In yesterday’s post, I talked about the current state of the videogame industry. Today, I want to delve into Nintendo’s strategy with the Wii and why, as a brand focus, it might just work…
Escaping the Red Sea
In discussing their motivation behind the Nintendo Wii, Nintendo execs have made mention of a book called Blue Ocean Strategy, one of those popular business books that one can (thankfully) read the summary alone and understand its key points. The Blue Ocean strategy goes like this: if an ocean is blood red from competition, successful companies don’t try to compete directly; instead, they find a spot of blue ocean to move their business to. From this great article, here’s the breakdown of the strategy:
1. DO NOT compete in existing market space. INSTEAD you should create uncontested market space.
2. DO NOT beat the competition. INSTEAD you should make the competition irrelevant.
3. DO NOT exploit existing demand. INSTEAD you should create and capture new demand.
4. DO NOT make the value/cost trade-off. INSTEAD you should break the value/cost trade-off.
5. DO NOT align the whole system of a company’s activities with its strategic choice of differentiation or low cost. INSTEAD you should align the whole system of a company’s activities in pursuit of both differentiation and low cost.
Frankly, Nintendo had two choices going into this next generation of systems: either resign itself to being a successful niche player, or radically differentiate itself from its competitors and try and build new markets. Sony and Microsoft have billions of dollars to throw at their videogame divisions; Nintendo is exclusively a videogame company and can’t win if the game is bigger, faster, more expensive. What Nintendo is doing with the Wii is taking the strategy that made the DS a success – not beating the competition at their own game, but changing the entire game itself – and moving it to the console market.
Change the Interface, Change the Game
The key to this strategy is the Wii-mote, a revolutionary controller that not only features buttons and control sticks but a sensor that reacts to three-dimensional movement. In games like WiiSports, if a player wants to swing the tennis racket, they swing the remote. If they want to bowl a bowling ball, they pull back and release forward. In Zelda, if they want to swing a sword, they swing the remote.
Sound gimmicky? Sure, but then again, so did the DS. I can’t speak how well the Wii-mote works, but reviews from all ends of the internet – from the gaming nerds to business magazines – are overwhelmingly positive. Videogame writers take the system home to show their friends and a giant party emerges, everyone wanting to try out the system to see just how it works (just like how my whole family crowded around the TV to watch the first time I got an NES). And more traditional games, like latest Legend of Zelda title, work just as well, with many reviewers noting that they would find it hard to go back to a classic control setup.
I knew the Wii-mote was a good idea the moment I heard about it, because I reminded of my trips to see my grandmother when I was a teenager. My grandmother’s house was often overrun with my second cousins, most of whom were under 10. My brother and I would always bring along whatever videogame system we had at the time and, of course, the kids wanted to play. The problem is that even with the simplest games, like a Mario Kart, it took them a while to get into it because their first instinct was to turn the controller instead of using the difficult-looking joystick. Eventually some would get the hang of it, while others simply gave up. I couldn’t help but think that if they had an easier interface, they’d get more out of it quicker and with less of them giving up on a good time.
The Wii-mote IS that easier interface. Yes, when combined with the nunchuk attachment it can easily handle complex gaming, but it allows for games that are simple, intuitive and easy to pick up and play. And in reaching out beyond the committed consumer, interface is critical. Look no further than Apple’s iPod. Is it the best music player in terms of sound quality, features or size? Nope. But it does have the most intuitive interface which, when combined with its sense of style, are the main reasons why the iPod dominates the portable music market with a 70 per cent market share.
Who used to control that market? Sony.
It’s no coincidence, then, that Nintendo’s new system looks like something Apple would make: white, clear, sophisticated. Heck, even the silly name – Wii – reeks of Apple’s adding of “i” in front of everything. Nintendo wants to be the Apple of the videogame market, being innovative in interface more than with graphics and sound and using THAT innovation to reach out to new markets and new audiences (and whooping Sony in the process).The Wii will be a dwarf in terms of its tech specs compared to the PS3 and the Xbox 360, but by getting out of the “more graphics = better” race that the other companies are committed to, Nintendo allows companies to focus resources on the gaming experience itself.
Dollars and Sense
It also means affordability. For the same price as a top-of-the-line PS3 with no games ($660 CDN, plus tax) you could pick up a Wii, an extra Wiimote and nunchuk attachment, four games (including the pack-in WiiSports), 2000 Wiipoints to buy classic Nintendo games with and an all-in-one classic controller to play those old games on – and you’d still have $20 to spare. Sure, the hardcore gamer is willing to drop $700+ on a system and the fixings, but that price point is inhibiting to new markets. By cutting back on the system’s specs and concentrating on the input device, Nintendo has not sacrificed innovation for affordability or vice-versa – they’ve accomplished both at the same time.
And here’s the kicker: the videogame business model has always been that companies take a hit on the systems at first – since startup costs are so high – but make their money back in licensing fees (take a hit on the razor, but make money on the blades). Sony and Microsoft are following this model; even though their systems are expensive to the consumer, it’s expected that they cost anywhere from $100-250 more than the purchase price to produce. Every Wii, on the other hand, will earn a profit for Nintendo right out of the box, the first videogame system in a LONG time to be able to do so.
Oh about those classic games…not only is Nintendo hoping that their innovative interface will allow more people to become gamers, they’re also hoping to get disillusioned gamers like me back into the fold. Part of this strategy is to play off of Nintendo’s biggest strength: its history. Nintendo will be offering downloads from an online store of its back catalogue of games, all of which can be played on the Wii. Games from the NES, SNES, N64, Sega Genesis and Turbographix 16 will all be available; only 30 at first, with more being released every month. In addition, Nintendo is launching the system with the latest game in the Legend of Zelda series, Twilight Princess, which is bound to make old-school Nintendo fans line up in droves.
Is the bigger picture beginning to come together here? This is a business model radically different than Sony or Microsoft, who are essentially doing the same thing as one another – picture Captain Kirk yelling to Scotty that he needs “more power.” Meanwhile, Nintendo is off exploring a whole new sector of the galaxy (or blue ocean, if you will). The Wii’s business model is based on affordability and accessibility in the hopes of following through on the two strategies that made the DS such an overwhelming success: creating a gaming experience that is innovative and fun, and attracting new audiences in non-gamers and ex-gamers.
It remains to be seen, though, whether the strategy of differentiation that worked so well in the handheld market carries over successfully to the console market. That success will largely depend on how the Wii is perceived: as a revolutionary new approach or as a gimmicky attempt at relevancy. And that question will be answered in the ever-complicated court of public opinion.
Tomorrow, I’m going to look at Nintendo’s marketing strategy for the Wii and why I think that it’s a fantastic example of emphasizing public relations over advertising as a successful approach in today’s marketplace…