This could be the biggest news of the year. Appearance alone, one could just think of what it simply says: “Microsoft says hardcore are easiest to sell…“
2010 is going to be the year of Disruptive Battle. This “Game Industry” understands the ‘console war’ only in terms of Symmetric War (i.e. consoles competing on the same values such as graphics). The “Game Industry” hasn’t yet realized that the ‘console war’ is still going on, but instead of competing in a symmetrical way, it is asymmetric. Nintendo is competing with very different values and motivations. And it is those values and motivations that is fueling the disruption.
While everyone is relying on conjecture, we are going to pull out our disruption literature on this one, reader. Let us look at the ever useful ‘Innovator’s Battle Plan‘.
As disruptive attackers follow their own sustaining trajectories, they make inroads into the low end of the market or begin pulling less demanding customers into a new context of use. What happens when the disruptive entrant begins to make inroads? A good way to visualize what incumbents can do when faced with a disruptive attack is to consider how humans respond to a perceived threat. Our body immediately reacts. We produce adrenaline. Our heart rate goes up. Our respiration rate goes up. Blood flow redirects from nonessential areas to critical areas. Our body is prepared for one of two actions: fight or flight.
Incumbents naturally choose flight. What looks highly attractive to the entrant continues to look relatively unattractive to the incumbent. The asymmetric motivation leads to incumbents naturally fleeing the low end. They cede that market to the entrant. AT&T, for example, initially ceded the lowest end of the existing long-distance market to MCI. Western Union clearly ceded the new local communications market to the Bell companies.
Microsoft’s Natal was a very ambitious response to Nintendo. Microsoft intended to co-opt Nintendo’s mission entirely. This is why when Natal was announced why there was so much emphasis on ‘expanding gaming’ and to expand games beyond anything because Natal doesn’t use a controller.
From the Interview:
“It’s a continuation of a strategy we’ve been articulating for a long time, which is that we have a powerful piece of hardware that enables a lot of different experiences,” he added. “Let’s start with the core users to really get their attention and get them invested and committed to us as a platform. Then as we look to broaden to new audiences, we have the hardware capacity and technology innovation to continue to evolve the experience, whether that’s by bringing things like Facebook, Netflix and Twitter to give people more reasons to turn the console on, or with Natal in the future, with a more social, casual and interactive controller-free gaming experience that something like Natal brings.
You don’t start with the core users at all. That is not the way how a correct response to disruption will work. And Facebook, Netflix, and Twitter are not a response to what Nintendo is doing with bringing in the Expanded Audience.
It does sound like Microsoft is giving up on Natal and intends to use it as only a technology toy for the ‘hardcore’. If Microsoft does what is said in that interview, this is referred to as ‘flight’ in the disruption literature.
Let us allow Christensen to continue:
Remember, incumbents focus on delivering up-market sustaining innovations that allow them to earn premium prices by reaching undershot customers. They view flight as a positive development. When there are large groups of undershot customers in the higher tiers of a market, incumbents can beat a long and profitable up-market retreat. The customers incumbents leave behind tend to be the least attractive. Sales can go up (high price points replace low price points). Margins typically go way up. The incumbent stops worrying about disloyal, dissatisfied, low-paying (overshot) customers whom outsiders may term “distractions” and instead focuses on very loyal, highly satisfied, high-paying customers. In essence, incumbents can disassociate themselves from a business in exchange for a better one.
Indeed, Microsoft is matching that it is no longer worrying about disloyal, dissatisfied, and low-paying customers (i.e. the Expanded Audience). Sony suddenly wanting paid online could also be a sign of Sony fleeing and trying to pursue high revenue customers. This will lead both Sony and Microsoft to remain in their box.
More Christensen:
How can we identify when flight is in progress? Changes in customer or product mix can be a clear sign of flight, as are plans to discontinue low-end product lines or to stop servicing old versions of products. Companies tend to announce that they are “focusing on the core” or “seeking higher margin opportunities” when flight is in progress. Sometimes companies will launch diversification efforts to flee from an attacker.
This sounds exactly what Microsoft is doing from that interview. Listen to what Microsoft says:
“I think if you look at experiences in other platforms that are doing well, they’re not all necessarily core experiences. Wii Fit was number seven [in November]. So there are certainly a lot of upsides for experiences if they’re done right that go beyond the core but still capture the imagination of the core.
“I don’t think Wii Fit does that, but there are certainly opportunities to do that. It’s about redefining who your customer segmentation is, and really looking at who the customers are that you have and how to have a frequent relationship with them, but also looking to new audiences. I think you can do both without alienating either,”
Redefining your customer segmentation? Good grief. This sounds more like a diversification method. And Microsoft is still gunning for the core. In other words, flight.
If this is true, then the great Disruption Battle between Nintendo Versus Sony Versus Microsoft of 2010 with the motion controls will end up with Sony and Microsoft lancing with straws and fleeing. What a sad state these competitors have become! I thought they would lose, but I had no idea they would wave the white flag.
If this disruptive battle is going to be decided so fast, then I can retire earlier than I anticipated. I can’t wait to start a new project.
The only issue that can arise is Nintendo destroying itself. And Nintendo was doing a good job of that with their adventures in User Generated Content. What I do now is try to figure out all the ways Nintendo can destroy itself. One way would be to put out a Wii HD in 2010. But seeing how the Vitality Sensor will launch in 2010, I highly doubt a Wii HD will arive. Woe to Pachter.
In the Christensen article, he says the battles of disruption end suddenly with a surprise to everyone. This disruptive battle looks like it is going to end suddenly. Unless the Wand and Natal come screaming out of the launch like a farg out of hell, this generation is over.
A miracle! Wii has been steadily sinking in Japan like a boat being pressed down into the rushing waters of disinterest. But one lone game is pushing the boat back up and draining the water out.
Wii – 142,000
Super Mario Bros. 5 – 465,000
This is very good for second week of sales. Strike up the choir!
People are stunned how Mario 5 is selling hardware. Who are these people who are buying hardware because of the arrival of a classic Mario game? They are me. I bought a DS, after over fifteen years of not buying any consoles, solely for NSMB DS. If Nintendo puts out a classic Mario on all their future hardware, I will buy every Nintendo hardware. Classic Mario is too irresistible.
If Nintendo does things correctly with Zelda, they could pull off an entertainment phenomenon we haven’t seen since Ocarina. Zelda is dominated more by disinterest at the moment.
But let us look at this handy dandy chart.
NSMB sales had to have been like a wake-up bat swung at the Nintendo executives’ heads. Just compare its sales to Super Mario Galaxy. Galaxy hasn’t even reached one million in Japan! Mario 5 passed Sunshine’s total sales within one week. Galaxy was surpassed in two weeks.
I do not know how big Mario 5 will go. I don’t think it will catch up to the DS game. And I do not know how long Mario 5 will be popping up the hardware. But I do know that it cannot be denied that Mario 5 is a killer app in Japan. And Iwata has been desperately searching for Wii killer apps.
Mario 5’s triumphant sales means we will see Mario 6 come out in 2027 of eighteen years from now. Hey, Nintendo did this after Super Mario World. Why not with Mario 5? Super Mario World sold SNES hardware too. But it still got abandoned.
So expect Super Mario Bros. 6 in 2027. I will put it on my calender next to the Kid Icarus sequel that took forty years to make.
