e interactive video game industry has went through many changes. Nintendo and SEGA have been the giants in the video game industry throughout the 1980s. The sales, which have been growing since mid 1980 have slowed and were relatively, flat through out 1994. However the "next generation" game players, which were released in 1995, gave a whole new dimension to the video game industry. New competitors like Sony, 3DO-based systems, and Philips were challenging Nintendo's market-share. The market size in 1995 reached approximately $15 billion in sales and reached $18 billion in 1996. Sales have increased once the next generation systems were fully on line in 1996, however the profits were weak because of razor thin profit margins on hardware, software proved to have a higher gross margin. Though out the 1990s the key to success in the video game industry has been innovation and technological advancement. The rivalry among the competing sellers in the industry is very intense, especially in the area of game quality. The revenue "hits" games accounted for as much as 30% of revenue from video game sales. The advancements in the personal computer industry is clawing away market share from the industry. In recent years the bargaining power and leverage has shifted from suppliers to the retailers. The limited shelf space and lining up software developers has been a bid challenge for competitors in the industry. There is a number of key factors which have driven the industry in the past. Product innovation and technological change were key. The fact that Nintendo lagged behind in introducing a 16-bit system has cost it 50% of the 16-bit market share and allowed SEGA to gain a firm foothold in the industry. Marking has also played a large part of video games sales. TV commercial & magazine ads helped boost sales for video games and created "hit" games. SEGA and Nintendo are the dominant companies in the fight for market share in the video game indu...
