Case Study: Sony

Up until the 1990s, video games were thought to be toys primarily for children and teenagers and the goal for console manufacturers was simple: target children. Eventually the popularity of games grew to the point where entire generations were labeled the Atari or Nintendo generation. But by the late 1990s, the first generation of video game players was graduating from university, entering the workforce, and spending its income on video games. Sony owed much of the PlayStation's success to an effective campaign that targeted maturing gamers looking for edgier, more sophisticated games that tested their gaming skills. As Sony claimed industry dominance, a new mantra spread over the industry: target the core gamers – males in their 20s. The strategy worked extremely well for Sony which sold over 100 million of its PS2 units worldwide. This would continue to be the strategy for Sony and Microsoft as both heavyweights rolled out powerful hardware in 2005 and 2006. 

Meanwhile, Nintendo had not kept up with shifting consumer tastes and its games were viewed as too "kiddy" for older gamers. In 2001, Nintendo's GameCube accounted for 18% of the console market in the United States, behind Microsoft's Xbox with 24% and Sony's PS2 with 55%. Nintendo found itself in a difficult position as the company wanted to continue to create fun, simple, kid-friendly games, but saw older gamers moving on to different types of games. Many wondered if Nintendo's time had passed and questioned its ability to compete against companies like Sony and Microsoft. But when asked if Nintendo would leave the hardware business, the company's CEO responded, "When we withdraw from the home game console, that's when we withdraw from the video game business". 

As GameCube sales leveled off just two years after the system's launch, Nintendo began to reformulate its strategy. Willing to let Sony and Microsoft battle it out for the core gamer demographic, Nintendo adopted a strategy to expand the market believing that simple, fun games with intuitive control schemes would appeal to people of all ages and genders. Nintendo first attempted this strategy with its portable gaming device, the Nintendo DS (Dual-Screen), which was launched in 2004. The DS had a clamshell design with two screens, one on top of the other. The bottom screen was touch-sensitive and could be pressed by either finger or stylus. The first breakout title for the DS, Nintendogs, proved Nintendo's intuition about the market correct, and was a runaway success. Nintendogs was a game where owners could care for a virtual puppy by using touch-screen controls or voice commands. By fall of 2006, Nintendo had sold over 4 million copies of Nintendogs in the United States.

Confident that its strategy was sound, Nintendo moved forward in developing its next home console, the Nintendo Wii, bringing to market a new type of controller that could detect three-dimensional motion and acceleration. In a tennis game, for example, players no longer pushed a button to swing the racquet, but swung the controller like a real racquet to hit the ball. Consumer anticipation was very high as the Wii's launch date approached. What was thought to be a two-company battle between Sony and Microsoft was shaping up to be a hard-fought three-way struggle for the hearts and wallets of gamers the world over.