Long ass post incoming, because I felt like getting out my thoughts on this, and thought I'd share and discuss with you guys. Inspired by a discussion about Microsoft's recent hardware results that went way off the rails.
Hardware First, Software First, Services First: How The Big 3 Sell Their Brands, As I See It
While any one of the big three platform holders Microsoft, Sony, and Nintendo have had their ups and downs at one point or another, all of them seem to have a pretty good hold on the industry, no one's going anywhere anytime soon. All three brands are fairly strong and durable. They each achieve this strength in a different way, through different philosophies. Each of the philosophies work fairly well, or these companies wouldn't still be here making games and platforms, with brands that remain strong and respected. As I see it, these philosophies center around what part of their offerings they emphasize to sell the rest. Personally, I divide the offerings of the platform holders into three categories: hardware, software, and services. While all three are needed to have a successful platform, each of the big three seems to focus on a different one, and I'd further argue that each seems to deemphasize one. Again, all three platforms need to have all three aspects to succeed, but each company specializes, or tries to specialize, in one, makes a decent effort at another, and lets the third just kind of sell itself. Mind you it hasn't always been this way, as the services end of things is relatively new to the industry and wasn't always essential, and in the arcade era none of the big three were around and hardware wasn't sold to consumers. This is just my impression of the industry in its current state. And just once again to clarify, I'm not saying this is their strength and their weakness, but rather the aspect they focus on and where they focus less on. Though most of the time, their focus becomes quite the strength that carries them through tough times and helps them soar during good times.
Nintendo: Software First, Services Last
Nintendo has a software first approach. You can see this in their strategy, their rhetoric, everything around their brand. It's why everyone asks them to go third party, and it's why they never will go third party. Software is their strength, and they use it to sell everything else. Hardware is secondary, but not the main focus. They usually try to either make it good hardware, as in the NES, SNES, and Gamecube, or interesting hardware, as in the Wii, Wii U, and Switch. Their services have long left a lot to be desired. Their online has never been up to par, their Virtual Console always trickled out games, forgot games, and refused to go past the N64, and the Nintendo Switch Online service is, um, er, controversial, at best. But the services are...serviceable :D so Nintendo lets their software sell those too. Note that they're selling their NSO service with a NES emulator. They put out Tetris 99 at the same time to promote the service as well. And of course, they stuck online multiplayer behind a pay wall because they know people love their games enough that they'll pay to get past the paywall. They were smart enough not to charge the same amount as their competitors, because they know the service isn't worth all that much, at least so far. Make no mistake, the bundle of a year of NSO with Super Mario Maker 2 was done not to use the service to sell the game, but to use the game to sell the service.
And how long have we been hearing the higher ups at Nintendo, especially Iwata, say that "software sells hardware"? SNES won its gen not because it was the superior hardware, but because it had Super Mario World, Donkey Kong Country, A Link to the Past, and Super Metroid, amongst others. When Nintendo was at its worst in the Wii U era, it remained an icon in the industry because of all the legendary software it put out. Even the hardware itself is designed to enable new kinds of software to sell it, be that motion controls with the Wii, or HD to allow for games like Breath of the Wild to be possible. Nintendo dragged their feet on HD until they realized what it made possible. They dragged their feet on smartphone games until they figured out how to use the smartphone games to advertise for their console games to sell their hardware. Nintendo's entire drive in their business strategy is to make software that sells everything else.
Microsoft/Xbox: Services First, Hardware Last
Microsoft is a wholly different beast. While Nintendo came into the industry when services weren't really a thing and bad software had made people lose faith in the hardware, Microsoft came around when online multiplayer was just becoming technologically possible on a scale that could be pushed into the mainstream. Arguably, Microsoft is responsible for doing just that. Sega tried with the Dreamcast, but it was too late for them, and too early for the technology. Microsoft from the beginning designed the first Xbox with online multiplayer in mind, trying to succeed where Dreamcast failed. PS2's online capabilities had no name and were the responsibility of the game publisher to make them work. Nintendo didn't even try with the Gamecube. Xbox, on the other hand, had Xbox Live. People were skeptical that online gaming would take off, but Microsoft was future focused, and pioneered online into the behemoth it is today. Even Microsoft had its killer app software in Halo, but what made it such a killer app was the online multiplayer, don't kid yourself. It was an awesome game, no doubt, but its cultural significance in gaming was what it did to bring the first person shooter into an online competitive format that dazzled players with an experience unlike any they'd had before.
Microsoft's concern in designing hardware has always been around these types of services. The first Xbox didn't have dialup support because they didn't want the shitty performance that technology would give associated with their platform, it was broadband and broadband only for them. Back then, games mostly came with whatever was on the disk, DLC wasn't popular because of the lack of broadband making downloads slow, if there was online connectivity at all. Gates wanted his new console to be able to sell premium downloadable content, allowing games to be expanded after release. With the 360, we saw the beginning of a free version of Xbox Live, to get people interested in the online ecosystem, and the advent of Games with Gold, where Microsoft gave out games for free, because they wanted to get people hooked on the Xbox Live Gold service, their real money maker. With the Xbox One, Microsoft took this philosophy too far. From most people's perspective, their always online, all digital vision of the future was a nightmare and commercial suicide, but when you think about things from the perspective of their services first philosophy, even the all-in-one device aspect made sense. In Microsoft's mind, their customer base loved them for their online service, so why wouldn't they want an always online console with all kinds of other entertainment services? They were wrong of course, but that was their logic, and they didn't abandon it, just adapted. Now we see them offering Game Pass, a Netflix for games like service, and moving onto XCloud, a games as a service subscription. While Xbox consoles have never been slouches as far as hardware goes, hardware was never the focus, services was. Soon, with XCloud, there won't be a need to sell hardware at all. Microsoft uses its services to sell its other products, invests but doesn't focus on making sure the software is there for content (through indie-friendlyness, or money-hatting exclusives, or lately through actually buying up studios), and lets the hardware basically sell itself, or in the case of XCloud, pay for its own upkeep.
Sony/Playstation: Hardware First, Software Last
Then you have Sony, who I'd argue is the hardware first company. It's not surprising really, considering they're known outside of gaming for their hardware as well. All their hardware is pretty high quality shit, few would argue with that. Sony's philosophy is that a sold Playstation is how the brand is sold, how the games are sold, how the subscriptions are sold, etc. If a consumer invests in the hardware, they'll want to get more for that hardware. It's a pretty straightforward, classic business model. Sony embodies it more than the other two in their brand, however. It's why the Playstation has always been called the Playstation, with increasing numbers after it. Sony wants people to recognize that hardware product. After Microsoft got started with services, Sony created some service offerings of its own, and they're pretty good. Not the focus, but pretty good. I mean if you have a Playstation, you're going to buy games, and if you buy games, a lot of them are online nowadays so you're going to buy their service. It's simple yet effective. While they did used to cultivate a strong first party exclusive presence with the mascots of past, they haven't had a face since Crash Bandicoot. Whom they sold. Seriously. Can you imagine Nintendo selling Mario? Sony does produce software, but it doesn't rely on iconic software to sell its hardware. It's why they moved away from Crash and Spyro and toward the Nathan Drakes and Joels and Ellies of the world. The games are good, they sell well, but most of the time they don't sell Nintendo-first-party well and Sony isn't concerned about that. They don't need to be. It isn't their business model. What they do works. Pretty damn well actually.
Case in point, the only 1st party software from Sony above 10 million are Gran Turismo 3, 4, and 5, and Uncharted 4, GOW 4, and Horizon Zero Dawn, and the only software for Playstation at all above 10 million are those, some Call of Duty games, some GTA games, some FIFA games, and Red Dead Redemption 2. Yet consistently, Playstation consoles sell more software than their rivals, have incredible software tie-in ratios, and that's all because they end up with more games, a greater variety of games, all selling pretty well, but usually not Nintendo-first-party well. Did you notice I missed The Last of Us in my list? That's because I'm bringing it up as a separate point. The remastered version outsold the original! The original didn't make 10 million, the remastered is nearly at 12 million. Why? Because the remastered is on the PS4, which outsold the PS3. Indeed, look at that list, and you'll find that the majority of the 10+million sellers are on the PS2 or the PS4, the consoles that after this holiday will be the 1st and 2nd best selling home consoles ever, respectively. Even the PS4 port of GTAV is about to outsell the PS3 port. When Sony consoles sell better, their games just sell better. Sony doesn't need to focus on games, because it just makes a console that's easy to develop for and can run basically anything, and the games just come to it for the most part. So long as the games are all there, and the services needed to play them are good, the people come in droves. Bring the people to the console, and they buy the games and services. That's how Sony does it, and you can't argue with the results.
Consequences Of These Brand Philsophies
Of course, while all three of these philosophies have earned their respective companies ungodly amounts of money and kept them in business for decades now, they're obviously not equal. That was never the point, the point is that each company has a focus that it uses to make its money and drive the rest of its business. Each model has its ups and downs and certain situations where it's more advantageous.
Nintendo's philosophy won it the 3rd and 4th gen with one iconic blockbuster after another, but even Ocarina of Time and Super Mario 64 couldn't save the N64 from Nintendo fucking up the hardware by going cartridge instead of disk. The Wii's motion controls enhanced the gameplay of many games and helped those games push the concept of the console, winning the 7th gen, but the Wii U's concept, while interesting and fun, just didn't integrate as well into gameplay, and Nintendo really slacked on software in the Wii U era. Wii U has its share of good games, but is lacking in instantly timeless classics, and who can forget those software droughts? Developers couldn't develop for it easily, and frequently voiced their frustration. The Wii made the development struggle worth it, but not the Wii U.
Microsoft's leadership in the services end of things has made Xbox Live such an incredibly strong brand, yet their difficulty selling hardware means that Sony's services have overtaken them in revenue, and the Xbox Live brand could very well outlive the consoles that inspired it, with rumors that it's coming to Switch and others. Microsoft might not even care that much if that happens. They'll always sell some consoles, and with the XCloud, the consoles don't matter at all anymore. Meanwhile Xbox Live and Game Pass will make them money whether they're on Xbox, Nintendo, or even Playstation. This service focus has put them into a weird, interesting niche of late, where they might soon compete more closely with Google and Stadia than with Sony and Playstation. If they do indeed bring their services to Switch, I daresay they've stopped competing with Nintendo altogether.
Sony has won two of the four gens it participated in, at least in terms of console sales, and looks primed to win a third. So their strategy works pretty damn well, but even it has its faults. We all saw how bad things can go, when the PS3 insisted on a high price and technology that developers struggled to program for. Console sales were cut in half from the PS2, PS3 almost ended up last place, and it's set to be last place probably forever on the list of Sony home consoles, unless Sony screws up even bigger in the future. That hardware focus means that if you don't get the hardware right from the start it can really break your momentum. Of course, in the end, the brand was nigh unstoppable and Sony managed to scrape into second place once the PS3 finally got going, and even if it hadn't it would have managed a respectable third.
Conclusion And The Future Of These Strategies
All this said, that doesn't mean Sony's strategy is the hands down best. It's just the best at selling hardware, or so it would seem. Nintendo's strategy makes it really, really scrappy, able to keep going and stay in the business against seemingly impossible odds, and when it does well, it really hits it out of the park, at one point reviving the entire industry from ashes in the US. And in the portable arena, where hardware doesn't matter as much, Nintendo is king, while Sony has been decisively crushed. Not that this matters since even Nintendo has now merged their portable end with their home console end, so they were kind of pushed out too. But perhaps a more interesting prospect, and this is pure speculation on my part, is how each company's strategy has prepared it for the future.
Microsoft, while it could get pushed out of the hardware race altogether, is already set up to exit if necessary. It may never need to exit, but whether it does or not, if the rumors are true and it starts selling its services on Nintendo, and if cloud gaming does indeed take off, Microsoft is ready, it doesn't need its hardware, it doesn't need to win console wars, because soon it won't even need its own console to have its own platform. If it continues developing into this niche, I think it'll be fine. Nintendo's approach, combined with its wealth of IP and blue ocean strategy, will probably allow it to keep making weird but fun hardware to put its games on, and its fans will keep buying that hardware. Sony, on the other hand, depends the most on the status quo never changing.
The time may come when Microsoft is gone from the console market, Nintendo's off doing its own thing, and Sony barely needs to compete with anyone in the home console market. But it may also come to pass that game streaming really takes off, made possible by 5G technology to produce satisfactory feedback time for fast paced games, and if it does take off, what's to stop the Playstation from looking like a glorified PC? At that point, people who want the ultimate experience will likely go for PC, while people who don't care that much will probably go for streaming. Indeed, with the hardware potential of streaming limited only by the servers and connectivity, a more connected world with better technology might produce better streamable performance than a single console could ever manage, and Stadia and XCloud could become the better experience. In a world where hardware is little more than a sometimes necessary evil, how does the hardware first company continue to compete?
Like I said, pure speculation, but it makes me wonder.
So what do you all think? Do I have a point here about their brand strategies or am I completely off base? Do you agree that Microsoft's focus on services makes them the most likely candidate of the big three to move away from hardware entirely or do you think Anaconda will be but the first of countless more Xboxes to come? Is my speculation right that Sony is indeed vulnerable to change or are they basically immortal? What do you think they'll do if what I said comes to pass? Will Nintendo continue to sell Nintendo games forever on their weird little inventions or is my Nintendo fanboy showing and they're going to just flame out eventually? God bless you if you actually bothered to read all that and thanks for bearing with me.
TL;DR: Sony focuses on selling hardware, its brand is focused on that, it's how it drives the platform, Nintendo, the same but with software, Microsoft, the same but with services. Microsoft cares less about hardware, Nintendo less about services, and Sony less about software, but all three companies do need and invest in all three catagories. The way these strategies have played out has determined each company's success to the degree that they've been successful each gen, and will determine their options for the future as well. Hylian is bored at work and wrote a novel.
