and how it fits in Computing Value Framework.

4.2 Microsoft Corporation

Well a company that doesnt require a formal introduction, as its being one of the top successful companies for a long time in software development. Its rose to dominate the personal computing system market with MS-DOS in mid-80s, followed by Microsoft windows. Microsoft Corporation is an American multinational software corporation headquartered in Redmond, Washington that develops, manufactures, licenses, and supports a wide range of products and services related to computing. Bill Gates and Paul Allen founded the company on April 4, 1975. Microsoft is the world's largest software maker measured by revenues. It is also one of the world's most valuable companies (Wikipedia, Microsoft Corporation n.d.). Microsoft's board of directors has nine members as of 2010, including the company's founder and chairman of the board Bill Gates, current CEO Steve Ballmer and seven independent, non-management directors. The board oversees the company's activities via five committees: Antitrust Compliance, Audit, Compensation, Governance and Nominating and Finance. Under CEO Steve Ballmer are seven business presidents, five senior vice presidents of various functions (such as human resources and marketing), the chief research and strategy officer, the chief software architect, the general counsel and the chief operating officer. Microsoft has five divisions as of 2010: Client, Server and Tools, Online Services Business, Business Division, and Entertainment and Devices. Well, the entertainment and devices division is also too broad and has many products under it just to point out the famous ones which might be easy to relate are Windows phone market, Computer games that is Xbox which will be majorly concentrating on, Zune media player and MSN TV also many hardware like mouse, keyboard and joystick. Also, interestingly it houses Macintosh Business Unit, which develops Mac OS software like Microsoft Office for Mac. As I said we will be concentrating on Microsofts Entertainment and devices division, Xbox came into gaming market with big marketing strategy unlike Sonys PS4, but initially for five years had to bear the loss, they struck profit in FY08, the loss in earning period if looked closely illustrates that they were selling good but the amount invested in the market was much larger due to which they suffered losses till the FY07. Its being seen that Microsofts gaming division two years preceding 360 launch to present has incurred a loss of close to $3billion (callaham 2013).

So considering the chart, people might just jump to a conclusion saying its not doing good and when do you actually see profit earned from the investment, well surely to support this idea let me provide you with the insight that, Sony barred even more almost $5billion loss in the same period. This is how it works, we are talking about multinational companies starting a new venture into a non-conventional stream of business, so there is always a steep down graph representation, as lot of money is poured for research and development. The organization structure being hierarchical while relating it to Hofstedes dimension on Power distance its scores low, hierarchy is established for convenience, superiors are always accessible and managers rely on individual employees and teams for their expertise. Both managers and employees expect to be consulted and information is shared frequently. At the same time, communication is informal, direct and participative (Hofstede n.d.). These dimension clearly relate the working style and Corporate culture at Microsoft, even a successful company like Microsoft had few instances were it was wrongly represented saying the innovative culture has being dying, one instance in which, the hierarchical structure no doubt gave an ease to communicate ideas but an engineer at Microsoft cited saying Microsoft had a touch-screen e-reader developed in 1998, but Bill Gates nixed it because he didnt like the user interface, because it didnt look like Windows. T he team that developed the reader was told to stop coming up with new ideas and instead work on software for Microsoft Office that would be instantly profitable. So they were no more focused on developing technology that was effective for customers but rather go on developing add-ons to its existing feature which would make money (Allen 2012). I doubt this article because as our discussion goes for console gaming, Microsoft came up with the motion gaming consoles with a camera attached and its very innovative but market never accepted because of their wrong marketing I guess, unlike Sony who gave this feature as a optional one, Microsoft made it compulsion to buy eventually raising its market price to $499 as compared to Sonys PS4 priced at $399. But, its really sad that market reacts negatively all the time be it an innovation with interesting camera peripheral or its about implementing DRM policies. Talking about the DRM policies, in which it expected Sony to follow the same suit, but Sony actually capitalized on that subject, this resulted in very negative response from the market for Microsoft and it had to remove Xbox One DRM policies (SCHREIER 2013). Well, Microsoft has grown at a very fast pace, and it was considered as a non-bureaucratic culture, but later moving from the start-up image it had now adopted bureaucratic culture, also we know that it follows individualist trait, so the recent advances had lead to competition among the company itself. Microsofts early corporate culture, as illustrated by Paul Andrews, author of How the Web was won, in the Northwest Bookfest, Nov 13, 1999, he talked about different management strategies as per its corporate culture undertaken by Microsoft. Though talked about a fast paced industry with a need for top performers, he then even discussed about companies failure to retain top employees due to stack ranking. Vanity Fair had an article in its August issue that tells the story of how Microsoft human resources culture drove away talent. Author Kurt Eichenwald interviewed Microsoft employees and found that, ... a management system known as stack rankinga program that forces every unit to declare a certain percentage of employees as top performers, good performers, average, and poor effectively crippled Microsofts ability to innovate. Every current and former Microsoft employee I interviewedevery onecited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees, Eichenwald writes. If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, 2 people were going to get a great review, 7 were going to get mediocre reviews, and 1 was going to get a terrible review, says a former software developer. It leads to employees focusing on competing with each other rather than competing with other companies. (Gasse 2012). 8

According to Computing Value Framework, Microsoft I might say is dropping down from the development culture just because its going down on innovation and flexibility in the work culture, otherwise its still has long time and external focus towards expansion.

5. Conclusion:
As we can see even though both havent capitalized on the gaming market it is expected to grow in future, considering the competition from mobile and PC gaming, it actually doesnt seem to fall under same category and also in near future wont effect the console gaming market. Also, this industry is more or less a supplementary to their mainstream business, thats the reason why it can sustain the loss they bare in the early stages. As far as competition between these two are concerned only technological advances in game console would help them in growing faster. Continuing the same Organization structure and the corporate culture are still doubtful, as I have seen mixed responses for both companies. Japan who is said to follow life-employment contradicts with Sonys move to lay-off 10% of its overall headcount. On the other hand Microsofts innovation group depleting itself of the talent by holding a competition within the organization. Well, as far as gamers are concerned all loyal to specific company wont change so it matters mainly to a potential crowd trying to get into gaming.

Works Cited
4VenturesLegacy. Management of Innovation. Malaysia. Allen, Frederick E. The Terrible Management Technique That Cost Microsoft Its Creativity. July 3, 2012. http://www.forbes.com/sites/frederickallen/2012/07/03/the-terrible-managementtechnique-that-cost-microsoft-its-creativity/. callaham, John. Microsoft's Xbox division has lost nearly $3 billion in 10 years John. research, Neowon.net, 2013. Chou, Kevin. "Mobile Kills the Console But Advances the Gaming Industry." Wired. January 31, 2013. http://www.wired.com/opinion/2013/01/how-mobile-kills-the-console-but-advances-thegaming-industry/ (accessed July 7, 2013). ESRB. How much do you know about video games? Research, Entertainment Software Rating Board, NY: ESRB. Gasse, Jean-Louis. How Microsoft's human resources culture drove away talent. August 13, 2012. http://www.guardian.co.uk/technology/blog/2012/aug/13/microsoft-human-resourcesculture#start-of-comments. Hofstede. "National Culture Dimensinos." research, The Hofstede Center. SCHREIER, JASON. Lets try that again -Microsoft Is Removing Xbox One DRM. June 19, 2013. http://kotaku.com/microsoft-is-removing-xbox-one-drm-514390310. Wikipedia. DRM Wiki page. July 8, 2013. http://en.wikipedia.org/wiki/Digital_rights_management (accessed July 8, 2013). Wikipedia. Microsoft Corporation. . Video Game Console. July 8, 2013. http://en.wikipedia.org/wiki/Video_game_console (accessed July 8, 2013). . Video game industry. july 8, 2013. http://en.wikipedia.org/wiki/Video_game_industry (accessed July 8, 2013).

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