EA Case

Since the writing of the Electronic Arts Case the Sony Playstation 3 and the Nintendo Wii have been released and both have online gaming capabilities. What’s your assessment of the current online gaming market?

Since the Electronic Arts case there have many positive changes in the online gaming market. It has become the biggest industrial wave. It is the fastest growing form of entertainment and has captured a similar size of customer base as the movie box office. It has transformed the way users find entertainment. Many online games are like reality TV imitating real life scenarios. I think that given the number of people with high-speed Internet access is growing at a fast pace, many free online games are becoming hugely popular due to the ease of access. Furthermore, online games are growing on a global scale and attracting a broader range of demographics than the traditional video game industry. Research indicates that in 2008, the North American video game market reached $21.33 billion and people continued to spend a greater portion of their free time playing them.

PS3 and Nintendo Wii – Performance in the Online Gaming Market
The Sony PlayStation 3 and Nintendo Wii both jumped into the game console market to compete against Microsoft’s Xbox 360. Each has a new feature that makes it stand out from older consoles, the Xbox, and each other. For the PS3, the feature is its Blu-ray DVD player. Nintendo Wii has outsold Sony’s PS3 by a factor of nearly 2 to 1. Research suggests that Nintendo generates a positive gross margin on its consoles as compared to Sony. Wii generated 55% of all console sales in 2008. Although Sony has the largest installed base, it has lagged behind Wii in terms of number of units sold. PS3 sold approximately 1.3 million units as of year-end 2007 whereas Wii sold 2.5 million. To better meet the competition and to further boost sales Sony dropped the price of its PS3 console product.

The sales continued to decline for Sony PS3 in December 2008. US sales of the PS3 fell 19% in December 2008 while sales doubled for the Wii console. Research suggests that part of Sony's strategy hinged on selling the PS3 as a relatively inexpensive Blu-ray player. But prices of Blu-ray players have fallen so sharply recently, new players are available for less than $200, that it's possible to buy a Blu-ray player and an Xbox 360 for less than a PS3.