http://malstrom.50webs.com/birdman.html

 This is a link to a Malstrom editorial that, while long, easily breaks down and explains the Wii and Nintendo's Blue Ocean strategy, and it also shows how the rest of the industry is either misinterpreting it, or they just don't get it.  (Hint:  Nintendo never said they were focusing on "Casual" games and gameplay. )

It's long, but a good read if you have the attention span.  Shows that, perhaps, Nintendo is smarter than many people perceive.

I read that the other day. A very good read.

It was well written. A good read indeed.

Here are some interesting tidbits: Bolded parts are a few of my favorite lines.

Nintendo: “We are following the strategy of disruption!”
NPD: “Nintendo wins!”
Journalist: “How are you winning, Nintendo?”
Nintendo: “We are following the strategy of disruption!”
Journalist: (ignores Nintendo) “What is going on here, analysts and third parties?”
Analyst: “It is a casual gamer boom!”
Third Parties: “OMG! Easy money! Quick guys, everyone start making casual games!”
Nintendo: “We are following the strategy of disruption!”
Journalist: (philosophically) “Will casual games cause the downfall of the hardcore games? Let me write many editorials about this!”
Analyst: (philosophically) “Is the casual game boom a fad? Let us pontificate over this.”
Third Parties: “Hey guys! How you like my casual games? They sure are snazzy! I will make millions! I am such the business whiz!”
Nintendo: “We are following the strategy of disruption!”
Journalist: (scratches head) “You hear something?”
Analyst: “It was just Nintendo speaking. They are saying the same thing.”
Journalist: “Yeah! Haha! Same old marketing speak. I am so much smarter about business than Nintendo. In my next interview with Iwata, I’ll give him some business lessons.”
Third Parties: (cries) “Oh no! My casual games are not selling!”
Journalist: “Obviously, this is because people buy Nintendo consoles for Nintendo games.”
Analyst: “Nintendo needs to assist these third parties in getting their casual games to sell.”
Third Parties: “That’s right! They need to do what WE want them to!”
Nintendo: “We are following the strategy of disruption!”
Journalist: (yawns) “Is that all they say? (becomes excited) Ohhh! Look! A new hardcore game is being made with fresh textures.” (runs off)
Analyst: “Obviously, Sony and Microsoft are branching with casual games themselves. Poor Nintendo. Too bad they are out of tricks. I expect Playstation 3 to be surpassing them in a year or two. The market revolves around technology you know.”
Third Parties: “My casual games aren’t selling? Why!? I do not understand!”

”That is all we know….”

Nintendo is already busy putting out Tier 2 and Tier 3 titles. The Wii Zapper and Wii Wheel are the ‘bridges’ to move Tier 1 gamers upstream.

Go back in time and look at the DS which was hated by the industry (who analysts referred to it as Nintendo doing another Virtual Boy). The industry did not understand the platform and just dumped many PSP ports or mini-game collections on it. While this was going on, Nintendo focused on the downmarket with games such as Brain Age and Nintendogs as well as a few tiers above that with New Super Mario Brothers. After a year on the market, Super Mario Kart DS and Animal Crossing DS came out. As you know, games like Brain Age and Nintendogs became huge hits which attracted new gamers. And these new gamers then swam upmarket to turn Mario Kart DS, New Super Mario Brothers, and Animal Crossing DS into huge hits (than they would have been without those lower tier games). The installed base for the DS surged which attracted more third party support but mostly meant support for upper market games such as Dragon Quest IX and the Final Fantasy and Dragon Quest remakes. As the DS swam upstream, the uppermarket games that were coming on the PSP began to be stolen by the DS.

The Wii is advancing in the same way. Nintendo focused on the downmarket with games such as Wii Sports, Wii Play, and Wii Fit which all became hits. Third parties become confused and made mini-game compilations. After a year, slightly higher tier Nintendo games come out such as Mario Kart Wii and Super Smash Brothers Brawl and Super Mario Galaxy. These games will become bigger hits because of the success of lower tier games such as Wii Sports sending new consumers upstream. Just as the DS has become the darling of hardcore gamers, so too will the Wii as the system moves upstream.

What happens when Nintendo moves upstream? Competitors have two choices:

1) Flee. Many companies will gladly ‘cede’ this new market. After all, this new market is not very profitable to the competitor and, besides, the competitor clearly is getting tons of money through the upmarket. While this choice works for the short term, the problem is that the encroaching company will swim upstream and begin to take customers away. Fleeing to the upmarket means ceding more and more of the market to the newcomer. Eventually, the competitor will have nowhere else to flee and will go out of business or be reduced to a niche.

2) Fight. Some companies realize that fleeing will ensure their demise so they stay and fight the newcomer for that market. However, the newcomer is patient for growth but impatient for profit. The competitor will likely be unable to defend that tier due to the newcomer gaining more profit. The battle becomes attrition until angry investors let the company’s managers know they do not enjoy them wasting so much money fighting over a market that has little profit in it. The investors will say the upmarket has plenty of profit to satisfy the company’s needs for growth. So, eventually, the competitor will decide to flee upmarket.

Imagine Nintendo using The Blue Ocean Strategy to gain a foothold in the market, attract new gamers, former gamers, and dominate on the downmarket. Once successful there, Nintendo slowly moves upstream with superior business models which prove more profitable than the competitors (that attracts more and more third parties). As Nintendo moves upstream into the upper markets, Sony and Microsoft either fight or end up retreating upstream. Since Nintendo has a more profitable business model, they will win any fight over a tier with Microsoft and Sony. As Sony and Microsoft retreat upmarket, Nintendo follows. Eventually, Sony and Microsoft either become niches or leave the gaming market entirely.

“NOOOOO!!!!” a hardcore gamer screams in sudden realization.

You see it, don’t you? You now are suddenly seeing the Big Picture. Now, when you hear Sony says that they think Final Fantasy XIII or Metal Gear Solid 4 to ‘save them’, you realize they are relying on the upmarket. Just now, Nintendo announced paid online services and even download content. “What does this mean?” asks a reader. It is a sign that Nintendo is moving upstream into the upmarket, into the more hardcore areas.

Be afraid. Be very afraid.

This guy reminds me of John Lucas without the crazy sales predictions.

Very good read! Thank you for posting this!

It is nice to know that there are people writing articles out there who can actually stop and take a look at the big picture as well. It's remarkable how many analysts paradoxically focus only on a very small part of the whole picture and then project it as the whole.

Finally finish reading the whole article. Good read and really explain Nintendo strategy to capture new gamers and bring them upstream to become core gamers.

I read all of it on my cellphone when I was commuting back home.

Wow, this guy has just eloquently analyzed what so much of the industry can't. I hope many executives read this, and hopefully they can stop their companies from falling into a pit of monetary and job losses.

Just found out this long article is just part of 8 parts chronicles, which the other 7 articles have not been published yet.
http://malstrom.50webs.com/

Prologue About Disruption: “Birdmen and the Casual Fallacy”

The Industry is making love to the ‘Casual Fallacy’ because it removes blame for bad decisions prior to the Wii explosion. The article ends by introducing the disruption context.

Description of Disruption: “Disruptive Storm”.

The article describes disruption and gives example of industry after industry being turned inside out. Countless Nintendo quotes reveal their aim is disruption, which new market expansion is merely the first step to a new re-making of the Industry… in Nintendo’s image. Article ends by showing the Industry is actually beginning the third generation, not the seventh.

Nintendo’s Execution of Disruption: ”Three Phases of the Revolution”

Iwata reveals three phases of the revolution. Two have passed. The third one is coming up. The past and future of the Wii are revealed here.

Disruption Confusing the Mainstream Consumer: “It’s Called Disruption, Mr. Hardcore.”

Unlike other generations, to the hardcore gamer, this generation appears to be ‘screwed up’ as prior generations didn’t go through this. But the ‘real’ generations did. This article cleans up the mess analysts and game journalists have made.

Fuel Behind the Nintendo Disruption: “Surprise! High sales of Wii and DS is because of large software library.”

A short but very important article that shows the fuel that is rocketing the Wii and DS to such lofty heights. And guess what? It is third party games.

Microsoft Responds to the Disruption: “The Blue Ocean Turns Red; Microsoft Strikes Back.”

Microsoft and Bill Gates realizes what Nintendo is up to and will attempt to stop it before it is too late. Will Microsoft succeed? Or is Microsoft already doomed?

Sony Responds to the Disruption: “Sony Flees and Takes Refuge in High End Market.”

Hit by a massive disruption, Sony runs to the high end of the market and plans a top-to-down disruption. But will it work? Is Nintendo doomed? Or is it Sony’s last gasp as being relevant to the market? Only one will stand. The market will decide. Find out who in this article.

Disruption’s End: “Why Nintendo Must Destroy the Wii Before it Destroys Nintendo.”

This article shows that the biggest threat to Nintendo is the Wii and why the Wii must be destroyed (else it bankrupt the company). The article goes on to why there will never be a Wii 2, why the Wii will have a longer lifespan than the PS3 (and the PS2), and what exactly Nintendo’s next console will be. (Hint: It will be disruptive.)