Nintendo has certainly made a splash in 2005 with the unveiling of their Revolution, a system that truly enters the next-gen race with it's own persona and style. Small, efficient, innovative. The little box that could has sparked one of the biggest debates in video game history as well as reignited an age-old fanboy war. A battle fought with arguments of specs versus innovation and graphics versus gameplay, Nintendo has once again shaken the foundation of gaming, and everyone is trembling with anticipation on how it's going to turn out.
But what exactly was Nintendo thinking? In a world where it seems it's all about the graphics, why would Nintendo shun the high specs, HD, and mind-blowing visuals in exchange for a one-handed remote? Can you already hear the whispers of Nintendo “going the way of Sega” sneaking up on you?
Well, maybe it's time to tread to where few dare to venture: the corporate world. While fans of a particular system or company duke it out with specs and sales figures, in all reality it's all meaningless. All of it. Specs, innovation, sales, hardware, software, games, online, HD; every little factor that people bend over backwards to defend in the billion and one debates going on all over the world right now, and in just about every message board on the net, all of it is meaningless at the bottom line. What we have here is not a battle of consoles, but a battle of corporations. Three enormous companies battling in a red, bloody ocean that is the market of video games. Their end goal is shared not only between the three of them, but between all of the corporate world: to turn over the biggest profit possible.
In this, believe it or not, Nintendo is king.
If it's one thing Nintendo understands, it's that no matter how enjoyable their games are, or even how many diehard fans they have, if they don't make any money they'll soon be out of business. Nintendo understands this because they must to continue to survive, a hindrance not suffered by Sony and Microsoft. Sony has a multi-billion dollar movie and music industry to pad their way, and Microsoft of course is the most financially safe business this side of the sun. If they make mistakes in video games, their other divisions simply bail them out: something it should be noted that has been happening for years now. Nintendo on the other hand suffers from having a one-track mind: if they can't succeed in gaming, they're dead.
Now, all this should not be news, it's been said for years. Many, including myself, will go on how Nintendo is the true winner of the current-gen, turning over a solid multi-million dollar profit while Sony barely scratches itself out of the red and Microsoft sits in a 4 billion dollar hole. In all respects, it's true, Nintendo came out on top this round. Problem is, they didn't set themselves up to well to do it again...
Nintendo's been on a downward spiral since the N64 days. The rise of the Playstation has took a huge niche out of the Big N's console market. Driven by a enormous marketing strategy, Sony has effectively turned Nintendo into a joke in the minds of gamers. While they continue to dominate Japan and the handheld market worldwide, people continue to look at Nintendo more like a children's toy company than a video game company. While Sony and Microsoft vie for control of the hardcore gamer market, Nintendo is usually left out of the picture entirely, having trouble even getting a footnote in most of the media's mind. It doesn't matter how many mature titles they have, or how many quality games they make, the fact of the matter that the general public and media does not see Nintendo as a major player in the realm of video games anymore, no matter how untrue that might be.
So what is Nintendo to do against the forces that are Sony and Microsoft? In a competition where no matter what you do, you can hardly get people to so much as look at you let alone respect you, how can you defeat these deep-pocketed big dogs?
Simple. Make the competition irrelevant.
Nintendo of America's marketing guru Reggie Fils-Aime has spoke at numerous presentations, making mention of Nintendo's next-gen plans, put into motion in what is referred to as a “blue ocean strategy.” It's really a simple concept: If you can't beat your competition, then don't try to. Of course, that certainly sounds good on paper, but it definitely gets more complicated figuring out just how to do it.
So let's take a look at a bit of a different battle first, one that closely resembles the coming next-gen war: the portable market. The Nintendo DS and Sony PSP have been going at it for around a year now, and while the PSP has captured all the buzz and media, the DS continues to come out on top. How can that be? It doesn't make sense, the PSP has all the hype, and Sony seems to practically own the media, with almost every talk show and whatnot having it on their “must-have” Christmas lists. The system is superb graphically, with almost console-level graphics and numerous multimedia capabilities.
Well, while Sony may market the PSP as a game system, the fact of the matter is that the PSP and DS are hitting different markets. To better visualize the difference, let's compare the two. No, not with specs or sales or anything, but let's instead use a strategy canvas. For those not familiar with strategy canvases, they're excellent tools for helping to show visually the differences between business strategies, and how to identify strengths and weaknesses of any particular product or marketing strategy.
Here we can get a better idea of how the companies are competing and what strategies their using. While the PSP is obviously taking a higher-end route, touting a powerful, appealing machine, the Nintendo DS is focused 100% on gaming and functionality. As you can see, the two are polar opposites of each other. This gives us a bit more insight into what's actually happening...
It turns out, the two are SO opposite, they're fighting over completely different markets. Sure, there's a decent bit of overlap, but in all reality there's quite a bit of separation. While the two clash over the hardcore gaming market, Sony is competing in the multimedia market, alongside products such as the Apple iPod, especially with the recent release of the Video iPod. But where's Nintendo at? Who is the DS competing with? Besides the bit of overlap against the PSP and even it's own Game Boy line, what market is left? The answer: there isn't one.
The DS's market is in fact it's own. Nintendo effectively created a blue ocean, drawing in a market segment otherwise left untapped, reaching out across multiple barriers, hitting two key types of people: casual gamers and female gamers. Games like Nintendogs and Mario Kart hold mass appeal, far from games like Grand Theft Auto which has a very limited targeted market, and these games, along with a more reasonable price point, have helped to launch the DS into an area where it effectively has no competition.
So, how does this relate to the next-generation and the Revolution? Well, the DS's blue ocean strategy is being mirrored by the Revolution. In fact, they're pretty much identical. Low price, gaming-focused innovation. Nintendo's setting themselves up to take the market that the DS has tapped, and make it explode. Running on the theory that casual gamers are confused and annoyed with complicated control schemes and tons of buttons, Nintendo invented a simple yet mind-blowingly innovative control that's intriguing and fun to use, and won't scare people away with a bunch of triggers to remember and button combos to memorize. The idea was simple: if people can just pick it up and play, they will.
Now, how well this theory will work out remains to be seen, but if the DS is any indication, Nintendo's next-gen should practically be smooth sailing. The DS proved there's plenty of market for what Nintendo's aiming for, and the Revolution if successful should blow that market wide open.
Still, what makes the Revolution so vastly different than it's competitors that it opens up a new market? And how do the Playstation 3 and Xbox 360 differ in their strategies? Time for another strategy canvas:
As you can see, the PS3 and Xbox 360 are taking extremely similar strategies. While the PS3 doesn't hold anything back, the Xbox 360 sacrifices a small bit of power to stay more affordable and productive. All in all however, the PS3 is really just a 360 on steroids. With the exception of Xbox Live, there's next to nothing one has that the other doesn't...
However Nintendo is the most diverse of the three, focusing much more towards their innovative controller and making the system cheap and easy for both consumers and developers. It's a solid strategy, and certainly one better than Nintendo trying to go to blows with the other two.
But if you think that's all there is to it, you'd be forgetting one very important factor: profit. It all comes back to that bottom line, and Nintendo's next-gen strategy definitely has that in mind. It costs a heck of a lot less for Nintendo to sell that Revolution controller than it does for Sony to stuff the Cell processor and Blu-ray drive into their PS3. This of course means Nintendo can sell it cheaper, but it also affects their total profits.
Nintendo seems to follow a strict rule of not selling a product that doesn't turn a profit. Thus, cost must be less than sale price. Sony and Microsoft on the other hand sell their consoles at large losses hoping to amass a strong market base and make it up on games and such. For instance, early speculation puts the 360 at over $500, meaning Microsoft loses around $100 every time they sell a new Xbox. A recent estimate even puts the loss at a possible $300.
Of course, for Microsoft that's nothing. However to Nintendo, a loss of even a few dollars per system could break the bank, and thus they need a profitable console. Some Revolution developers have said Nintendo could get away with a $99 Revolution. With that estimate in mind, Nintendo should have no problem making some cash off of the likely $200 price point. Thus, Nintendo is prepared yet again to be the most profitable of the three systems.
So who will come out on top? Well, if Nintendo has their way, they won't care. Nintendo's completely comfortable with the PS3 and 360 battling for the hardcore market, while they take over the casual market. Nintendo's president Mr. Iwata has said that he hopes hardcore gamers will look at the Revolution as a great second console if nothing else, and that it's cheap price point makes it perfect for just that.
So there you have it. Three consoles, two strategies. It's going to be an interesting battle over the year, and it's sure to get fierce. There's one New Year's resolution all of us video game fanboys should probably try to remember as all the systems hit the market this year: play what makes you happy, play what's fun. That should be what matters most to a true gamer.
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This article was written to help you better understand Nintendo's strategy entering the next-gen. This is NOT a fanboy post meant to insult other consoles in any way and this is NOT intended to start a flame war. Constructive opinion is always welcome, just please be considerate. Also, it's best if you read it before commenting. I know it's big, but it doesn't take to long to read it, promise.
