1. Video Game Basics
January 2006

2. Who are we?
 International Strategic Marketing
– Under the responsibility of Cyril Vermeil
– Includes 4 groups:
 Market Knowledge – Study the market and competition
 Consumer Knowledge – Study the consumers
 Marketing Intelligence – Benchmark competitors’ communication strategy
 Entertainment & Licensing – Identify trends and licensing opportunities
 Market Knowledge missions
– Study the past – to understand how the market works (Market
Reviews)
– Monitor the present – to see what’s happening now (Daily Competitive
Review)
– Anticipate the future – to help the company in making the right
decisions (International Release List, forecasts)
2 − January 200

3. Video Game Basics – Agenda
 Video Game History
The Pioneers / Modern Times / Milestones / Present Times
 Current Generation Consoles
Sony’s PlayStation 2 / Microsoft’s Xbox / Nintendo’s GameCube
Nintendo’s GameBoy Advance / Nintendo’s DS / Sony’s PSP
 Going Next-Gen
Microsoft’s Xbox 360 / Sony’s PlayStation 3 / Nintendo’s Revolution
 The Video Game Market
A Cyclic Market / The Software Market
 The Main Players
The Industry / Electronic Arts / Take 2 / Activision / THQ / Konami / Capcom / Atari
 Glossary
 Video Game Demos
3 − January 200

4. Presentation Rules
 If there’s something you don’t understand, ask us
 If you are too shy to ask, ask anyway
 If you are really too shy to ask, have your neighbour ask for
you
 There are no stupid questions
 This presentation is for you – participate!
4 − January 200

5. Video Games History
January 2006

6. Video Games History – The Pioneers
1971  Nutting releases the first arcade video game – Computer Space
1972  Pong breaks through
1976  Fairchild releases the first home console, the Channel F
1977  Atari releases the Video Computer System (VCS)
1978  Nintendo enters the arcade market
1981  Electronic Games becomes the first video game magazine
1983  Nintendo releases the Nintendo Entertainment System (NES) in Japan
8 bits
1986  The NES hits the USA, outselling its competitors 10 to 1
1989  Nintendo releases the Game Boy
16 bits
1991  Nintendo releases the Super NES but faces competition from NEC’s
Turbo Grafx and Sega’s Genesis
6 − January 200

7. Video Games History – Recent Times
32/64 bits
1995  Sony launches the PlayStation, Sega launches the Saturn. Both
consoles use CDs
1996  Nintendo launches the Nintendo 64
1998  Sega launches the Dreamcast in Japan – the first online-enabled
128 bits
console
1999  Sega launches the Dreamcast in the US, earning $98
million within the first 24 hours
2000  Sony launches the PlayStation 2 in Japan in March, selling 1 million
consoles in two days. The machine is launched in the US in October
2001  Sega exits from the hardware business. Nintendo launches the
Game Boy Advance. Nintendo’s GameCube and Microsoft’s Xbox
are released within days of each other in the US
7 − January 200

8. Video Game History – Milestones
1978  Taito creates Space Invaders
1980  Namco launches Pac-Man – the first video-game character to be used
in merchandizing
1981  Nintendo creates Donkey Kong … along with a little Italian plumber
named Mario
1985  Tetris is created by Alexey Pajitnov
1990  Super Mario Bros. 3 sells 17 million cartridges worldwide.
1991  Sega creates Sonic the Hedgehog
1995  Ubisoft launches Rayman
1996  Pokémon hits Japan. Video games get their first true heroine in Tomb
Raider’s Lara Croft
1997  Bandai creates the Tamagotchi
8 − January 200

9. Video Games History – Present Times
2003  April: Square and Enix merge, creating Japan’s RPG powerhouse
2004  April: Namco and Bandai merge, the last of the big Japanese corporate
movements
 November: Blizzard’s World of Warcraft is launched in the US
 December: the Nintendo DS and Sony PSP are launched in Japan
within days of each other
2005  May: Microsoft, Sony and Nintendo announce their plans for their Next
Gen consoles at E3
 July: “Hot Coffee” mod reveals sexual mini-game in Take 2’s Grand
Theft Auto: San Andreas
 Nov/Dec: the first Next Gen console, Microsoft’s Xbox 360 is launched
worldwide
9 − January 200

10. Current Generation Consoles
January 2006

11. Sony’s PlayStation 2 (PS2)
 The leading machine of the market
– Launched in Japan on March 4, ’00
– Launched in the US on October 26 ’00
– Launched in Europe on November 24 ’00
 Assets
– First console with DVD player capability
– Backward compatibility gives access to the PlayStation game catalogue
– PlayStation brand recognition
 Weak points
– Online offer somewhat lacking structure
 Top-sellers Installed bases
– Grand Theft Auto: San Andreas (Take 2) US 32M
– Gran Turismo 4 (Sony) Europe 34M
– Madden NFL 06 (Electronic Arts) Japan 18M
Figures at end 2005
11 − January 200

12. Microsoft’s Xbox
 The outsider turned second-best
– Launched in the US on November 15 ’01
– Launched in Japan on February 22, ’02
– Launched in Europe on March 14 ’02
 Assets
– The most powerful console around
– Microsoft’s marketing power and resources
– Xbox Live online service
 Weak points
– Perceived as a “gamer only” console
– Failed to establish itself in Japan
 Top-sellers Installed bases
– Halo 2 (Microsoft) US 14M
– Tom Clancy’s Splinter Cell (Ubisoft) Europe 7M
– Dead or Alive 3 (Tecmo) Japan 475K
Figures at end 2005
12 − January 200

13. Nintendo’s GameCube (GC)
 The struggling legacy
– Launched in Japan on November 14, ’01
– Launched in the US on November 18 ’01
– Launched in Europe on May 3 ’02
 Assets
– Nintendo brand recognition and franchises
– Link with the GameBoy Advance
 Weak points
– Perceived as too childish
– Lack of released titles
– Online support inexistent
 Top-sellers Installed bases
– Super Smash Brothers Melee (Nintendo) US 11M
– The Legend of Zelda: The Wind Waker (Nintendo) Europe 5M
– Mario Kart: Double Dash!! (Nintendo) Japan 4M
Figures at end 2005
13 − January 200

14. Nintendo’s GameBoy Advance (GBA)
 Uncontested … so far
– Launched in Japan on March 23, ’01
– Launched in the US on June 11 ’01
– Launched in Europe on June 22 ’01
 Assets
– Nintendo brand recognition and franchises
– Backward compatibility gives access to the GameBoy game catalogue
 Weak points
– Screen quality (corrected with the GBA SP)
 Top-sellers
– Pokémon Ruby/Sapphire (Nintendo) Installed bases
– Super Mario Advance (Nintendo) US 31M
– Mario Kart: Super Circuit (Nintendo) Europe 19M
Japan 17M
Figures at end 2005
14 − January 200

15. Nintendo’s DS
 The new kid in town
– Launched in the US on November 21 ’04
– Launched in Japan on December 2, ’04
– Launched in Europe on March 11 ’05
 Assets
– Nintendo brand recognition and franchises
– Backward compatibility gives access to the GameBoy Advance catalogue
– Dual-screen and wireless capabilities
 Weak points
– Retro-design of the console
– Sketchy positioning
 Top Sellers Installed bases
– Super Mario 64 DS (Nintendo) US 4M
– Nintendogs (Nintendo) Europe 2.5M
– WarioWare: Touched! (Nintendo) Japan 5M
Figures at end 2005
15 − January 200

16. Sony’s PlayStation Portable (PSP)
 The other new kid in town
– Launched in Japan on December 12, ’04
– Launched in the US on March 24 ‘05
– Launched in Europe on September 1 ’05
 Assets
– PlayStation brand recognition
– Multifunction device: games, music, movies
– Wireless capabilities
 Weak points
– Duplicate line-up with the PS2
– (Very) limited battery life
 Top Sellers Installed bases
– Grand Theft Auto: Liberty City Stories (Take 2) US 3M
– Need for Speed: Underground Rivals (Electronic Arts) Europe 2.5M
– Untold Legends: Brotherhood of the Blade (Sony) Japan 2.5M
Figures at end 2005
16 − January 200

17. Going Next-Gen
January 2006

18. Microsoft’s Xbox 360 (X360)
 The first Next-Gen Console
– Launched in the US on November 22 ’05
– Launched in Europe on December 2 ’05
– Launched in Japan on December 10, ’05
 Assets
– Next-Gen processing power
– Limited backwards compatibility with the Xbox
– Xbox Live online service
 Weak points
– Launch line-up with limited interest
 Top-sellers Installed bases
– Call of Duty 2 (Activision) US 1.2M
– Madden NFL 06 (Electronic Arts) Europe 500k
Japan 80k
– Perfect Dark Zero (Microsoft)
Figures at end 2005
18 − January 200

19. Sony’s PlayStation 3 (PS3)
 The favorite
– Expected launch in Fall 2006
– Should be expensive ($400+?)
 Assets
– PlayStation brand recognition
– Backward compatibility with the PS2 and the PSX
– Will double as a Blu-ray reader
– On paper, twice as powerful than the Xbox 360
 Weak points
– Complex architecture, difficult to program for
– Will have to compete with Microsoft’s counter-attack at launch
19 − January 200

20. Nintendo’s Revolution
 The family-friendly underdog
– Expected launch in Fall 2006
 Assets
– Nintendo brand recognition and franchises
– Innovative, motion-based controller
– Backward compatibility with the GC
– Online service, similar to Xbox Live
 Weak points
– The least powerful Next-Gen Console
– Seducing concept, will have to confirm with games
– Should remain dominated by Nintendo properties
20 − January 200

21. The Video Game Market
January 2006

22. Video Games – A Cyclic Market
Sources: ELSPA / ScreenDigest
22 − January 200

23. The Software Market
Japan
$3.0bn (15%) UK
Europe
France
Germany
$7.0bn (40%)
Spain
Italy
Others
US
$8.5bn (45%)
Sources: ELSPA / ScreenDigest
23 − January 200

24. The Software Market
Home Console Software Market Share in Value
GC GC
GC PSX PSX
PSX 11% Xbox 17%
17% Xbox 3% 1%
2% 1%
15%
Xbox
22%
PS2
59% PS2 PS2
71% 81%
USA Europe Japan
Sources: ELSPA / ScreenDigest
24 − January 200

25. The Main Players
January 2006

26. The Video Game Industry
From concept … to game … to product Consumers
Developer Publisher Distributor
Creates the game Markets the game Installs the game
in stores
Software Development Game Approval
Kits (SDK) Manufacturers check if
Special versions of the Royalties
the games respect Manufacturers receive a
consoles designed for their standards in
developing and testing set royalty on each and
terms of quality and every game produced for
games contents their console
Manufacturer
Creates and produces the consoles
26 − January 200

27. The Main Players
Microsoft Eidos
Ubisoft
Take 2 Atari Sony
Konami
Electronic Arts Sega
Activision Capcom
THQ Nintendo
27 − January 200

28. Electronic Arts
 The leader of the market
 Assets
o First development resources in the world
o Dominates the Sports segment (Madden NFL, NBA Live, FIFA titles)
o Has a strong portfolio of licensed titles and franchises (Harry Potter, James Bond, The
Sims, Medal of Honor)
 Weak points
o Rely on established brands, and lacks original creations?
o Recently suffering from quality issues
 Top-sellers
o Madden NFL 06 (PS2/Xbox/GC)
o The Sims 2 (PC)
o Need for Speed: Underground (PS2/Xbox/GC)
28 − January 200

29. Take 2
 The publisher on the edge
 Assets
o Hit gold with the Grand Theft Auto franchise
o Very tight-lipped around upcoming projects
 Weak points
o Might go too far with polemic titles (cf. Manhunt)
 Top-sellers
o Grand Theft Auto: San Andreas (PS2/Xbox)
o ESPN NFL 2K5 (PS2/Xbox)
o Midnight Club 3: Dub Edition (PS2)
29 − January 200

30. Activision
 The house that Tony Hawk built (or close enough)
 Assets
o Dominates the Extreme Sports segment (Tony Hawk titles)
o Has a strong portfolio of Marvel licensed titles (Spiderman, X-Men)
o Solid marketing know-how
 Weak points
o Didn’t manage to establish its O2 brand of extreme sports titles
 Top-sellers
o Spiderman: The Movie 2 (PS2/Xbox/GC)
o Tony Hawk’s Underground 2 (PS2/Xbox/GC)
o Call of Duty (PS2/Xbox/GC)
30 − January 200

31. THQ
 Wrestling the competition to the ground
 Assets
o Dominates the wrestling segment
o Benefits from kid-oriented licenses (Rugrats, Spongebob, Scooby-Doo)
 Weak points
o One-dimensional publisher relying on wrestling and handheld titles
 Top-sellers
o The Incredibles (PS2/Xbox/GC/GBA)
o WWF Smackdown! vs RAW (PS2)
o SpongeBob SquarePants: Battle for Bikini Bottom (PS2/Xbox/GC/GBA)
31 − January 200

32. Konami
 The “Electronic Arts” of Japan
 Assets
o First development resources in Japan
o Benefits from a strong Sports range (Pro Evolution Soccer, baseball titles)
o Has a few strong licensed titles (Yû-Gi-Oh)
o Has developed strong franchises (Metal Gear Solid, Silent Hill)
 Weak points
o Has a tendency to use and overuse licenses and formulas
 Top-sellers
o Metal Gear Solid 3: Snake Eater (PS2)
o Yû-Gi-Oh (PS2/GBA)
o Pro Evolution Soccer 5 (PS2)
32 − January 200

33. Capcom
 The classiest-looking of all
 Assets
o Has developed strong franchises (Resident Evil, Onimusha, Devil May Cry, MegaMan)
o Benefits from technical prowess on all platforms
o Can come up with very original titles
 Weak points
o Often favours style over matter
o Has produced uninspired sequels
 Top-sellers
o Devil May Cry 3 (PS2)
o Resident Evil 4 (PS2/GC)
o Onimusha 3: Demon Siege (PS2)
33 − January 200

34. Atari (Infogrames)
 The other French video game company
 Assets
o Has access to strong licenses (The Matrix, Dragon Ball)
 Weak points
o Difficulties to absorb its acquisitions
 Top-sellers
o Dragon Ball Z: Budokai 3 (PS2)
o Enter the Matrix (PC/PS2/Xbox/GC)
o Driv3r (PS2/Xbox)
34 − January 200

35. Other Key Publishers
 Sega
Assets: Strong franchises and recognized know-how
Weak points: Too many remakes and revivals
 Namco
Assets: Ridge Racer and Tekken franchises
Weak points: Sometimes lacks creativity
 Vivendi Universal
Assets: Movie franchises and Blizzard
Weak points: Game quality and overall situation
 Eidos
Assets: Tomb Raider and Championship Manager
Weak points: Badly handled the Tomb Raider brand
35 − January 200

36. Some Key Developers
 Game Freak (Nintendo)
Pokémon
 Naughty Dog (Sony)
Crash Bandicoot, Jak & Daxter
 Rockstar North (Take 2)
Grand Theft Auto
 Bungie (Microsoft)
Halo
 Blizzard
Warcraft, Starcraft, Diablo
 Valve
Half-Life
36 − January 200

37. Faces and Names
 Ken Kutaragi
Father of the PlayStation, CEO of Sony Computer Entertainment Inc.
 Hiroshi Yamauchi
Long-time, outspoken CEO of Nintendo (1949-2002)
 Shigeru Miyamoto
Creator of Donkey Kong, Mario, Legend of Zelda, Pikmin.
Currently head of R&D at Nintendo
 Peter Molyneux
Creator of the “God Game”, with Populous, Black & White, Dungeon
Keeper, Fable, The Movies
 John Carmack
With John Romero, founder of id software and creator of the “First
Person
Shooter” with Castle Wolfenstein, Doom, Quake
 Hideo Kojima
Creator of Metal Gear Solid
 Sid Meier
Creator of Civilization, uses his name as a brand for life management
titles
37 − January 200

38. Video Game Market – Consumers
January 2006

39. Video Game Market – Consumers
 Identified core target: Males 9-35
– 32% of active gamers in the US / 25% in Europe
– Male-to-Female ratio around 2.5
– Play an average of 10 hours a week in the US / 9 hours in Europe
– Purchase an average of 6 games per year in the US / 4 games in
Europe
 Three distinct groups
– Intense / Heavy players (50%): playing daily, spend over 30% of their
leisure time in game-related activities, average age 16-18
– Medium players (35%): playing weekly, spend about 20% of their
leisure time in game-related activities, average age 21
– Light players (15%): playing monthly, spend less than 15% of their
leisure time in game-related activities, average age 25
39 − January 200

40. Video Game Market – Glossary
January 2006

41. Glossary – Console Types
 Home consoles are broken down based on processing power
– 16 bits consoles: Super Nintendo (SNES)
– 32/64 bits consoles: Sony PlayStation (PSX), Sega Saturn (SS),
Nintendo 64 (N64)
– 128 bits consoles or current generation: Sony PlayStation 2 (PS2), Sega
Dreamcast (DC), Microsoft Xbox, Nintendo GameCube (GC)
– Next generation consoles: codenames only – Sony PS3, Microsoft
Xenon, Nintendo Revolution (or N5)
 Handheld consoles
– Old generation: Nintendo GameBoy (GB), Nintendo GameBoy Color
(GBC)
– Current generation: Nintendo GameBoy Advance (GBA), Nintendo
GameBoy Advance SP (GBA SP)
– Upcoming: Nintendo DS (DS), Sony PlayStation Portable (PSP)
41 − January 200

42. Glossary – AAA Titles
 What is a ‘AAA title’?
– The name is taken from the stocks and bonds rating system
– AAA bonds are bonds of the best quality, offering the smallest degree of
investment risk. Issuers are exceptionally stable and dependable
– AAA titles are hit titles of the best quality
 How much sales does a AAA title generate?
– Depends on the console format, the timeframe in the console cycle, the installed
base and the country
– Better to use a definition based on relative rank rather than sales
– IDG defines a AAA title as one ranking among the top five titles based on unit
sales, and a A title as one ranking between 6 and 20 for the year
 But really, how much?
– For the US in 2002: PS2 / 660K, Xbox / 225K, GC / 175K, GBA / 270K, PC /
270K
42 − January 200

43. Glossary – Video Game Categories
 Categories are a way to look at the market by regrouping titles by
gameplay.
 Categories allow to segment the video game market in new, pertinent
and trend revealing ways.
– Sports – The main appeal to the player is the sports universe
– Action / Adventure – The main appeal for the player is to progress through a
story and a universe, using a mix of game mechanics (combat / shoot /
puzzles…)
– Vehicle / Piloting – The main appeal for the player is to master the given
vehicle(s)
– Shoot – The main appeal for the player is to aim and shoot
– Combat – The main appeal for the player is to master techniques to beat his
opponent in a spectacular way
– Strategy – The main appeal for the player is to progress by making the right
decisions regarding resource management or units management
– Family games – The main appeal for the player is to have immediate fun playing
a simple game that is usually non-violent. Within each usually short session,
players don’t create, build or progress
43 − January 200

44. Video Game Demos
January 2006

45. Super Mario Sunshine (GC)
 Mario is back!
– Publisher: Nintendo
– Developer: Nintendo
– Category: Action / Adventure
– Launched for the GC on August 27th, 2002
– Sales of over 1.6 million units for the US (end Oct ’04)
 Key features
– Water and liquid effects : 2D reflection, 3D deformation
– Combination of platform and “watering” gameplay such as jetpack,
cleaner and rocket
– New ropes walks
45 − January 200

46. Grand Theft Auto: San Andreas (PS2)
 Unlimited freedom in today’s California
– Publisher: Take 2
– Developer: Rockstar North
– Category: Vehicle / Piloting
– Launched for the PS2 on October 26th, 2004
– Sales of over 2 million units in one week in the US alone
 Key features
– Mix of gameplay: driving (120 vehicules including scooters, boats and
cars) and shooting (40 weapons)
– Character evolution through a huge array of mini-gameplays
– Wider area to explore (at least 3 times the size of GTA: Vice City)
– Licensed soundtrack and top production values
46 − January 200

47. Mario Kart: Double Dash!! (GC)
 The funniest racing game
– Publisher: Nintendo
– Developer: Nintendo
– Category: Vehicle / Piloting
– Launched for the GC on November 17th, 2003
– Sales of over 1.7 million units for the US (end Oct ’04)
 Key features
– The new version of the Nintendo classic (previously released on the
SNES, N64, GB and GBA)
– Introducing the new two-characters karts
47 − January 200

48. Halo 2 (Xbox)
 The Xbox “Killer App” gets a sequel
– Publisher: Microsoft
– Developer: Bungie Software
– Category: Shoot
– Launched for the Xbox on November 11th, 2004
 Key features
– Hollywood-like experience through overall direction, graphics, sound
effects
– Feeling of immersion in a heated conflict
– Mix of gameplay: shooting / driving
– Online play added (no online previously in Halo)
48 − January 200

49. Pokemon Ruby / Sapphire (GBA)
 Gotta catch them all! (again)
– Publisher: Nintendo
– Developer: Game Freak
– Category: Action / Adventure
– Launched for the GBA on March 23rd, 2003
– Sales of over 4.1 million units for the US alone (end Oct ’04)
 Key features
– Tried-and-tested gameplay using the (hugely) popular Pokémon formula
– 100 new Pokémons (for a total of about 200 Pokémons in the game)
– Two-on-two Pokémon battle system
49 − January 200

50. The Sims 2 (PC)
 Life is just a game
– Publisher: Electronic Arts
– Developer: Maxis
– Category: Strategy
– Launched for the PC on September 14th, 2004
– Sales of over 720,000 units for the US alone (end Oct ’04)
 Key features
– First full sequel to Maxis’ best-selling original game The Sims
– The characters now grow up, grow old, and eventually die
– Characters express desires and aspirations – fortune, knowledge,
popularity, or romance
– Update of the first game: full 3D graphics, extensive new building and
decorating options
50 − January 200

51. Half-Life 2 (PC)
 Technologically perfect (or close)
– Publisher: Vivendi Universal Games
– Developer: Valve
– Category: Shooter
– Launched for the PC on November 16th, 2004
 Key features
– The long-awaited sequel to the reference title on PC (over 2 million units
sold in the US alone)
– Story-driven gameplay with puzzle-solving elements
– Realistic physic model and top-notch graphic engine
– Elaborate AI and opponent reactions
51 − January 200

52. Questions & Answers
January 2006

53. References / Bibliography
 Market Knowledge tools available on the Ubisoft intranet
o Market Essentials section on @UBI
o Daily Competitive Review – a global and concise view of all main events in the
videogame industry
o International Release List – a comprehensive view of upcoming titles
o MOKA – user-friendly tool designed to regroup and analyze data regarding the various
videogame markets
 On the Internet
o All Game Guide
o Gamespot – The History of Video Games
 Some books to read
o Bit Generation 2000 / Kobe Fashion Museum & Contemporary Art Center (2000)
o Trigger Happy – The inner life of videogames / Steven Poole, Fourth Estate (2001)
o 1000 Game Heroes / David Choquet, Taschen (2002)
53 − January 200