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..

I'm pretty sure the PS2 had more to it's name than just DVD and the success of the PS1, but this is a good read.

No. Other companies Know where the Blue Ocean is. The probelm is getting there.
Agreed, NightStalker.

Largely I agree with your analysis, TheSource: Nintendo is not the only company to find Blue Oceans.

I'd add a few things, however. First, while almost every generation sees some new target audience included, it's thus far seemed to take a much larger jump every two generations: the first generation was obviously important simply because it established the market, the third generation (NES) was the introduction of Nintendo and not just a ressurrection of a fallen market but a vast increase from what it was before; the 5th generation, PS1/N64, saw a similarly large increase as more 15-25 year olds were brought into the fold, not just 5-15 year olds. And lastly, the seventh generation, where we are now, appears to be opening up a similarly massive increase in market size.

From my perspective, the 2nd, 4th and 6th generations all did increase market size, but did not do so in any revolutionary way. Most of the growth could be attributed to increases in population and affluence.

I see PS2 mainly as a continuation of PS1 - PS2 just saw Sony learn the lessons of how to build a perfect developer ecosystem and game format from PS1.  Nintendo was new to diskbased formats and had to learn how to balance things.  It is similar to how SNES and Genesis just expanded on the development of the NES.

You can tell from the growth of the industry when features are added that people like.

Atari - NES 2x growth

NES - SNES/Gen 20% growth

SNES/Gen to PS1/N64/Sat - 2x growth

PS1/N64/Sat to DC/PS2/Xbox/GC - 20% growth (estimated..PS2 still selling)

DC/PS2/Xbox/GC to Wii/360/PS3 - logically, this would see 2x growth..to 360 million units sold!..I suspect it will only grow to 200-250 million though...

I think you hit it on the spot by saying Nintendo tapped into the women and older market. Proof of this is my wifes DS and interest in getting the Wii. She doesn't care for my type of games and rarely plays them with me. She does however cruise the DS and Wii sections, looking for new games. I'm just glad she is interested in general, which opens up the possibility of me getting new hardware and games. =) Very interesting article indeed, good job.

Often it proves true that those who have had a history of success on some level of regularity, often tend to just continue to use the same things that have reaped successful for them-- just more aggressively.

I think one can see these paterns in time with the likes of Nintendo, the 64 being the real example in their case, and the PS3 more or less shaping up for that of Sony.

I think all of the companies pine after the Blue Oceans, but at Don says, getting there is the problem.

Unless Sony can pump some profit out of the PS3, which is looking less and less likely, I generally am worried that Sony's investors might raise the white flag for their gaming department if things go bad enough this round. Sony has already burned up their minimal profits, considering PS2's dominance and sales, already with their investments in PS3! Sony's best chance for blue ocean's is obviously with PS4.

I think M$ is in a similar boat. They are so far in the red at this point, that their only real hope for blue ocean's is their Next-Box. Sadly, they too might be forced out of contention due to staggering debts if they don't learn how to turn a profit soon.

I think PS1/PS2 mostly grew the market in Europe a ton, so their Blue Ocean would mainly be non-US non-Japan people. :P Though the whole media center concept surely helped growth in US and Japan too, but I don't think the market doubled there.

 Hey! That's why I just said, except with math :(

It was also 18-25 year old males. It's so long ago we may not even remember, but pre-PS1, video games were largely seen as young boy territory. From the PS1 through the PS2, it came to be viewed as young MALE territory. It is an important difference, actually.