It's not product differentiation because that implies you're sharing a market. Hotdogs aren't a 'product differentiation' from helicopters. One sates your hunger, and the other takes you around.
The Blue Ocean is, instead of selling hamburgers in a big city, finding starving people in the desert and selling them hamburgers. The starving people in the desert don't care if your hamburgers are kind of crummy, and they'll be willing to pay way more for it, and you don't have to worry about competition. Casual gamers were starving in the desert. They liked to have fun, but nobody was making games that were fun for them.
Also, I'm confused by the posts in this thread about the DS 'strangling' the hardcore market in terms of the PSP. The PSP is the best selling non-nintendo portable in history. Its not getting strangled by 'casual gamers', its getting strangled by the almost complete dominance Nintendo has had of the portable space since the original Gameboy.
Wii has more 20 million sellers than PS3 has 5 million sellers.
Acolyte of Disruption
