Week 2 EOC: Boston Consulting Group - Video Games

"...last month, video game sales plunged by a record 29% year over year, according to market-research firm NPD Group. Meanwhile, sales of consoles such as Microsoft Corp.'s Xbox 360 and Nintendo Co.'s Wii plummeted 38%. The steep drops came on top of a gradual sales decline that began in March." - Yukari Iwatani Kane. The headline news not to long ago as there was a steep decline in video game console sales in the industry thought to be decline-proof. The stalwart entertainment industry used to personify the endless strength of the American economy really can falter eventually. A few years ago entertainment took its first hit in a long time starting with the drop in console sales with the downturn of the economy in 2006. Quick to follow was a sharp decline in game sales across the board. "While the videogame industry had hopes of posting double-digit revenue growth this year, analysts now predict flat to 5% growth from $11 billion in 2008. Jesse Divnich, an analyst for Carlsbad, Calif., research firm Electronic Entertainment Design and Research, said he will "be happy if the industry grows." - Yukari Iwatani Kane. The unfortunate side effect is a loss of morale among the largest of these companies including Electronic Arts and Activision Blizzard planning on losing out in upcoming years instead of making profits. Where the lack of innovation went and with it, the profits I have no idea. What made these companies and the games they produce so monstrously profitable was fresh ideas and thoughts behind the creation, not updating the graphics engine and slapping a bigger number on the box. "Analysts expect Sony to cut the price on its PS3 by about $100 this year, leading to price cuts by Microsoft on some of its Xbox 360 models. The PS3 starts at about $400, compared with the equivalent Xbox 360, which costs about $300. Though Nintendo has said it won't cut prices on its $250 Wii this year, it is expected to do so indirectly by bundling games with the console." Yukari Iwatani Kane. The first thought to increase sales is to reduce cost on the console itself. Though we know (this being in the past) that the reduced cost on the PS3 to $250 and Xbox 360 to $200 increased sales slightly, the better and more powerful tool is to stop stifling innovation from the independent developers and allow ideas to flow. Sticking to Modern Warfare 5, PGA tour 16 and the 20th Madden to date is not the way to make money in the long run.