Let me begin by saying this: It seems every dominant console in the history of gaming has tapped into a blue ocean.
Since 2004, Nintendo has been telling everyone who would listen that the videogame market was in need of interuption to attract new people into the market. While gaming was growing, Nintendo executives realized that a larger number of women and older people could be tapped to play games. It seems that by seeing their corporate philosophies validated in books like the "Innovator's Dilemna", Nintendo had the balls to go through with the DS even as Sony announced the PSP. With DS trouncing PSP in worldwide sales figures, Nintendo applied the same lessons to Wii, as Sony was forced to decide whether to follow Microsoft's approach and risk losing to Nintendo again, or follow Nintendo's approach and risk losing to Microsoft's approach.
Looking back, it seems obvious that every successful console has tapped into a blue market of sorts. Originally, Atari set the ground work for the industry, establishing new types of entertainment, without really knowing what the market would want. They also set up the arcade and 1st party/3rd party business model in parallel to what was happening on PCs in the 1970s and 1980s. In time, Atari faced fierce competition from Colecovision, Intellivision, Magnavox and others in the console arena, as Japanese companies like Nintendo, Namco, and Taito began to grow in arcades. Atari lost focus and flooded the market with what no one wanted - crappy movie games (ET), and soon the industry crashed in the USA.
Nintendo entered the market at this point and saw a blue ocean - games beyond a single screen, where the player's interest would be grabbed with a compelling, if simple story. This point was discovered in Nintendo's famed R&D labs when Yamauchi attempted to make a game as big as Ms. Pacman. In time, Mario became Nintendo's lead character. The NES expanded the market then by appealing to gamers who wanted a more complex, rewarding and interactive experience, which is why the market grew to over 60 million. In the next-generation, no innovations were unveiled, except for better graphics and sound. Story telling and cpu increases expanded the market, but there was no dominant console. The market grew, but Nintendo and Sega were working on two innovations to advance the market: CD based gaming & 3D graphics to allow for more freedom.
In fighting one another however, a new company was introduced to gaming: Sony. Sony and Nintendo quickly broke off their deal for CD based Nintendo gaming, and as such 2 innovations were split between 3 companies. With Sega Saturn seen as the inferior 3D game machine and the inferior CD-based machine, it languished and died prematurely, despite a promising start in Japan. In Japan, CD's proved to be a much more important innovation for RPGS and story telling, and PS1 took off. The success translated across most of the rest of the world, except in the USA, where Nintendo put up a better fight and still managed to sell 20 million consoles on the strength of brand, quality games, and graphical prowess. However, in time, it became clear that Sony's PS1 could exploit both innovations - 3D games and better storytelling, while Nintendo had missed the boat...With two innovations brought to market, instead of one, the market effectively doubled in size from 75 million to 150 million, with PS1 finding the motherload of blue oceans - 100 million gamers+.
With the PS2, Sony believed it had found another blue-market - the PS2 as "living room computer" theory. Microsoft, fearing this, engineered the Xbox to stop Sony's advances, while Nintendo continued to focus on games. In time, it turned out that the living room computer market was not ready. However, the world was ready for DVDs, and decided that since they enjoyed PS1 and needed a new way to watch movies, that PS2 was the way to go. Inadvertently, by releasing first, Sony had found a new way to sell consoles, through DVD and the success of PS1.
After PS2 however, it seemed that Microsoft was still concerned about the living room threat, while Nintendo saw Sony as a threat to it's gaming empire. As such, they moved forward, leaving Sony the choice of following only one path...leaving Nintendo a chance to revisit it's past philosophies of increasing interface to drive sales..
People are difficult to govern because they have too much knowledge.
When there are more laws, there are more criminals.
- Lao Tzu
