| The Killer-App Add-on Myth
Threatened by Nintendo, a hardcore console company turns to an add-on to save itself from irrelevancy. Nintendo remains unconcerned and has Donkey Kong Country for its holiday season. This add-on is very popular during the holiday season and was sold out. There were more orders for it than the company could keep up.
Microsoft and Kinect? No. I am talking about Sega and the 32X. You do know the history of the 32X, do you not?
Apparently, no video game analyst does which is why they are not really ‘video game analysts’ at all. I have NEVER seen them reference game market history prior to the PlayStation. Everything that occurred in gaming prior to the PlayStation just doesn’t exist.
As a requirement for a video game analyst, would it not make sense to analyze ALL gaming history instead of just the time when Sony entered the market? This is a major reason why all the analysts missed the Wii. They do not know why the Atari 2600 or the NES sold. Or why the SNES and Genesis ‘Console War’ only ended up handing the gaming market to Sony.
In fact, I bet you most hardcore gamers didn’t even know the 32X was extremely popular. All they know is the Internet meme about ‘plastic mushroom’.
And I bet no one will bring up the 32X subject to a video game analyst. In just the same way, you had video game analysts trying to explain Nintendo without mentioning Blue Ocean Strategy or disruption.
Over the years, I’ve been trying to figure out why video game analysts talk, and talk, and talk, but they never analyze and tend to leave out chunks of gaming history. The only conclusion I have is that they are attempting to sell their ‘services’ as consultants to publishers. This is likely a reason why they sound so brown nosed to certain publishers.
But let us discuss the 32X for a moment. People will say, “It is not fair to bring up the plastic mushroom and compare it to something as glorious as the Kinect. In fact, my local viral marketer has informed me that Kinect is bliss.”
Here is why the 32X is very important in the understanding of game console business. The 32X was designed under a very rational thinking that an ‘upgrade’ to the console would deliver much more impressive games than the competitor. This would be a far cheaper alternative than bringing out a whole new console. This is the Killer-App Add-On. The 32X was designed to make the competition of the Genesis and the SNES irrelevant.
Contrary to the plastic mushroom Internet meme, the 32X was extremely popular. This is why there are so many 32X devices out there today (which is why they are also so very cheap for collector’s to buy). In fact, there were more orders than Sega could ship at the time. What killed the 32X was the games. The only game that really sold on the 32X was Star Wars. Donkey Kong Country showed that good games can be made without addons to the console.
It is true that Nintendo was shoehorning as much as it could in its cartridges such as the FX chip. But games like Star Fox, while costing more to produce, did not cost more to the consumer. Nintendo wisely stayed away from add-ons that Sega kept latching onto its console.
The nail in the coffin for the 32X was software support drying up. When software for a platform does not sell, publishers stop making software for that platform. This is why this is ominous:
Wilson also expressed disappointment in sales of Kinect games. Despite the hype Microsoft’s motion-sensing camera system generated, Wilson said software for the unit totaled sales of $57 million, or about 4 percent of game sales for the month. Wilson didn’t weigh in on the peripheral’s most highly promoted titles, but he did say that Electronic Arts’ third-person shooter Harry Potter and the Deathly Hallows, Part 1 (the 360 version of which supports Kinect) was another disappointment, as the blockbuster movie tie-in sold fewer than 100,000 copies.
From my tribes of old school gamers, I ask if they are going to get the Kinect. They say, “Sure. Next year when it is in the bargain bin.” They have lived through the 32X. They know the debacle of the ‘killer-app add-on’. Add-ons cannot make a console suddenly sell more. It has never been done.
This is why Sony’s Move has seen a dead end in the sales area. With Kinect, consumers see the same thing with the difference that Kinect brings a different experience than the Wii-mote rip-off. But this interest doesn’t stretch beyond gadgetry. It is why the Kinect hardware sells but the software does not.
Eventually, the hardware will move down to wherever the software is at. This is also why Sony has been unsuccessful at selling PlayStation 3 hardware just as hardware. PS3 sales depend entirely on the software as all game consoles do.
Interestingly though that Donkey Kong Country, this time, isn’t a herald of the future as the original was in 1994 but a throwback to the past. It would be as if, in 1994, Nintendo released Super Mario All-Stars for their flagship holiday title (which Nintendo did this holiday as well with the same exact All-Stars SNES game!). And just as ironically, the Metroid title released now will be the absolute opposite of Super Metroid (in that Super Metroid created many fans past the SNES era, Other M is only destroying the fans).
Game consoles cannot redefine themselves. And they cannot break their reputation. For example, the Wii will never be home to the ‘first person shooter’ no matter what. In the same way, the Xbox 360 and PlayStation 3 will never be home of the ‘Expanded Audience’.
While Microsoft orgasms of outselling its competitors this year in North America, I find Microsoft’s position very weak. Here is why:
1) PlayStation 3 sales deflating- This is actually bad news for Microsoft. The PS3 and Xbox 360 share a relationship where when one console sales go up, the other goes down like a see-saw. PS3 sales going down tells us that Xbox 360 sales are likely cannibalizing the PS3 market (which means the Xbox franchise is not actually expanding) and that the PS3 upsurge was in large part to the new model. This means sales trends from the new model are not permanent. Since the Xbox 360 is currently riding a new model sales wave, this points that it will not be permanent and will come down.
2) Without a doubt, shooters are still driving Xbox 360 hardware sales. This is proven with the software sales. Call of Duty: Black Ops outsold Call of Duty 4 (which shows that firing the Infinity Ward guys was the right thing to do) and is far more responsible for propping up the hardware. Xbox 360 hardware has been up long before Kinect came out. Halo: Reach also came out not too many months ago. Even when Wii was constantly sold out, Xbox 360 hardware would spike up when Halo 3 came out.
3) Nintendo is coming off a line of bad software. And by bad software, I mean software that doesn’t sell the hardware (for that is the purpose of First Party Software). After the spike from Mario 5 and the updated Wii Sports and Wii Fit software, what has Nintendo released? There was more 3d Mario in the form of Mario Galaxy 2. There was Metroid: Other M which is a game Nintendo should be as ashamed as they are of the CD-i Mario and Zelda games. There is Donkey Kong Country Returns but that is a very recent game and is only one game. And it isn’t a NCL game.
What should be very disconcerting is that the Wii remains sales healthy with no drop in the price and that Move and Kinect are not eating into Wii’s sales. The only thing harming Wii’s sales is Nintendo’s software output.
When hardware and software sales are different, the result is that hardware sales will be brought down to the software sales level. Just as the PlayStation 3 hardware sales or PSP sales were eventually brought down to the software sales level. Unless Kinect and Move software actually sells, both of these add-ons will fare worse than the 32X. 32X, at least, had a cool Star Wars game.
And do not forget:
When the 32X was released in November 1994, the demand was so high that Sega couldn’t fulfill all of the one million orders retailers had made for the system. By January 1995, Sega had shipped 600,000 units.
Speaking of Kinect, a disruption author has weighed in on the subject.
My wife saw a commercial for Kinect, and said, “I assume you’ll want that for Christmas.”
Later that week, a colleague who knows that I’ve written extensively (and, largely positively) about the Wii said, “I assume you are a big fan of the Kinect.”
In both cases, the questioner was surprised by my ambivalence.
This has been my experience as well. People know I like the Wii so they assumed I would like the Kinect as well. And they are surprised at my ambivalence.
Interestingly, Anthony uses the ‘Charlie test’ (his young son’s experience) to describe the reaction of the device. This is shrewd because this puts the viral marketers in a very difficult spot. They cannot attack Charlie. All they are left to doing is bringing in their own children to the discussion.
Whether they are marketers or not, the difference in how they talk in comparison to the Wii’s launch is very striking.
When the Wii came out, the ‘Wii fans’ were not declaring Wii was ‘better’ than PS3 or Xbox 360. Their attitude was more like “This console reminds me when video games used to be fun!” When Wii fans talked, they talked about the games they were playing. They talked about Wii Sports, talked about Excite Truck, talked about Zelda: Twilight Princess, and other games that were on the system. But these ‘Kinect-is-bliss’ people I see on the Internet never talk about the games. Instead of saying, “This game is fun,” they are saying, “Kinect is fun,” which comes across as very strange to me. It is as strange as if someone said, “The Move is fun,” but do not mention any games.
According to NPD November 2010, aside from Black Ops, top ten sales include Wii Fit Plus and Just Dance 2. How odd that no Kinect or Move software was in the top ten. What this says is that Microsoft and Sony are not successfully co-opting Wii’s disruption. If they were, the software would be performing far better.
The fate of Kinect and Move are tied up in their software sales, not their hardware sales. Let us see if any “video game analyst” acknowledges this.
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