The Games Have Just Begun

Microsoft and Nintendo battle for a place in an ever-expanding video-game market.

February, 2002

The holiday season shopping showdown is over. So who won the video game console war? Everyone did … at least for now. Introduced in successive weeks last November, Microsoft’s Xbox and Nintendo’s GameCube quickly complicated the gaming world, which had been thoroughly dominated by Sony’s dreadnaught PlayStation 2. The beefy Xbox, which boasts a 40 GB hard drive and Ethernet connection, sells for $299. The petite GameCube, with a long history of video gaming behind it, sells for $199.

According to Kimo Smigielski, assistant manager at video-game emporium Toys & Joys, his store’s allotment of several hundred Xboxes and GameCubes sold out within days of their respective releases. The store then sold the only consoles it could find, bundled packs that included game console, several games and accessories. The bundles raised the prices of the consoles an additional $200 or so, but the Xbox and GameCube continued to be snapped up.

“Actually, sales have been pretty well spread out between both systems,” says Smigielski. “As far as demand goes, I’d give the edge to the Xbox, but that’s only because we’ve had less of them.”

Smigielski says that sales may continue to remain good throughout the year because the consoles seem to be carving out their own niches: The Xbox looks like the choice of hardcore gamers, and GameCube seems to be a family favorite. This segmentation may be indicative of how large the video-gaming playing field has grown recently. According to the Interactive Digital Software Association, approximately 145 million Americans play computer and video games. In 2000, more than 219 million computer and video games were sold, or almost two games for every household in the country. The total dollar value amounted to some $6 billion. Not only is the market large, it is also diverse. According to IDSA, the average age of players is 28 years old, and 43 percent of game players are women.

“A lot of people are comparing the gaming world to the movie business,” says Smigielski. “Video games are probably getting as popular as movies are, and the cost of producing a new game now costs millions and millions.”

This year, the gaming world will get even bigger when Sony introduces a broadband modem and a 40 GB hard drive for the PS2. The accessories will enable the console to be hooked up to the Internet. Both the Xbox and the GameCube will have similar capabilities. However, Sony has a leg up on the competition with an established on-line entertainment division, which already has in its stable Jeopardy Online (100,000 players a day), Wheel of Fortune Online and the role-playing game franchise Everquest (375,000 registered users). By 2003, on-line players are expected to number nearly 70 million.

“We believe that the ability to play games on line will finally bring together the three disparate groups that have made up gaming – people who play on consoles, PC gamers and on-line games,” says Karl Okemura, vice president of Sony Hawaii Co. “The gaming world has been growing quite a bit lately, and we see on-line gaming as the next stage of growth.”

Not only does the future look bright for Sony, the present isn’t so bad either. According to Okemura, sales were a little slow in November, but picked up considerably during December. Surprisingly, the PS1, the first-generation PlayStation had strong and steady sales.

“Actually, for the holiday season, PS2 remained on top. We still sold more of them on average,” says Smigielski.

“I think it’s going to be this way for a long while.”

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David K. Choo