3 Do

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Information about 3 Do
Business & Mgmt

Published on March 22, 2009

Author: smehro

Source: slideshare.net

 

Home Video Games First Video Game: 1967 Needs devices such as Television (Display)‏ Joystick or Control Pad (Input Device)‏ How different from computer? More specialized machine (Cheaper)‏ Limited number of Input / Output Devices Use ROM (Read Only Memory) as a Medium No or very small storage devices (RAM)‏ Ralph Baer’s “Brown Box”, 1967 Nintendo Entertainment System (NES), 1983

First Video Game: 1967

Needs devices such as

Television (Display)‏

Joystick or Control Pad (Input Device)‏

How different from computer?

More specialized machine (Cheaper)‏

Limited number of Input / Output Devices

Use ROM (Read Only Memory) as a Medium

No or very small storage devices (RAM)‏

Targets Main target: Teen Agers and Young Adults (Existing gamers)‏ Has some Spending Power Having some preference on brand Young Children (New comers)‏ Less Spending Power Rely on their Parents Parents (No Idea about games :)‏ How much they can spend?

Main target:

Teen Agers and Young Adults (Existing gamers)‏

Has some Spending Power

Having some preference on brand

Young Children (New comers)‏

Less Spending Power

Rely on their Parents

Parents

(No Idea about games :)‏

How much they can spend?

Technologies ROM Cartridge on Video Game Introduced in 1976 (Fairchild Channel F)‏ Dominant Media of Video Game System CD-ROM (1985) on Video Game Introduced on 1988 (TurboGrafx-CD)‏ Slower loading, but more capacity CD-Drive is expensive, but Disk is cheap Early stage of 3D, “Virtual Reality” More Computing Power needed

ROM Cartridge on Video Game

Introduced in 1976 (Fairchild Channel F)‏

Dominant Media of Video Game System

CD-ROM (1985) on Video Game

Introduced on 1988 (TurboGrafx-CD)‏

Slower loading, but more capacity

CD-Drive is expensive, but Disk is cheap

Early stage of 3D, “Virtual Reality”

More Computing Power needed

Opportunities 3DO Saw Superior Hardware Draw attention of Users Better Titles Open Architecture Attract Developers Reduce Converting Process Joint Venture with Leaders Aiming even the other Multimedia Entertainment Market

Superior Hardware

Draw attention of Users

Better Titles

Open Architecture

Attract Developers

Reduce Converting Process

Joint Venture with Leaders

Aiming even the other Multimedia Entertainment Market

Market and Its Neighbors, 1991 World-Wide Home Video Game $3 Billion North America Entertainment Arcade games, Movie theater, Video Rental Japan Europe Asia Home Video Game Companies belong to: All other amusement and recreation industry (713990)‏ $29 Billion Overall

Players in Industry Suppliers Hardware components Software developers Video Game System Companies Usually exclusive manufacturer Wholesalers and Retailers Consumers (Gamers)‏

Suppliers

Hardware components

Software developers

Video Game System Companies

Usually exclusive manufacturer

Wholesalers and Retailers

Consumers (Gamers)‏

How Industry Worked

Source of Revenue Two Main Source of Revenue: Software Loyalty Hardware sales In case of Nintendo 64,* Hardware Margin: 1~5% Software Margin: 45% … Why? * Business week Jun., 9, 1997 Estimation including cartridge mfg cost (Nintendo)‏ Loyalty Data from OEM Magazine (1996, 8), Software Pricing from NPD Group Inc. (1997, 8)‏

Two Main Source of Revenue:

Software Loyalty

Hardware sales

In case of Nintendo 64,*

Hardware Margin: 1~5%

Software Margin: 45%

… Why?

Estimation including cartridge mfg cost (Nintendo)‏

Loyalty Data from OEM Magazine (1996, 8), Software Pricing from NPD Group Inc. (1997, 8)‏

Pricing Strategy of Industry

Multiple Layers Industry Value Added * $50 Retailers $27.5 Developers Software Hardware $5 License Fee $450 – Retailers Manufacturer ** (Closed Architecture)‏ 1~5% Margin * In case of Sega’s case. ** Only estimation is available, but some says that retail price could be lower than manufacturing cost. (http://www.alexassoc.com/white/sony.shtml)‏ $19.5 Revenue

Industry Structure Map Independent Collaborative Closed Open Original map was drawn by Hirabayashi Hisakazu, Akio Koichi (1996), and slightly modified Exclusive Heavily rely on software loyalty Industry Solely rely on Hardware sale Collaborative Software Royalty only Licensing Hardware

Exclusive

Heavily rely on software loyalty

Solely rely on Hardware sale

Collaborative

Software Royalty only

Licensing Hardware

Market Share Nintendo Ruled until 1994 Sega almost catch Nintendo in U.S. Market In 1993, HHI was 5,468 * (Highly Concentrated)‏ From: Feasibility analysis of domestic game system development, Hee Soo Kim, Jan, 2002 Total Revenue (in Million$)‏ * Excluded NEC’s TurboGrafx-16, which discontinued in 1993, and Philips’ CD-I, which had minimum market share.

Nintendo Ruled until 1994

Sega almost catch Nintendo in U.S. Market

In 1993, HHI was 5,468 * (Highly Concentrated)‏

What’s Attracts Gamers? Own Games Titles Best Seller? Many titles sold? Competitors have it? Technology – Better System Quality of Graphics or Sound? Speed of Processing, Loading Price How many gamers can buy it? …

Own Games Titles

Best Seller?

Many titles sold?

Competitors have it?

Technology – Better System

Quality of Graphics or Sound?

Speed of Processing, Loading

Price

How many gamers can buy it?

Strategic Move: 3DO (1)‏ Intrude untapped home entertainment area Dream Team Alliances: EA, Matsushita, Time Warner, Kleiner Perkins, AT&T… Comparable with a lot of Media Formats The most advanced machine First 32bit, RISC Microprocessor CD-ROM based High-end platform 24bit Graphic Processor Expandable Peripherals and Enhancements

Intrude untapped home entertainment area

Dream Team Alliances:

EA, Matsushita, Time Warner, Kleiner Perkins, AT&T…

Comparable with a lot of Media Formats

The most advanced machine

First 32bit, RISC Microprocessor

CD-ROM based High-end platform

24bit Graphic Processor

Expandable

Peripherals and Enhancements

Strategic Move: 3DO (2)‏ Open platform Large Comparability – New Standard Favor for Developers No hardware license fee Anyone can produce 3DO $3 for Software Royalty per Disc Free Contents Libraries Pricing: $700 for Hardware $75 for Software

Open platform

Large Comparability – New Standard

Favor for Developers

No hardware license fee

Anyone can produce 3DO

$3 for Software Royalty per Disc

Free Contents Libraries

Pricing:

$700 for Hardware

$75 for Software

3DO’s Multiple Layers Value Added $75 Retailers $40 Developers Software Hardware $3 Royalty Fee $700 – Retailers * Manufacturers (Open Architecture)‏ * Retail price is vary from manufacturers to manufacturers. Any manufacturers can make 3DO if it is comparable with 3DO. No License Fee Revenue

Perceptual Map, 1993 Own Game Titles Few High Low Performance Many Super NES $200 Genesis $190 3DO $700

Strategic Reaction: Sega Use its strength: Own amusement centers and Arcade games Convert them into Home Video Game Consoles Introduce CD-ROM – Earlier than 3DO Sega CD – Add-on for Genesis Announce Next 32bit machine, with CD-ROM Sega Channel – through cable network Other enhancements: Network add-on: Edge 16 Enhance add-on: Genesis Super 32X

Use its strength:

Own amusement centers and Arcade games

Convert them into Home Video Game Consoles

Introduce CD-ROM – Earlier than 3DO

Sega CD – Add-on for Genesis

Announce Next 32bit machine, with CD-ROM

Sega Channel – through cable network

Other enhancements:

Network add-on: Edge 16

Enhance add-on: Genesis Super 32X

Strategic Reaction: Nintendo Keep low pricing strategy Enhance existing system Enhance add-on: Super FX Showcase title: Star Fox Project Reality (later Nintendo 64)‏ Announce 64bit System Appeal existing system’s capability

Keep low pricing strategy

Enhance existing system

Enhance add-on: Super FX

Showcase title: Star Fox

Project Reality (later Nintendo 64)‏

Announce 64bit System

Appeal existing system’s capability

Perceptual Map, 1994

Strategic Move: Sony New entrant with Play Station (later PS-X)‏ 32bit, CD-ROM machine Use the other subsidiaries License with software community $3 ~ $9 per disc Advanced commitments from software developers Pricing System: $500 (1994)‏ Later $300

New entrant with Play Station (later PS-X)‏

32bit, CD-ROM machine

Use the other subsidiaries

License with software community

$3 ~ $9 per disc

Advanced commitments from software developers

Pricing System:

$500 (1994)‏

Later $300

Perceptual Map, Late 1994 (with SONY)‏ Own Game Titles Few High Low Performance Many Saturn $450 (400)‏ 3DO $500 PS-X $500 (300)‏ Nintendo64 $250 (200)‏ * Number inside of ( )‏ Is actual retail price

As time goes by…

Epilogue Enhancement to catch competitors: M2 Accelerator Price drop (1996)‏ Out from Hardware Development (1996)‏ Sold to Samsung (1997)‏ Become a Software Developer (Studio3DO)‏ Bankrupt (2003)‏

Enhancement to catch competitors:

M2 Accelerator

Price drop (1996)‏

Out from Hardware Development (1996)‏

Sold to Samsung (1997)‏

Become a Software Developer (Studio3DO)‏

Bankrupt (2003)‏

Why 3DO failed? Too Expensive (High entering cost)‏ Few Titles and No “Star Player” No focus on its identity No “star” game producers No bestsellers Too broad targets What really is it? $200 (Super NES) $190 (Genesis) $700 (3DO)‏

No “star” game producers

No bestsellers

Too broad targets

What really is it?

$200 (Super NES)

$190 (Genesis)

$700 (3DO)‏

Pitfalls: Trip Hawkins should not: (1) Focus too much on Software Industry License fee is coming from developers, but Who really pay the License fee? “Gamers” Underestimate power of major game publishers They already have strong influence to gamers, but New developers don’t have it. (So 3DO does)‏

Focus too much on Software Industry

License fee is coming from developers, but

Who really pay the License fee? “Gamers”

Underestimate power of major game publishers

They already have strong influence to gamers, but

New developers don’t have it. (So 3DO does)‏

Pitfalls: Trip Hawkins should not: (2) Try to put everything in 3DO Needs to reduce cost by remove unnecessary parts Make consumers focus on Open Architecture Sony priced PS-X as $299 while manufacturing cost was above $339. Could 3DO do that? * Go too far from consumers Affordable “future” * Shakeup at SONY: What's the Playstation Costing? (http://www.alexassoc.com/white/sony. html )‏

Try to put everything in 3DO

Needs to reduce cost by remove unnecessary parts

Make consumers focus on

Open Architecture

Sony priced PS-X as $299 while manufacturing cost was above $339. Could 3DO do that? *

Go too far from consumers

Affordable “future”

Thank You

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