How does Sony decide when to launch a major new gaming innovation? They should consider not just the proximity to a major giving holiday, but to the timing of Microsoft’s next big announcement. New research by Sreekumar Bhaskaran and Karthik Ramachandran, professors of information technology in SMU’s Cox School of Business, shows why firms must take into account what their competitors are doing when making launch decisions – and cite the ongoing video game console war as a case in point. While Microsoft planned to launch the Xbox 360 in late 2005, Sony scheduled its own PlayStation 3 much later in 2006. Both firms were debuting new consoles that were different in remarkable ways. To date, with a monopoly for about a year, Microsoft has sold 11.6 million consoles to Sony’s 5 million.
“The expert consensus … in 2005 was that Microsoft would be the early bird, but PS3 would be the superior console,” Bhaskaran says. “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?… There are several strategic considerations in this industry. Consumers buy Xboxes because there are games for them. Additionally, given that users frequently participate in online gaming, the network base becomes a very important asset.” Bhaskaran’s and Ramachandran’s work reveals different strategies companies can take to maximize profits, avoid mutual destruction and increase longevity on the long road to technological nirvana. (Right, a partial screenshot from the best-selling Halo 3, currently available only for the Xbox 360 platform.)