Alright, when I left off in the last post we were asking if Nintendo was really competing for the "hardcore" gamer, or if they were strictly going for the Expanded Market (often mistakenly called the "casuals"). We saw that Nintendo knew full well that they had a ton of new gamers on their hands, and that Nintendo seemed to have some plan for them. We read the "gateway drug" opinion of Ken Levine, but saw that it did not match up in the particulars with Nintendo's own "bridge game" philosophy. I concluded that you were partly correct that Nintendo was not, in fact, going for the "hardcore" gamer. Now, it's time for me to explain my thoughts and reasoning.
"”I am here today to share some stories about Nintendo. But, I begin with a story about Pepsi because it demonstrates how thinking differently, and holding strongly to your strategy, can disrupt an entire industry and in a good way.”
”For some time, we have believed the game industry is ready for disruption. Not just from Nintendo, but from all game developers. It is what we all need to expand our audience. It is what we all need to expand our imaginations.
”But the success of DS is not based on just one game; it is the story of several new kinds of software creating brand new players.
“Let me explain how disruption is working for us. Most of you are very familiar with the American market, so let me share some information about Japan.
“When it launched in 2001, PlayStation 2 sold 6 million units in its first 21 months. Soon after, our Game Boy Advance did even better, reaching 6 million in 20 months. But Nintendo DS is selling at a much faster pace than any game system in Japanese history. We have reached sales of 6 million systems in just 14 months. And, this number would be far higher if production could keep up with demand.
”Some people put their money on the screen, but we decided to spend ours on the game experience. It is an investment in actual market disruption. Not simply to improve the market but disrupt it. We believe a truly new kind of game entertainment will not be realized unless there is a new way to connect a player to his game.
”Yes, we have already disrupted handheld and it worked...We disrupted the very definition of a game and that is working, too. In a few weeks, you will better understand how to disrupt console gaming. You will play, and you will see.”"
-Iwata, 2006
"We took a different path, one we call the path of disruption, of really doing things differently, focusing on games and hardware that consumers could immediately pick up and play like the DS and Wii. (We developed) software targeted to new users, not only the core 15- to 25-year-old type of consumers but consumers older and younger as well as focusing on the female demographic…”
”And we've pulled the wraps off a new game interface for our upcoming console, code-named Revolution, that will break down the barriers of complexity that bar newcomers from test driving our products, while featuring the most advanced gaming experience ever. We're expanding our market by disrupting it.”
-Reggie
It's clear that Nintendo sought to use the principle of "disruption" with the DS and the Wii. Note that the pre-release quotes focus primarily on new customers, on enticing people who don't play games into doing so by changing the rules of the game. If we only looked at this, we would have to conclude that you were right, that Nintendo is only interested in the new, or "casual" as the uninformed call them, gamer. And yet we already saw, with the "bridge game" quote, that the emphasis is changing. What's going on here?
“To help frame for you what we're doing from a strategic standpoint, let me spend a little talking about two current business thoughts out there in the market place. And how it corresponds to what we're doing from a Nintendo perspective.
”The first is a first the concept of "Blue Ocean Strategies." I don't know how many of you might have taken a look at this book. I've read it and I'm a big fan of the thinking. Really what it talks about is how, from a company perspective, you ought to focus on expanding your market boundaries versus singularly being focused on your competition. The thought being, if all you do is focus on your competition, imagine it's like sharks in the water, dealing with blood in the water, constantly going at each other. Take a wider view, look at broader opportunities out there in your marketplace.
”What's important about that is if you do it successfully, you're able to create new demand -- demand that never existed in that way before. Part of this is thinking about what can be versus what is. Thinking about broader horizons, broader opportunities.
”The second book is "The Innovator's Dilemma." I actually had the opportunity to meet the author of this. The thinking is similar, slightly different bend. What this focuses on is the concept of disruptive technologies. There's a lot of examples in history that touch on this. The thought being that if you are a market leader, you focus on doing what you are doing a little bit better.
”And then out of nowhere, some one comes with a disruptive technology and impacts your marketplace. A great example is one of our competitors. You look at how Sony was so focused on creating a better Discman, a better disc-playing portable device, MP3 players came out of nowhere and impacted their marketplace. And then, out of nowhere, came Apple with IPod and ITunes and further disrupted their marketplace.
What this talks about is creating new definitions of performance, new definition and what the consumers wants and delivering on that in new and provocative ways. These disruptive technologies typically appeal to new customers, people entering the category for the first time, but done successfully really blow open a marketplace and bring all types of consumers -- new, existing -- into the marketplace.”
-Reggie, 2005
Let me boil down the above, incredibly illuminating quote. Disruption is about looking at a market in which the competitors are all competing to build a better version of what already exists, and then voluntarily dropping out of that race. For our purposes, Bigger, Better graphics and More Processing Power were what all the competitors, including Nintendo, were doing until this generation. They were building a better version of what already exists.
Instead, the disruptor approaches the industry from a completely different direction, and uses new values to enter the market. Because the new values are usually not as good for traditional customers, the disruptor begins his attack by targeting the lowest end of the consumer spectrum, including people who aren't normally interested in that industry's products. Again, to relate this to our discussion, this is Nintendo, deliberately using new values (intuitive motion controls) to target non-gamers and people who were losing/had lost interest in gaming. These new values are not yet good enough to appeal to traditional gamers, who still measure things by graphics and processing power.
But the disruptor does not end there. No, the traditional customers were fought over so much because they are the ones who shell out the most cash, so the disruptor begins to try to bring those customers into the fold too. Of course, he doesn't go straight towards the top: instead, he gradually climbs up the ladder, improving the appeal of his product until even in the eyes of most traditional customers the new values also become the better values. In the end, the disruptor gets his cake and eats it too: to quote Reggie, the disruptor "open(s) a marketplace and bring all types of consumers -- new, existing -- into the marketplace."
Disruption isn't some crackpot theory. It's been seen time and again throughout history, and the man who coined the term "disruption" is now one of the most respected economics professors in the world. But perhaps you object that disruption is not what's been happening in the gaming industry. In fact, your statement that "Nintendo is not competing for the attention of hardcore gamers. Nintendo is competing for the attention of non-gamers." seems to imply just that. So let's examine why you're wrong.
Even if we ignore Nintendo when it says openly that it's pursuing disruption (and it appears many have!), a simple glance ells us that such is the case. First, with the DS, Nintendo didn't bother pursuing the traditional path of More Graphics, More Power, even though it knew that Sony, with the PSP, was doing precisely that. I'm not sure how old you are, or how much attention you were paying to gaming in 2004, but you may recall that the DS was popularly heralded to fail miserably, and that the PSP was going to be the new king of handhelds. And why would you think differently, if you didn't understand disruption? By all traditional measurements, the PSP should have destroyed the DS. But Nintendo wasn't trying to compete with the old methods: it was trying to introduce new values into handheld gaming.
And Nintendo successfully disrupted handheld gaming. I know it's in vogue to sweep the DS' first two years under the rug, but do you remember that for half its lifetime the DS was the crappy product that had nothing but mini-games, while the PSP had all the Real Games? Feel free to browse some gaming archives: you'll get a chuckle at how wrong so very many gamers were. Worse yet, the DS was when the term "non-game" first emerged; software that was barely a game by traditional standards, which was hated and reviled by the traditional gamer.
And yet because of the DS' new values it was those crappy games, targeting those non-gamers (another new word created by the DS), that more and more people started to either come back to the fold, or to experience gaming for the first time. Brain Age, Nintendogs, Flash Focus...these all strike you, the "hardcore" gamer, as utter rubbish, but to the masses they were a godsend. But Nintendo was not satisfied...
About two years ago, phase two began. You've surely noticed by now that even amongst the average, self-proclaimed "hardcore" gamer, the DS is the handheld of choice, and the PSP is an afterthought. How did it go from "crappy product" to "best system ever"? Simple: it began to go upstream.
Traditional titles for the system began to emerge, such as the JRPGs. More and more, third-parties began adopting to the new landscape, and making new titles that still appealed to traditional gamers. Even more astonishing, Nintendo used its new values to entice the new gamers into buying more traditional software. Have you noticed, for instance, the massive successes of Mario Kart DS and New Super Mario Bros., to name but two examples? They've sold more than their predecessors have, by a large margin, and they're still selling. Today, all types of software sells on the system, from the "non-game" (Cooking Trainer) to the "hardcore" ones (Bangai-O Spirits, etc.). The disruption is complete; Nintendo started out with the users that Sony ignored, used that base to climb up the ladder, and now has the PSP completely beat.
The new values have supplanted the old, and it brought the "hardcore" gamer with it, but only by making the "hardcore" adopt some of its expectations and beliefs. It brought customers, new and old, into the same fold. Nintendo never strenuously bothered to pursue the "hardcore" gamer with the DS; it made the "hardcore" gamer adopt to them.
And now it seeks to do the same thing with the Wii.
The Wii is inferior, by traditional standards, to the HD consoles in every way. Graphically, it's not all that much better than a Gamecube. Its processor wouldn't be out of place in 2003. And its storage capacity is a joke.
But that's all fine, because Nintendo has substituted all of the old values with new values as well. And just like the DS, the Wii started out by targeting "non-gamers" and soon-to-be former gamers, using mini-games and "non-games" as its primary weapons. Shoot, there are more traditional Nintendo games on the Wii than the DS saw in three years, let alone two.
And now, two years in, you may have noticed something funny, something bizzare, something a few folks find enfuriating: like the DS' second year, third parties are coming on board now with more traditional titles, albeit ones that have slightly adopted to the Wii's new interface. Nintendo itself is being even more dramatic in chasing the "hardcore" gamer with the Wii than it was with the DS, as it's introducing a much better motion controller this year (Motion+). 1:1 motion controls would make a ton of "hardcore" games infinitely more fun, even if they lack the graphics of the HD consoles. Nintendo itself is working on "bridge" games, titles which appeal to new and old gamers (sound familiar?). Nintendo's focus has shifted from the lowest customers. As with the DS, the Wii has its greedy eye on engulfing all gamers, including the "hardcore."
But when they get them, as I'm confident they will, it will be on Nintendo's own terms, using the new values.
Nintendo won't be competing for the hardcore gamer as he exists now. It will have made them adopt to Nintendo's game, using Nintendo's new rules. It will, in short, have disrupted the console business, including the hardcore gamer.
At least, that's the goal, the aim. Whether lightning strikes twice remains to be seen. Nintendo made a multi-billion dollar bet that it will. So far, it's been cashing in.
