Video Games Market

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Nintendo was able to enter with an 8-bit system and rise to dominance by selling consignment, alleviating retailers’ risk. It had near a monopoly but Sega was able to overthrow Nintendo’s dominance by introducing a 16-bit system. At the time when Nintendo earned money on its 8-bit systems and wasnt going to reduce sales of 8-bit games by introducing new console, Sega ,who had experience from its arcade games, decide to create a new more advanced product. At last Nintendo also decided to introduce a 16-bit system but to that time it was useless. At first it was incompatible with Nintendo’s high amount of 8-bit games. And also it was made too late. Gamers already had Sega’s systems; they liked it and have no need to buy the same one. So, thinking what factors enabled Sega to break Nintendo’s near monopoly of the U.S. video game console market in the late 1980s, we can see that Nintendo was unable to plan its time and to make good compatibility decisions and let Sega to gain market. Nintendo choose to not make its video game consoles backward compatible. Nintendo knew that it conquered almost the whole market and felt that they could make consumers buying libraries for new parts of games. Video game console producers made most part of their profit on game and sold their consoles on a small price. Nintendo understood that the introduction of 16-bit systems create a strong consumers’ will to buy new 16-bit games. But Nintendo wanted its consumers to buy 8-bit video games. By not making their new product backward compatible Nintendo widened the playing field for Sega. It caused customers to incur switching costs to upgrade that were comparable to the costs to switch to Sega’s products. When Sony entered the video game market in 1995 its weakness was the lack of experience and reputation as a game manufacturer. By the way Sony entered the market with tremendous brand image in consumer electronics and access to extensive distribution channels in electronics and media....
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