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Global Insight on Video Game Systems

  • May 2014
  • -
  • Frost & Sullivan
  • -
  • 15 pages

Market Definition and Overview

The video game systems market includes video gaming consoles and handheld devices that
render videos in addition to being used for gaming. Video is usually rendered on these devices
using formats such as MPEG LA defined codecs as well as Windows Media Video codec. While
High Efficiency Video Coding (HEVC) has not made it to the latest generation of consoles,
PS4 and Xbox One, MPEG 4 AVC remains the dominant format on these devices. The
increasing use of video streaming applications on these devices, even on seventh generation
consoles—PS3, Wii, Xbox 360, had driven manufacturers to quickly adopt MPEG 4. This trend
continues in major eighth generation consoles, and is also evident in the devices of some of the
low cost new entrants.

The devices included in this analysis are Sony’s PlayStation (PS) 2 (not included 2013
onwards), PlayStation 3 and 4, PlayStation Portable, and PlayStation Vita; Microsoft’s Xbox
360 and Xbox One; Nintendo’s Wii U, Wii, 3Ds, and Gamepad. The percentage share of
consoles in the total unit shipment increased from - in 2012 to - in 2013. The percentage
share of handheld devices declined from - in 2012 to - in 2013. This shift can be directly
attributed to the release of Xbox One and PS4 in 2013.

The regions covered within this study are North America (NA), Europe, the Middle East and
Africa (EMEA), Asia-Pacific (APAC), and Latin America (LA). The forecast period is 2014 to
2018, with 2013 serving as the base year, although 2012 numbers have also been provided.
Unit forecast is based on the number of units shipped by device manufacturers and not units
sold.

In 2013, the total market declined by ?%. This decline was primarily due to the fact that many
consumers put off their console purchases during the year in favor of the newest generation
consoles, Xbox One and PS 4, launched in 2013. A number of other factors also played a role
in this decline. Other factors such as the increasing use of smartphones and tablets for gaming,
limited to no price cuts that continue to render consoles an expensive purchase in emerging
countries, high import taxes in countries such as Brazil, and to some extent even a slow
economy, prevented consumers from making new console purchases.

Of course, additional factors such as availability of online games, accessories, subscription
price, and breadth of streaming content and third party apps all contribute to the adoption of a
video game console.

The greatest long-term growth challenge to this market is posed by competing devices such as
smartphones, tablets, smart TVs, and increasingly, online gaming services as well. In 2013, this
factor was of low intensity, but as the penetration of these devices increases and the bandwidth
in homes increases, this challenge can become a critical growth impediment.

The most important technology trend in this market is cloud technology which is in the emerging
phase right now. This technology is also tied to online gaming services, where cloud can be
employed to improve the gaming experience of those services. Vendors’ recognition of the
importance of this trend is evident in some of their strategic efforts. Sony acquired Gaikai in
2012, and at the consumer electronics show in January 2014, it unveiled its cloud-gaming
service, PlayStation Now. The service utilizes Gaikai’s cloud technology to stream games not
just to its gaming consoles, but also to its smart TV sets, smartphones, and tablets.

Microsoft, for its part, introduced its cloud-based Titanfall game in 2014. Titanfall uses
Microsoft’s Azure cloud platform to feature artificial intelligence-controlled characters to offer
users a more powerful and a more realistic experience.

Other growth factors and challenges, forecasts, and market shares are discussed in the
following sections.

Table Of Contents

Global Insight on Video Game Systems
Contents
Market Definition and Overview ....................... 3
External Market Factors—Drivers and Restraints ........................ 4
Key Drivers ................... 5
Critical Restraints .......... 6
Unit Shipment Forecast by Video Game System Type and by Region ..................... 7
Competitive Analysis ......... 10
Key Takeaways ................. 13
Legal Disclaimer ................ 14
The Frost and Sullivan Story 15

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