My career is analysis and problem solving. I am a formally qualified engineer and for the last couple of years have been essentially involved in higher level management consulting. As such i thought i might turn my mind to having a wider look at the forces on the videogame industry. More importantly, where companies have gone wrong leading to the current state of play within the industry.
The first thing i would like to make comment on is that in attempting to analyse sales data from the videogame industry, you have to look far wider than the industry itself. You also need a base level understanding of "group think" or what is essentially mob mentallity, as the products are aimed at mass consumption.
HD displays and formats - This is oft touted as one of the prime strengths of the Xbox360 and PS3. But what is the true effect of HD displays/formats on the mass market? It is easy to see that the mass consumer is trending towards HD displays in the form of either LCD or plasma TVs. So is the market truly moving to HD? For the mass market this is a by proxy "yes". The proxy part comes in the form of what is driving HD sales. The mass consumer does not look at a 42" plasma and initially say"it is 1080p", they look at this display and see a good quality picture, on a screen that is 2-4 times larger than what he previously had, in a form factor that is slim and stylish, for a reasonable price. The fact that the display is HD is part of the decision to buy, but for the mass consumer it is not the overiding factor. Rather it is oft considered an added bonus. So while HD display sales are increasing, it is not primarily due to the HD factor. This leads to a misconception of the applicable market forces, on which other commercial decisions are based, such as HD media formats (BR, HDDVD) and the hardware for these formats (standalone players, consoles). Sony made a larger fundamental error here than microsoft due to their vested intrest in their own proprietary format. Recently it has been recognised that the mass market is yet to really choose a side in the HDDVD v BR format war. Sales of mvoies on either type are nowhere near DVD levels. Rather it appears that the mass consumer is relatively happy with the DVD format and despit owning a HD display, would rather spend money upgrading his player to one that can upscale DVD to 1080p than investing in a whole new format. Remember i am talking of the mass consumer here, not the technophiles whose voices seem so dominant when talking about HD v SD.
Time - This may seem a rather strange market factor, but the time available to your mass consumer today is crucial, especially when talking about an entertainment device. Your average mass consumer today has less time available to them now than they did 20-40 years ago. Time is money is the axiom of the 21st century and people are loathe to waste it. As such the mass consumer focus is on "instant gratification". They want their music now, they want their internet now, they want their enjoyment now, with the effort involved in gratifying this want being minimal. Each market also has varying amounts of time available to them depending on the culture.
Cost - If time is money, and time is valuable, then money must be valuable. Doubt anyone would dispute that money is of general concern to the mass consumer. Needless to say, cost of a product must balance perception of value (not actual value) against cost. the difference between actual and percieved value is exactly that, perception. The mass consumer does not look at the power of the cell, the advantage of 50Gb BR storage, the "future proof" nature of a technologically advanced piece of hardware, the size of the HDD, the improved wireless speeds, the ability to add HD or any other number of specific factors. The mass consumer generalises and then comes up with a percieved value. Would a phone sell better if it was MP3 capable for the same price? Yes, as the percieved value would be greater. Even if the consumer already had a MP3 player, or had no real use for a MP3 player the perception of value would be greater. This has a limit though, as i stated before, as it needs to be balanced against cost. Revolution v evolution also add to mass consumer perceptions of cost v value.
Style - The modern mass consumer is far more style aware. The awarenese being borne predominantly of the current cultural trend of image signifying importance or societal standing. Consumerism and posession are culturally considered bigger indicators of importance and social standing than is money. Not to say that money isn't part of it, as you still need to have the money to consume and possess the goods. However, credit and debt in society are far less frowned upon than they were 20-40 years ago, and far easier to obtain.
This is not an exhaustive list of the market factors. I have specifically left out factors that have been previosuly discussed in other posts such as user base, development costs, production costs, etc. These have been done to death. The broader factors mentioned above from the mass consumer point of view have seen to be overlooked quite often however.
Wii - percieved value v cost is good. The "new way to play" and "novel idea" that is the Wii increase percieved value. The HD display/format factor is considered appropriately in it's use of technology, however this may be good luck more than good planning and analysis. Style and form factor fit with current mass consumer trends. Fails to expand on possibilities that would increase value however. Considers the time factor by addressing the instant gratification that the casual audience is looking for, but also runs the risk of alienating the established audience.
PS3 - Pushes a format that the mass consumer is not ready to adopt. The "push" of the format makes the mass consumer standoffish. Cost v percieved value is poor due again to the misinterpretation of the market adoption of HD display types, which ties into new HD format. Cost v Value also suffers from similarity to other products that have a higher percieved value such as a PC. Time factor alienates a wider audience as games tend to be "hardcore" and require a more devoted effort for full enjoyment. Style suffers due to size more than form factor. Over time the products appeal will increase as the above factors shift, but the horse may have bolted by then.
Xbox360 - Cost v Value is fair and reasonable, but reported failure rates tarnish this. Percieved value through large library of games is good, but limited due primarily to the genre focus of the titles. HD factor is well balnced. Appears to understand the HD market trend the best. That is that it is becoming the new standard but is not yet purchased based on the new standard. Time factor suffers in the same way as PS3. Stle factor is moderate, but suffers again in the same way as PS3.
DS - Time is the DS's major advantage. Especially in japan. You can gratify your want/need almost instantly, and very quickly just about anywhere, espcially given the nature of the games made for it. HD display/format factor is again understood on a technical basis when applied to the handheld market. Cost v value is again well understood, but suffers from poor development of possibilities that would improve this. Style is demonstrated by the growth in sales from DS to DS Lite.
PSP - Suffers in a similar way as does Xbox360 when compared to Wii (DS v PSP). Multifunctionality means all elements suffer in same shape thus reducing perception of value to cost. (yes it does internet, MP3, video, games etc, but a solo MP3 player is much smaller for example. Cramming everything in reduced the "portable" appearance of the device.) Time suffers based on games catalogue, especially during the era of PS2 to PSP ports. Style is good, but againn suffers in a similar way as PS3. Looks good, but too big.
This is my broad and VERY VERY SIMPLISTIC analysis of why sales can be seen to be the way they currently are. Hopefully the basics of the point are conveyed however. Finally, i hope that the videogame fanboys (don't care what console you back) realise that the industry is not it's own microcosm. The attitude of the market in general, and not just to videogames has to be understood. The only one who this generation appears to have understood it is nintendo. That is not to say that they have not stepped a foot wrong. This analysis is also with the benefit of hindsight.
