Console manufacturer
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A console manufacturer is a company that manufactures and distributes video game consoles. It is also known as a first-party video game publisher. Historically, some of the most recognized console manufacturers include:
- Atari - now a 3rd party publisher.
- Microsoft - the newest player in the market, releasing the Xbox console.
- Nintendo - historically the best known console manufacturer; also the longest running company in the market, and long-time domineer of the handheld console market.
- Sega - now a 3rd party publisher.
- Sony - became the market leader with its first console - the Sony PlayStation.
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Industry
The fact that out of the list above only three remain as console manufacturers demonstrates the volatility of this industry. Each new console generation, which typically lasts 5-7 years, experiences significant changes in the market share. For example although the Nintendo NES enjoyed a 90% market share during the 8-bit era, this dropped to approximately 60% after the 16-bit era, with Sega being responsible for the majority of this change with their Sega Megadrive. Likewise, during the 32/64-bit era, Sega's market share plumetted with the Sega Saturn, and Sony — a newcomer in the industry became the market leader (Nintendo took second place with their Nintendo 64). As of 2004, the most significant console manufacturers in the industry during the 128-bit era are Sony (PlayStation 2), Nintendo (GameCube), and Microsoft (Xbox). Out of the three, Sony is the current market leader with Nintendo and Microsoft equally in second place.
Pricing
An interesting strategy that many console manufacturers take is to sell their console at a low price (respective to the production costs) with the hopes that this will entice more consumers to purchase the hardware, which in turn will generate additional profit through extra software sales. For example, although a bit extreme in terms of "normal" pricing strategies within the industry, it has been reported that Microsoft was losing $300 USD with the sale of each Xbox unit.
Backwards compatibility
Recently console manufacturers have began considering backwards compatibility as an important feature in their future consoles. Nintendo has had much success making their Game Boy Advance compatible with the regular Game Boy and Game Boy Color handhelds, and Sony did the same making their PlayStation 2 backwards compatible with their PlayStation. Sony has mentioned that they will continue with this strategy and make their PlayStation 3 backwards compatible with the PlayStation 2, and Nintendo has hinted that they will do the same with their next-generation console: N5 (code-name: Revolution) as well as their new handheld Nintendo DS which will be compatible with the Game Boy Advance.
First-mover advantage
The "first-mover advantage" that certain console manufacturers experience on the other hand is a somewhat risky strategy. While there have been cases of consoles becoming successful partly because they were the first ones released within a specific era (most notably Sega with their Megadrive during the 16-bit era), success from being the "first-mover" is not always guaranteed. Sega tried once again but failed to reap benefits by being the first-mover during the 128-bit era with their Dreamcast. Unfortunately for Sega a lot of consumers decided that they would rather wait for the PlayStation 2 to be released instead. Interestingly enough Microsoft is reportedly considering using the first-mover strategy with their next-generation Xbox (code-name: Xenon, Xbox 360) which is slated to be released late 2005.
Third-party support
It has often been said that when it comes to a console's success: "its all about the games" and this is certainly true. A console manufacturer needs to have ample third-party developer support in order to have a steady stream of quality video games being released throughout the year. Although brand loyalty, technical capabilities and price certainly plays their part, people tend to purchase the console that offers the games that they enjoy most. Without games, there is no reason to buy a console. It is the very reason why people doomed the Nokia N-Gage to failure before it was even released. Therefore console manufacturers need to establish good relationships with third-party developers, otherwise they risk losing the support that they need to another competitor. A lot of this revolves around management, business decisions and partnerships, however a console manufacturer can also help promote third-party support by making their console easy to develop on. Part of the reason for the success of the Sony PlayStation against the Sega Saturn was that the PlayStation was considered an easy platform to develop games, while the Sega Saturn, with its dual processors and overall complexity, frustrated developers instead.