Week 3 EOC: Boston Consulting Group - Video Games

During a time of recession in the United States, more and more people have to cut expenses due to high unemployment rates. This has affected many industries and has more often than not been the downfall of such industries. One such industry, Entertainment, more specifically Video Games has taken a hit. According to an article in the Wall Street Journal entitled Videogame Makers Can’t Dodge Recession, it is explained that videogame sales have plummeted while people are “tightening their purse strings [waiting for game makers] to cut the prices of their consoles."

Due to fierce competition between the different video games makers, console games nearly meet their “death.” Dollar sales of consoles and other gaming hardware declined, mostly because of price cuts that have occurred in the past year from companies trying to survive the recession.  “Nintendo Co., for example, sliced the price of its 3DS handhold in August to $170 from $250. As a result, overall console sales dropped 9% in November to $982.4 million compared with a year earlier.” (The L.A. Times Business, Dec. 09, 2011)

Life seems to stirring once again in the general population as more and more people are finding work again. Companies like Microsoft and their Xbox just might be saved from this recession. “Thanks in part to the sixty-six million consumers who have purchased an Xbox and accessories, Microsoft (NASDAQ:MSFT) posted net income of $6.62 billion on revenue of $20.9 billion for the second quarter-ended December 31st.” (IRA.com. Thomas Hertog, 01/23/12)

Having recently studied the Boston Consulting Group matrix in Marketing: An Introduction for Education Management Corporation, 10^th Edition, by Gary Armstrong and Philip Kotler, I believe that the video game market, more specifically Xbox, is a “Cash Cow.” Cash cows are low-growth, high-share businesses or products. These established and successful SBUs need less investment to hold their market share. Thus, they produce a lot of cash that the company uses to pay its bills and to support other SBUs that need investment.  Having survived dangerously low sales, to only come back and begin to soar shows this