Research by Southern Methodist University’s Cox School of Business offers new insights into the methodologies behind the timing of videogame hardware and software releases.
Conducted by Cox Professors of Information Techology Sreekumar Bhaskaran and Karthik Ramachandran, the research indicates that companies must take into account the actions of their competitors when considering the timing of a major product release. The ongoing “console wars” are cited as an example, with Sony’s PlayStation 3 console, launched considerably later than Microsoft’s Xbox 360, significantly lagging in sales.
“The expert consensus in 2005 was that Microsoft would be the early bird, but PS3 would be the superior console,” said Bhaskaran. “Examples like these in competitive industries beg the question: How do – and how should – firms decide to launch new products in very technologically driven, highly competitive markets? When and what do they decide to launch?”
“Microsoft must have learned from its experience with the original Xbox,” added Ramachandran. “Then, Microsoft had been late to market with its Xbox console, launched in 2000. Because Sony launched first, many games were written and published for PlayStation. By the time Microsoft entered the market it was already too late, as Sony had a foothold.”
According to the report, Sony had a better than two-to-one market share with its first console because it was able to launch its product early, but being the first to market isn’t necessarily as important as how a company responds to its competitors. “By staggering product introduction, firms can take different positions not only on the quality dimension but also on the time dimension,” Bhaskaran said. “When product differentiation is harder to achieve, staggering becomes even more important. If one chooses to be the pioneer, and the other one a laggard, then both are better off.”
More information about the SMU Cox School of Business research is available here.
