Business 2.0 story:

QuoteHow the Wii is creaming the competition

Business 2.0 Magazine tells the inside story of how Nintendo outfoxed Sony and Microsoft and got itself back in the game.

By John Gaudiosi, Business 2.0 Magazine
April 24 2007: 7:30 AM EDT

(Business 2.0 Magazine) -- A year ago it looked like game over for Nintendo's storied console business. The Kyoto-based gamemaker--whose Nintendo Entertainment System ushered in the modern age of videogames--was bleeding market share to newer, more powerful systems from Sony and Microsoft.

Even as the videogame business grew into a $30 billion global industry, Nintendo saw its U.S. hardware sales shrink to almost half of what they had been nearly 20 years earlier.

Today, as anybody within shouting distance of a teenager knows, Nintendo is the comeback kid of the gaming world. Instead of joining Sony (Charts) and Microsoft (Charts, Fortune 500) in the arms race to pack their consoles with ever-higher-performance graphics chips (to better attract sophisticated gamers), Nintendo built the Wii--a cuddly, low-priced, motion-controlled machine that broke the market wide open by appealing to everyone from grade-schoolers to grandmas.

Unorthodox? Maybe. Effective? You bet.

The Wii is a pop culture smash of such dimensions that Nintendo still can't make consoles fast enough. Even so, it's outselling Sony's PlayStation 3 and Microsoft's Xbox 360--at least since January. (The Xbox had blowout pre-Christmas sales.) And while its competitors lose money on every console they build, expecting to make it back selling high-margin games, the Wii was designed to sell for a profit from the get-go.

Nintendo's turnaround began five years ago, when the company's top strategists, including CEO Satoru Iwata and legendary game designer Shigeru Miyamoto, zeroed in on two troubling trends: As young consumers started careers and families, they gradually cut back on game time. And as consoles became more powerful, making games for them got more expensive.

Studios thus became more conservative, putting out more editions of Madden NFL and fewer new, inventive games that might actually grow the market.

Iwata and Miyamoto eventually concluded that to gain ground, Nintendo would have to do something about the game controllers, whose basic design had hardly changed since the first NES paddles. Changing how the controllers interacted with the consoles would mean changing how engineers designed a system's electronics and casing and eventually the games themselves.

The first product to test the new strategy was not the Wii but the DS handheld game system, released in 2004. To appeal to a broader audience, Nintendo abandoned the kid-friendly Game Boy name it had given its other popular handhelds, while building in Wi-Fi networking, voice recognition, and two touch-screens.

The idea was not to load the DS with technology but to help draw in new gamers by offering options other than the old button-based controls. Some DS games would work through the tap of a pen and simple voice commands.
The trouble with gee-whiz gadgets

The $150 gadget got off to a tepid start. Until gamers tried it, they tended to be wary. "People thought it was weird," says Perrin Kaplan, vice president for marketing at Nintendo of America. "It took about two years for people to warm up to it."

But warm up they did, largely thanks to Miyamoto. The creator of Nintendo's blockbuster franchises--Donkey Kong, Super Mario Bros., Legend of Zelda-- offered up Nintendogs, a Tamagotchi-like simulation in which players use every feature of the DS to nurture virtual puppies. The game struck a chord with female gamers in particular, says John Taylor, an analyst at Arcadia Research.

During the first holiday season after Nintendogs hit the market, Nintendo sold 5.6 million DS units--a standout performance that was nearly twice its total for the rest of the year.

Soon after Nintendogs, the company released Brain Age, a game designed for more mature players in which they solve a series of puzzles by filling in answers or speaking phrases aloud. "That further bolstered the market by attracting older boomers and even senior citizens," Taylor says. The DS surge encouraged Nintendo executives, who saw their strategy to grow the market taking shape.

They wouldn't have to wait long to put it to a bigger test. Work had already begun on the console, code-named Revolution, that would become the Wii.

Nintendo's top strategists knew early on that they wanted to build a machine with a wireless, motion-sensitive controller. But equally important was the chip that would be the brains of the Wii console itself. The more powerful processors that Sony and Microsoft were using would make the screen action look better but would also guzzle more electricity.

What if Nintendo used a cheaper, lower-power chip instead? After all, the DS, with its efficient mobile processor, had already proven that you could create new gaming experiences without the fastest chips. A low-power chip also meant that the machine could be left on overnight to download new content.

It was settled: The design team made the risky decision to build the Wii around a chip similar to the one that powered the GameCube, an earlier Nintendo entry that posted disappointing sales. If the Wii succeeded, it wouldn't be on the strength of breathtaking graphics.

Next, engineers settled on a new approach for the Wii's looks. Just as the DS shunned the Game Boy name to appeal to a broader audience, the Wii would adopt a sleek white exterior instead of the toylike loud colors used on the GameCube. Even CEO Iwata got involved in the design process; at one point he handed engineers a stack of DVD jewel cases and told them the console should not be much bigger.

Why so small? To work with the motion-sensitive wireless controller Nintendo planned, Iwata reasoned, the console would have to sit directly beside the TV. Make it any larger and customers would hesitate to leave it there.

While the console team worked on the shell, Miyamoto and another team perfected the controller. He was determined that its design be as simple as possible--he insisted on several revisions that enlarged the "A" button to make its importance obvious.

When design work was done, players could arc the Wii remote to throw a football in Madden NFL 07, tilt it to steer off-road vehicles in Excite Truck, and swing it to play sports like Wii tennis and baseball. Market tests suggested that the product was everything its designers hoped: engaging enough that nongamers might give it a go, and simple enough that newbies could quickly get up to speed.

Finally it came time for Nintendo to market the Wii to the world. In addition to its standard TV campaigns targeting schoolkids, the company pumped 70 percent of its U.S. TV budget into programs aimed at 25-to 49-year-olds, says George Harrison, senior vice president for marketing at Nintendo of America.

He even put Wii ads into gray-haired publications like AARP and Reader's Digest. For Nintendo's core users, he took a novel, Web-based approach: "To reach the under-25 audience," he says, "we pushed our message through online and social-networking channels" including MySpace.

But Nintendo's most effective marketing trick was to give away its killer app, Wii Sports, with every $250 console. It was a calculated attempt to speed up the process that brought success to the DS. And because Nintendo makes about $50 in profit on every Wii sold, it can afford to give away a game.

To be sure, not everything has gone according to plan. Although Nintendo shipped more than 3 million Wiis in 2006, supply-and-demand problems have plagued the machine since its launch. Demand continues to outpace supply and may continue to do so until summer.

It's a problem many businesses wouldn't mind having, but it means that Nintendo might be leaving money on the table--something no company can afford to do for long, not even the newly revived Nintendo.



John Gaudiosi is a freelance journalist in Raleigh, N.C.

I wonder if there's a lesson for the RPG industry here...

Sadly there are no Miyamoto's on the rpg industry.

Awesome article, Jong! And so true! We have a Wii, and it's small, inexpensive, and absolutely elegant in its interface. My son Klaxon is the e-gaming fiend in the family, and he has been talking for years about how inadequate most games are in their interface. The Wii makes him happy.

-clash

So what's the lesson for RPGs? Time for a new interface? Miniatures and stacks of rules are so 20th century.

Quote from: James J SkachSo what's the lesson for RPGs? Time for a new interface?

None that I can see. If an ice cream vendor does well by offering exotic sprinkles, I'm not sure there's necessarily a lesson for an unrelated industry in his success.

Seanchai

Quote from: James J SkachSo what's the lesson for RPGs? Time for a new interface? Miniatures and stacks of rules are so 20th century.

Innovation. More than that: clever innovation. Bigger, faster and shinier isn't necessarily good to attract a bigger audience. You can see the trend at work in the electronics industry: the iPod, simple cellphones for kids and the elder, etc.

And no, I don't think that minis and hyper crunchiness is the solution.

Innovation is the general lesson, yes.

I think part of the specific lesson of the Wii might be this:  Directing a lot of mental energy into figuring out how to harness the state of the art (in this case technology, in ours rules-sets and techniques) to making your product more accessible to people who have never even thought about the state of the art can be a very powerful strategy.

Quote from: TonyLBInnovation is the general lesson, yes.

I think part of the specific lesson of the Wii might be this:  Directing a lot of mental energy into figuring out how to harness the state of the art (in this case technology, in ours rules-sets and techniques) to making your product more accessible to people who have never even thought about the state of the art can be a very powerful strategy.

That's why I very badly brought up the interface.  I mean, it seems to me that it wasn't the games, themselves, that made certain groups not even consider it. It was that there was no hook to get them to even take notice and/or facilitate whatever level of minimal interest they might show.

So these guys come along and change the controller and suddenly Grandma is playing tennis on the Wii? The tennis is the same (essentially) as it was before - so why is Grandma playing it now? Because the interface - how she got the game to react the way she wanted it to - was no longer dependent on her arthiritic hands pushing small buttons or her fading memory recalling the intricate key combination for the backhand. Now she just moved naturally.

But here's the kicker - the game took the input differently but reacted the same way.  It didn't make it a game about the trials and tribulations of being a tennis star on the tour (managers, stalkers, other players, etc.).  It's still about kicking your opponents ass and taking his ranking. But now Grandma wants to do that because they removed the barrier.

That's how I'd look at it from the RPG perspective.  It's not that you want the rules or goals to go away, but you want to simplify the interface thereto - remove the barrier, not the core.

Quote from: James J SkachThat's how I'd look at it from the RPG perspective.  It's not that you want the rules or goals to go away, but you want to simplify the interface thereto - remove the barrier, not the core.

I agree completely.

If somebody were to try to introduce me to RPGs today, I'd probably not bother with them at all. There are so many games out there with a far simpler learning curve. They're easier to get into and easier to play than any RPGs I know.

Quote from: WhitterI agree completely.

If somebody were to try to introduce me to RPGs today, I'd probably not bother with them at all. There are so many games out there with a far simpler learning curve. They're easier to get into and easier to play than any RPGs I know.

I guess what I'm saying is that "easier to play" doesn't necessarily mean the underlying structure is any simpler. It's that the interface between the human and that underlying core is simplified.

So when I'm playing, it seems simpler.  But really, under the hood, it's a complex undertaking so that it reacts in an expected way.

Hard to explain...

EDIT: In a way, it explains the rise of CRPG's.  The interface changed, but the underlying system might be even more complex than the game upon which it was based. So the engine is just as complex, but the interface was simplified.

The question is how to do that without actually becoming a CRPG.

As nice as the Wiimote and the Vc and all that other stuff is, the real reason for the Wii's success is purely economic.

They released a new system at an affordable price, while their two main competitors were charging near record prices for their own machines.

Combine that with the fact that they aren't taking a spectacular loss on every console sold, and they've got a sure fire route to success, so long as they don't totally botch it, which they've shown some proclivity towards doing with previous systems.

Price might be a factor for some people, but it's far from being the real reason for Wii's success. People are buying it on eBay for what, 200% more? That's not exactly bargain price we're talking there.

I have to agree with James Skach and Whitter, in that Wii succeeds in attracting new gamers thanks to a new, user-friendly interface. The core of the game remains the same, but the initial entry barrier is much, much lower.

(BTW: Nintendo isn't the only company that learned this lesson. Apple's iPod wasn't the first MP3 player to hit the market and it didn't have the best tech specs, but it certainly had the slickest interface and massive appeal)

Also, I propose that if Nintendo releases a new set of Wii colours, one of them should be as follows:





Yeah, old picture and all that, but you get the nostalgia, don't you? Right?

Quote from: JongWKPrice might be a factor for some people, but it's far from being the real reason for Wii's success. People are buying it on eBay for what, 200% more? That's not exactly bargain price we're talking there.

I have to agree with James Skach and Whitter, in that Wii succeeds in attracting new gamers thanks to a new, user-friendly interface. The core of the game remains the same, but the initial entry barrier is much, much lower.

(BTW: Nintendo isn't the only company that learned this lesson. Apple's iPod wasn't the first MP3 player to hit the market and it didn't have the best tech specs, but it certainly had the slickest interface and massive appeal)

Except the interface isn't that user-friendly in the end, it's just novel.

Anyone who's actually played the damn thing, and dealt with botching a shot in Wii Golf because their wrist was off by 2mm, or dealt with that shaky-ass pointer, can tell you that.

It's fun, yes, but not necessarily any better than the alternative, just different.

And it's worth noting that even Nintendo realizes that.  Smash Bros., one of the most anticipated upcoming titles, uses the classic controller.

Quote from: J ArcaneExcept the interface isn't that user-friendly in the end, it's just novel.

Anyone who's actually played the damn thing, and dealt with botching a shot in Wii Golf because their wrist was off by 2mm, or dealt with that shaky-ass pointer, can tell you that.

I've got one, and use it regularly, and I cannot tell you that.  I'm sorry if Wii Golf isn't your game, but I personally find the system hella intuitive.

I enjoy (for instance) frying vegetables in Wario-Warez by using exactly the same motion I would use to actually saute with a wok. I feel that the fact that I could pick that aspect of the game up instantly, without instruction, tells me that the user-interface is pretty damn good.