CASE STUDY
"Battling Video Game Piracy"
Nicholas Degaetano
Econ 136 ? Business Strategy
January 28, 2007
Industry Profile
The video game industry has grown to take in over twenty-two billion dollars in revenues since 1997, with the three major players being Sony's playstation, Microsoft's Xbox and the soon to come Nintendo Wii. In 2004 Asian gamers spent a reported $7.6 billion dollars on game software while the U.S. spent some $7.4 billion dollars translating into about 300,000,000 copies sold. 2004 marked the biggest loss for video game industry in years when a new statistic showed that almost 70% of circulating games were actually pirated copies. This large percentage sums up to about four billion dollars in losses from piracy alone. Piracy started off as a small problem in eastern Asia and the industry just ignored the problem hoping it would subside. In 2002 Sony teamed up with Microsoft to sue Lik-Sang, the largest distributor of chips on the market, hoping that this would end the mod chip craze and return profits to an elevated level. Even though this industry is obviously susceptible to piracy, the barriers to entry are so great that the threat of possible substitutes or new entrants is next to none.
2004 Market Share
Sony struck early in the video game battle, releasing its playstation a full year early in Japan, which enabled them to sell over 20 million units before the Xbox even hit the market. "Between 2000 and 2006 Sony (Blue) had sold 111 million playstations, while Microsoft (Green) sold 24 million Xbox units and Nintendo (Purple) only sold 21 million of its unpopular gamecube. "
Razor & Razorblade Strategy
The video game industry's image has become that of state of the art ...