Download a commpetitive assessment of the us video game industry PDF

Titlea commpetitive assessment of the us video game industry
LanguageEnglish
File Size3.7 MB
Total Pages100
Document Text Contents
Page 1

A COMPETITIVE ASSESS_MENT
OF THE U.S. VIDEO GAME
INDUSTRY

Report on Investigation
No. 332-160 Under Section
332(b) of t"e Tariff ·Act
of 1930

USITC PUBLICATION 1501

MARCH 1984

United States International Trade Commission I Washington, D.C. 20436

Page 2

UNITED ST ATES INTERNATiONAL TRADE COMMISSION

COMMISSIONERS

Alfred E. Eckes, Chairman

Paula Stern

Veronica A. Haggart

Seeley G. Lodwick

Kenneth R. Mason, Secretary to the Commission

This report was prepared principally by

Ralph J. Watkins

General Manufactures Division

Office of Industries
Norris A. Lynch, Director

Address all communications to

Office of the Secretary

United States International Trade Commission

Washington, D.C. 20436

Page 50

0

34

Europe

Coin-operated video games

Officials of both U.S. and Japanese producers stated that, as in both
Japan and the United States, piracy of coin-operated video games became
prevalent in Europe in 1978. Typically, game logic boards programed with
copyrighted games were copied in Taiwan and then exported to Italy, where they
were assembled with locally produced cabinets. With high transportation
charges and the dollar appreciating in terms of most European currencies, the
rising prices of most u.s.-made arcade video games tempted the majority of
European operators to turn to the less expensive infringing games. However,
the quality of the infringing games was reportedly inferior to that of
U.S.-made games. The reduction in quality stifled player interest in the.
arcades. Reduced revenue per machine lengthened the payback period of even
the infringing games. Furthermore, poor-quality counterfeited games hurt the
reputations of some U.S. producers. Many European arcade operators went out
of business, and those that remained found it difficult to purchase the higb-
priced u.s.-made games. By the end of 1981, U.S. exports of coin-operated
video games had nearly halted.

The current European market is supplied by three sources: (1)
subsidiaries of U.S. and Japanese firms which import game logic boards from
their parent companies and assemble them with locally made cabinets or market
them as conversion kits; !/ (2) loca:l producers which license copyrighted
games from the United States and Japan; and (3) cabinetmakers (usually in·
Italy) which import infringing game logic boards from the Orient (usually
Taiwan). g/. Competition with infringers discourages the Japanese
manufacturers from marketing their products in Europe more aggressively.
Until recently, no research and development for arcade video'games had been
done in Europe. Approximately one-half of the quantity of new, coin-operated
video games sh~pped to operators in Europe in 1983 were conversion kits. A
shortage of laser disc players prevented U.S. producers from exporting laser
disc video games to Europe in 1983.

Video game systems

The disenchantment of European video game players with the poo~ quality
of arcade games has limited the market for video game systems. However,
according to a major U.S. exporter, the limited choices in television
programing invites the alternative use of televisions in Eu·rope. 11 Consumers
affluent enough to own a television are not discouraged by the price of
imported video game systems.

!I Market conditions or local laws sometimes require subsidiaries of U.S.
and Japanese arcade video game producers to form joint ventures with European
companies.

i1 There are no significant manufacturers of logic boards for coin-operated
video games in Europe.

11 Michael Schrage, "U.S. Video Games Set to Blitz World Market," The
Washington Post, Kar. 20, 1983; p. Gl.

Page 51

35

The European market for video game systems is supplied by one local
manufacturer (which also produced video game systems in the United States from
1972 to 1983) and three U.S.-based suppliers. One of these U.S. firms exports
the systems directly from its production facilities in Hong Kong~ and the
other two export from the United States.

Game software

A major distributor and exporter of software stated that U.S.-made game
cartridges for video game systems and home computers are preferred in Europe
over game software from other sources. Cartridges from the United States have
a reputation for higher quality .in production standards and in graphics, game
play, and sound. However, countries which require programs to be written in
the local language and countries which do not allow prepayment reportedly
present barriers to U.S. exports. European video game players tend to take
more interest in sports-oriented games than their counterparts in the United
States.

The chief competition for U.S. producers in the European market is from
counterfeit game software which duplicates copyrighted programs carried on the
EPROM'·s of U.S. -made game cartridges. Industry sources indicate that most of
the counterfeit software is made in Taiwan, Hong Kong, and· the Republic of
Korea.

Hand-held video games

Hand-held and tabletop video games are still very popular in Europe
because of the large portion of the population without household television.
Demand is strongest for sports games. Nearly all of the hand-held video games
in the European market are imported from Hong Kong, Japan, and the United
States. Games.marketed by U.S.-based suppliers have a reputation for high
quality. Games produced in Hong Kong and Taiwan by foreign firms usually have
the advantage of lower price. According to a principal U.S. exporter,
hand-held video games produced in Japan have a minority share of the European
market, because they tend to be priced above games by manufacturers based in
Hong Kong or Taiwan but do not carry a reputation for quality as high as that
attributed to games by U.S. companies.

Other Markets

U.S. producers were successful at marketing coin-operated video games in
Canada for a period, but the strength of the U.S. dollar and the value-added
tax contributed to make arcade games appear overpriced compared with other
forms of entertainment: Import substitution policies and higher duties for
finished goods than for components make the export of conversion kits the only
feasible way to enter the markets in Australia and Latin America. Some
countries, such as Singapore and the Philippines, have banned coin-operated
video games, because they allegedly caused increased truancy among school-aged
children. !_I

!I "Zapped: Singapore Bans Video Parlprs," The Washington Post,
Aug. 27, 1982, p. A34.

Page 99

83

Table C-11. -0~ sc drives for home computers': Assessment by U.S. producers and
importers.of video games and components!/ of the competitive position of
U.S.-made disc drives for home computers versus foreign-made products during
1978-83

Factor of competition

Lower purchase price
(delivered)----------------

Ability to s~pply products at
va~ious market price levels--:

Exchange-rate advantage--------

Terms of sale--------------

Overall availability (wh't you
want, where and when you
want it)··

Shorter delivery time-----

Warranties an_d service------

Historical supplier relation-
ship------------------

Overall competitive advan-
tage---------------

Average rating ll of the competitive advantage of
U.S.-made disc drives for home computers products

made in--

Japan Taiwan

3.0 3.0

3 .0 3 .0

3 .0 3 .0

3 .o 3 .0

3 .0 3 .0

3 .0 3 .0

3 .0 3 .0

3 .0 3 .o

Hong Kong

2.0

3.0

. 3.0

3 .0

2.0

3 .0

3,,0

3 .0

European
Community

3 .0

3 .o

3 .o

3 .0

2.5

2.5

2.5

2.5

Other

3 .o

3.0

3.0

3 .0

3 .o

3 .0

3 .o

3 .o

3 .0 3.0 3.0 2.5 3 .o ___ .;;...;...;;_.,.,;._ ___ _.;;...;....;;..~------_.;;...;....;;..-'--------=--'-----------

3.0 : 3 .o 3 .0 3 .0 3 .0

11 Data were supplied by 2 U.S. producers and importers assessing products made
in Japan; 1 firm, Taiwan; 2 firms, Hong Kong; 2 firms; the European Community; and
2 firms, other sources .
. · ll The questionnaire respondents listed the competi t1 ve advantage in each factor
as being "domestic," "foreign, 11 or 11 same. "· A score of 3 was assigned to a domestic
advantage, 2 to same, and 1 to a foreign advantage. An average rating close to 3.0
indicates that a consensus of. the respondents listed a domestic advantage; the
closer that the average rating is to 1.0, the greater the consensus toward a
foreign advantage.

Source: Compiled from data submitted in response to questionnaires of the U.S.
International Trade Commission.

Page 100

84

Table C-12.---Cassette recorders for home computers: Assessment by U.S. pro-
ducers and importers of video games and components !/ of the competitive
position of U.S.-made cassette recorders for home computers versus
foreign-made products during 1978-·83

Factor of competition

Lower purchase price ..
(de 1 i vered )-........ ___ _

Ability to supply products at
various market price levels-:

Exchange-rate advantage-.... --·--:

Quality·-------.. -·--·---.. --

Terms of sale-·-------··------:

Overall availability (what you :
want, where and when you
want it)·---.. -.. --.. - ... - ... -:

Shorter delivery time-.. - .. ·--·---:--:

warranties and service-·-.. -·---:

Historical supplier relation-

Average rating.l/ of the competitive advantage
of U.S.-made cassette recorders for home

computers versus products made in--

Japan Hong Kong
European
Community

3.0 1.0 '1.0

3 .o 1.0 1.0

3 .o 3 .0 . 3 .o:

3 .o 1.0 3.0

3 .o 1.0 2.0

3 .o 1.0 2.0

3 .o 1.0 ·2.0

3 .0 3 .o 2.0'

..
3 .0 1.0 2.0 ship-......... ---·--·-----.,..... .. - .. --.... ---·-:-----....;:;..~-"-------=-"-=--.;;......------=::.;;...;;.

Overall competitive advan-· :
tage·-·--.. ---.. -· ... - ..... -.... - ... -.... ··---: 3 .0 1.0 1.0

1.1 Data were supplied by 1 U.S. producer assessing products made in Japan; 1
firm, Hong Kong; and 1 firm, the European Community.

2/ The questionnaire respondents listed the competitive advantage in l~ach
factor as being "domestic," "foreign," or "same." A score of 3 was assigned
to a domestic advantage, 2 to same, and 1 to a foreign advantage. An average
rating close to 3.0 indicates that a consensus of the respondents listed a
domestic advantage; the closer that the average rating is to 1.0, the greater
the consensus toward a foreign advantage.

Source: Compiled from data submitted in response to questionnaires of the
U.S. International Trade Commission.

Similer Documents