Price always depends on the perspective. Arguably the Kinect console at $300 is the same price the Wii launched at considering the thing which sold the Wii early on was 2-4 player Wii Sports. They are using a 5 year old amortised console (Xbox 360) rebranding it and using it as the basis for their technology. Since they tore the Kinect accessory down in order to lower its overall cost I would have to argue that its coming in on the low end of the price spectrum. Their use of accessories to justify cost does indicate where they are coming from. The Xbox 360 Kinect is supposed to replicate one Wii console two Wiimotes balance board for $300.

I didn't want to talk about Kinect in this thread, but I felt I had to since you were making so many interesting points...

Top down disruption, bottom up disruption. So Nintendo's being disrupted from both sides? How can they survive?

Prof, you're seeing disruption where there is none. Do you still think Blu-Ray and Xbox Live are disruptive?

I agree, I think it makes a lot of sense, they just have to make sure the consumer is aware of how "value-added" it is compared to a wii and balance board.

But anyways, good thread. I think a lot of the points you made are just very slightly innaccurate as to what the motivations are, but there is some soun reasoning behind it. However, I believe that the market Sony is targeting is not just their core market, it is an ignored market.

according to christensen's own explanation of top-down disruption, BR is disruptive, as is XBL. More highly discerning customers willing to pay more for a better product that doesn't exist in a given market that a group of people wish was an available option.

Also, I'm not entirely sure Kinect is bottom-up disruption. I think both are top-down which is rarely fatal.

When I said that they are occupying several layers I meant that there are layers above wii that the wii could have moved upstream into.

I agree, I think it makes a lot of sense, they just have to make sure the consumer is aware of how "value-added" it is compared to a wii and balance board.

But anyways, good thread. I think a lot of the points you made are just very slightly innaccurate as to what the motivations are, but there is some soun reasoning behind it. However, I believe that the market Sony is targeting is not just their core market, it is an ignored market.

@ Bold: Good point. But how big would the market be for comsumers who want motion controls, but prefer high end graphics that will expand the market? I Still believe that Move is designed more to KEEP the PS3 owners it has from wanting to own a Wii, versus expanding the audience on the PS3.

IMO, both Sony & Microsoft are making a mistake on hopeing(sp?) that 3rd parties can help them provide that expanded audience experience. Since this thread is Sony centric, focusing on the launch lineup RIGHT NOW, that Sony is offering, it's sits squarely at non-expansion.

I really think your post should be addressed one point at a time but for the sake of clarity and for ease of argument.

A disruptive product has to be disrupting something. The Wii disrupted Sony and Microsoft by making the games easier to play and enjoyable by a wide audience of people. Kinect is not disruptive. For one, Microsoft is an incumbent, so they can not be disrupting. Second, Kinect has to be disrupting something. Since it has very similar values to the Wii, it would not be disrupting the Wii.

When you say Kinect is not disruptive you list Nintendo's disruptive device as being easier to play (and enjoyable) by a wide audience of people. You say that the values of Kinect are similar to that of the wii, and therefore not disruptive. I question that value set. I don't know what line of reasoning you're using, but it is not a doctrine of disruption that the value sets have to be different. Take for example the postal market. First there was the United States Postal Service, then there was UPS, which offered things like tracking of your packages, 2 day delivery, and confirmation signatures. Then came FED-EX, who's product Clayton Christensen uses as an example of top-down disruption using a niche product aimed at the top premium consumer to move downstream into the other markets. Both UPS and FEDEX had the same values. High precision, high speed package delivery.
However, in accord with your distinction, FED-EX was not an incumbent when it came out. However, Nintendo is. I'm wondering if you are confusing the word incumbent for market leader, because Christensen makes it perfectly clear that it is the market leaders that are most susceptible to disruption, since they all have a lot invested in their product and all applications of it.

For example, Sony refused to go into the MP3 player market when it was beginning, instead opting for the minidisc which had better copyright protection. They did this because they own several labels and studios and mp3s are easily pirated. Not wanting their side businesses to weaken, they tried a different product that could perform similarly to an mp3 player yet retain their digital rights. They were ripe for disruption.

At the moment, Nintendo is the market leader and like it or not, they make most of their money on hardware peripherals and their near total exclusivity on games reinforces peripheral sales. Their competitors are targetting 2 demographics that are on the overlapping periphery of Nintendo gamers, and the ones that bring in the least amount of sales. Sony is focusing on the hardcore, and MS is focusing on the super casual. Markets like these develop from consumers who use a product but wish there was a better alternative to the product.

We hear at least one side of the argument here all the time, that wii games are too low res and look like last gen. the other side of the argument, "I don't want to even hold a controller at all" we barely hear about because it is the super-casual who would not be on this nor very many other VG sites. Not to use anecdotal evidence, but whenever I go to the science museum, the most popular attraction is a kinect-like volleyball game. The periphery markets are there, and they fit the requirements for disruption.

Also, I'd like you to consider your description of Sony and MS as incumbents. It has been said countless times by all sides that they are in different markets. Now, Christensen specifically uses Sony in a number of cases in which they were disruptive as examples. However, they were already a company at that point, but they moved INTO another market with disruption. In this specific case, Sony and MS are not part of the motion control/casual market, they are not incumbents, and they are moving into the market on the periphery. MS moreso than Sony. Sony's Move seems like more of a red ocean strategy, but could be top down disruption since they appear to be "introducing" a new element into the casual market. To contradict what I posted yesterday, kinect does not seem to be in the same market, rather it appears to be in an overlapping market of Nintendo's market and a new market.

Kinect is the response from the incumbents. Microsoft made Kinect to stop Nintendo from expanding upmarket, where Microsoft's core consumers are.

Just consider what you are saying. Kinect is made to stop Nintendo from expanding upstream where its core consumers are. Who are 360's core owners? Halo gamers, FPS gamers, XBL users, Action and roleplaying gamers. Nintendo is not even close to MS's core gamers. They would have to completely change the system to move that far upstream. MS, rather, is the one that is moving, and it is moving downstream to occupy a market that even Nintendo is not a core part of. I know one of the key ways that red ocean is identified is using the term "better" rather than "different". Kinect does seem in some ways to be a "better" casual device, but it's easy to see that it is really a different device. MS is courting the people that don't even want to hold a controller, or stand on a board to do yoga. Plus, the camera has many other useful functions, like the news about being able to read sign-language.

Smash, I'm curious why you think the only solution is to either buy Nintendo or disrupt them. In just a few short months, the wii will be in red ocean, and with their announcements at e3 of classic titles and re-envisionings, they made it clear that they are re-entering red ocean, and Nintendo has not done well in red ocean when the competition is just as strong.

To quote Christensen.

Fleeing from the disruptive attacker feels good in the short term but further deprives the incumbent of the necessary skills to compete. The end can come swiftly and can appear stunning to the untrained eye. Typically, the best an incumbent can do is to belatedly acquire the winning firm and stave off ultimate destruction.

Nintendo is at the disadvantage here. Consider the stream of disruption. The competition is supposed to abandon markets and move upwards as the disrupter moves upwards. However, the competition is moving downstream to meet the wii. Additionally, consider the competition. Kinect is moving directly at the wii with the type of gaming and control style, and Move is aimed at gamers but with the expanded control style. So not only did the competition move downstream, but they ocupy several levels. Kinect is directly in the wii market, and Move is just above them in a smaller, nicher market composed of the traditional core.

Sony and Microsoft are not moving downstream. Nintendo has the lower markets locked. Sony and Microsoft are counter attacking Nintendo.

When the incumbent has retreated into the highest tiers of its market and has to fight because there is no room for further retreat, it is at a competitive disadvantage. As the game changes to the one the disruptor plays best, it is very hard for the incumbents to develop new skills quickly.

It was also Christensen who said that nobody has perfected disruption or continued disruption. Nintendo's sales are lower than they've ever been (this gen) even with a price cut and 2 huge games not one year previously.

We will see MS and Sony survive and they won't need to buy out Nintendo to do it.

Nintendo is looking at some obstacles. Look at their history with the wii. They used a crappy controller that didn't do what everyone thought it would do. Then they expanded with the board. Then, they moved upstream with the motion . Now the competition is expanding downstream. Nintendo has the vitality sensor for some more expansion, but they currently have no means of moving upstream.

Your missing how disruption works. The Wii remotes goes at the lower tiers because it offers values the others are not providing. It moves upmarket because the Wii remote improves and reaches people who were undershot by it. They eventually make it better as they better understand customer's needs. So they improve and move upmarket. That is what Motion Plus is. This image should give you an idea.

That's pretty much exactly what I wrote. Except that you're missing the point christensen makes when he says there is expansion in disruption. They used a crappy controller that didn't do what everyone thought it would do undershot some people.  Then they expanded with the board. Then, they moved upstream with the motion(plus). Like I said, they have currently no way of making the controller better and keeping up with the market. Motion Plus is the precision that it was missing, there is nothing more they can do to it. 

They have the 3DS, but it has no additional functionality. Think about this: Apple is dominating the handheld market, and their product is even crappier than the 3DS. Crappy games, but expanded functionality. The fact of the matter is, Apple really does push more games than any other console out there all because the expanded consumer is satisfied with crappy games. Additionally, Apple has a network and social interaction, something Nintendo doesn't even acknowledge. How many people do you think are interested in 3D, but only on a 4 inch screen? As far as disruption goes, it makes sense. It's a much smaller screen, a small crappy screen for a crappy consumer. That's disruption. However, what expansion is it making? That's the whole point of disrupting. Why did wii succeed? It is because it expanded the market to people who were into gaming, but not the geek image of gaming. How does 3DS replicate this? The answer is that it does not. In fact, it is even geekier than before.

You are totally wrong. Disruption is about crappy product because the mainstream industry sees them as such. Mainstream gaming industry sees iphone gaming as crappy. They are crappy customers because they are not a big money maker for the incumbent. iphone games make developers only several thousand and are very marginally profitable. They rely on their best customers who keep buying (i.e. Hardcore gamers) Past DS owners, and Nintendo owners, and core gamers. Think about it. I'm a core gamer and I love the idea of the 3DS. It's also called the 3DS (for the moment), it's obviously trying to lure DS owners. Don't think too much on the "crappy," part. Think about what new doors they open.

Apple will have no success in video games. They don't even have their own development staff. They have no hope of being able to break into it without that. Right now, they are on par with cell phone games, which have never broken intp the mainstream market. Apple is unlikely to disrupt anyone as Christensen doesn't even like to use it as an example. Most of Apple's moves have been Red Ocean.

Also, the 3DS is disrupting Sony's 3D business. In this case, Sony is the incumbent. Which is strange because I like 3D and wouldn't consider the 3DS a crappy product. It may be somehow disrupting the 3DTV market, but Sony is not the leader in the market like I said in another thread. Everyone seems to think that Sony is the one being disrupted because they are updating the ps3 to work with 3D, for free. It is so incorrect to think the 3DS is disrupting the PS3, if that is indeed what you think. The only thing it will be disrupting is the 3Dtv market, and not specifically Sony. Sony isn't even that heavily invested in one aspect of 3D tech. Didn't you see its cylindrical display that shows 3D without glasses in every direction? That's even better than 3DS tech. Additionally a 3D tv can allow several people to watch the same thing as long as they have glasses. The 3DS is only viewable by one person at a time. I'm not arguing the facts with you here, but I am really on the fence about what 3DS is actually disrupting. Would you kindly post a link from malstrom or christensen on the issue?

Now I'm not saying 3DS is going to fail. It is a DS. It will be impossible to fail. However, don't think for a minute that Nintendo is some agile, fresh, cutting edge-strategy kind of company and that Sony and MS are lumberingly slow Goliaths who are stuck in the old ways of doing things.

Again, Nintendo is disrupting Sony's 3D. Watch their press conference (Nintendo) and you can see it clear as day.