Mr. Furious said:
I think having such a profitable pillar makes it possible for Nintendo to take risks such as the Wii and not conform to what the market wants in an effort to penetrate a potentially untapped market.
What is this risk you speak of? There is little financial risk with the Wii.
Oh, I am silly! You are making the common mistake to think that video games are in the
technology business when, in fact, they are in the
entertainment business. Seeing how the PS2 is outselling the Xbox 360 for the last year, I think it is clear that most consumers do not find this 'graphics leap' to be a leap of 'entertainment value'.
In an entertainment context, the Wii is not risky. The entertainment business is dependent on surprise. What is more surprising to the consumer, the wii-mote or a graphics upgrade?
Mr. Furious said:
Can everyone please stop comparing home console markets to that of portable. They are apples to oranges and require different strategies for market success.
I must add this to my list of 'GAFisms'.
The reason why you can compare home console markets and portables is because they are both in the entertainment business. You can even compare the console market to the movie market (Nintendo does: see Reggie's 'Masters of Hollywood' speech. Kojima even does this). Industry experts also frequently compare consoles with television.
Everyone thinks Nintendo's new strategy is the "Blue Ocean Strategy". This is actually only one half of it. The second half is this book:
Video games only use technology to entertain like how magicians use smoke and mirrors to entertain. Sony and MS are relying on the standard uses for console entertainment: more graphics and horsepower. This leads to an eventual overshooting of the market (lol at the $400 and $600 price tags).
This becomes an opening for a disruptor. The Wii's unique interactivity, affordibility, ease of use, open it up as a solution to people who believe the PS3 and MS have overshot them. The Disruption Strategy is a growth strategy. The Ipod is a perfect example. The Walkman kept being upgraded incrementally, but the Ipod, which was not the 'best' music player, was extremely simple to use and rose in sales. As the Ipod rose, the Walkman became more and more irrelevant. In a similiar way, when the DS rose, the PSP also became more and more irrelevant. Disruptive platforms grow the market while traditional platforms become seen as more and more archaic. The Ipod example is a good one because, not only is the Wii copying it with aesthetics and the i-tunes store, the company that got disrupted was Sony.
To everyone who believes that, if the Wii has a good early start, it will flounder because the PS3 and Xbox 360 will come down in price and have "OMG" graphics, you should read
THIS. This analyst immediately recognizes the Wii as being a disruptive platform. However, he is not up to date on Nintendo's speeches. Let me quote him:
analyst said:
I don't know whether Nintendo (OTC BB: NTDOY.CC) executives read Christensen's book, but their new Wii video game console seems every inch a classic example of disruptive technology.
Not only have Nintendo executives read Christensen's book, they mention how Wii (or 'Revolution') is a disruptive platform in every speech they make. Reggie even brags how he got to meet Christensen in person. Interestingly, the executives define the DS as more of an 'innovative' system with the Wii being 'disruptive'. Reggie: "
Disrupt or be disrupted."
What this means is that if the Wii were to gain traction, both the PS3 and Xbox 360 would become disrupted. As is common with disruption, the companies on the losing side get unfairly blamed for incompetence. GAF blames Sony incompetence for the fate of the PSP. But Sony did everything they could. People are beginning to wrongly blame MS and Sony incompetence for the cracks beginning to widen now with their platforms. It is like blaming Sony for their walkman woes because of the Ipod, or traditional bookstores for falling sales because of Amazon.com.
Disruptive products usually fare poorly in the market at first. Wii's successful early adoption must have those at Nintendo singing (the Ipod or Blackberry never had interest like this when they first launched). It just goes to show how
badly the console market needed disruption.
Unless one knows "The Innovater's Dillemma", one will be completely in the dark of Nintendo's strategy. Everyone interested in the sales should check it out.