- last post: 01.01.0001 12:00 AM PDT
A few major games will dominate the mature genre and it is unlikely that Nintendo’s will be one of them. Nintendo’s fixation on new genres and their unwillingness to pander completely and utterly to the existing hardcore audiences has made their name mud with many of the most vocal elite in the game industry.
Product innovation leads to increased profitability
C’est la vie. You can’t have it all. Focusing on product innovation at the expense of commodity markets is a classic business strategy that is used successfully in non-game companies around the world. Companies like 3M are required as part of their strategic plan to have 30% of their revenue come from new products. They are constantly exiting markets when strong competition emerges and constantly competing with themselves by offering new products that outdate their existing products. Nintendo releases new genres where other companies release new products, but the basics are the same.
The non-business person looks at this strategy with horror. Nintendo invented the 3D platformer, yet they have no major product in that niche at the moment. Surely this is the most obvious sort of stupidity. However, consider the following portfolio management issues:
* The likelihood of getting a genre king early on in a genre life cycle if you invented the genre is quite high. Competition is limited.
* The cost of creating a genre king early in the genre life cycle is low. You can rely on things like simplified graphics and limited amounts of content. The neo-retro graphics of most Nintendo games has a lower cost of production than the realistic look of many of its competitors.
* The cost of creating a genre king late in the genre life cycle is high. Customers demand realistic graphics, voiceovers, cut scenes, loads of extra content, etc.
* The risk of having your game not becoming king of the genre goes up. The competition is simply greatly increased. Mario is a great game, but would it own the entire genre if it were forced to compete against Jax and Daxter, Sly Cooper, Prince of Persia and others?
What you find is that selling innovative products early on can be dramatically more profitable and less risky than selling commodity products. The early market might not be as large, but the money is much better. You see this over and over again. Nintendo sells less but makes more money. Sony and Microsoft sell more, but make less profit.
Consider this tidbit. The Xbox, which focuses on highly mature genres catering to hardcore gamers has production costs of $1.82 million a title. The Gamecube costs half as much at $822,000 a title. The real kicker is that the Nintendo DS only costs $338, 286 a title to develop for, even less than the Gameboy. Some of these costs have to do with the hardware and development kits, but for the most part they are derived from the scope of the projects. Being able to develop successful titles at 1/5th the cost of your competitors is a major boost to your bottom line.
Thus, Nintendo’s profitability and need to innovate go hand in hand. They need those new genres because the old ones quickly become too competitive and too expensive.
New controller features as a source of Innovation
The new controller is best seen in light of this larger corporate strategy.
One of the easiest ways of creating a new genre is to invent a new series of verbs (or risk mechanics as I called them in my Genre Life Cycle articles). One of the easiest ways of inventing new verbs is to create new input opportunities. Nintendo controls their hardware and they leverage this control to suit their particular business model.
And this is exactly what Nintendo has done historically. The original Dpad, the analog stick, the shoulder buttons, the C-stick, the DS touch pad, link capabilities, the tilt controller, the bongo drums…the list goes on and on.
Each time, they also bundle the controller innovation with a series of attempts at creating new dominant genres. Not all attempts are successful, but a few of them are highly successful. The 2D platformer, the 3D platformer, the Pokemon-style RPG, and the virtual pet game all come to mind as successes. By seeding a genre and by owning the key hardware platform that the new genre lives on, Nintendo achieves a position of financial stability and security that is unheard of in the game industry.
As a side note, folks who argue Nintendo should just make games for other platforms are completely missing the point. Nintendo needs to control their hardware platform in order to force innovation to occur in the control mechanisms. Other console manufacturers who rely on the hardcore audiences and standardized genres don’t see this need. They would happily standardize the console platform and make it into a commodity. Microsoft has historically made major comments about having one universal development platform.
The moment Nintendo loses control over their hardware, they lose a major competitive advantage in terms of creating new genres.
The new controller
The new controller is yet another logical step along a path that Nintendo has been pursuing for many years. We are likely to see some very obvious patterns repeated.
* It allows for a wide variety of new verbs that are unique to Nintendo’s hardware platform
* There will be a number of genre-seeding attempts that take advantage of the new verbs that are available. With luck and a lot of skill, one or more of these will become a major new genre. New genres bring in new gamers who are loyal to Nintendo.
* Nintendo will leverage their powerful brand to encourage early adoption and dominance of this genre. I’ll make a bet that Mario, Pokemon or other major Nintendo brands will be a major element of their new genre attempts.
* As the years pass and the genre becomes mature, hard core gamers will consolidate within it and begin demanding more polished experiences. Craftsman-oriented companies will wrest control of the genre away from Nintendo.
* Nintendo will innovate once again in order to maintain higher profit margins.
Some predictions about the games
There are also some obvious predictions that we can make about the game designs based off the standard genre lifecycles.
* Early titles will be essentially technology demos that showcase a specific core mechanic. There will be one or two major titles such as Mario 64 of yore that are highly evolved, but these will be few and far between due to the cost associated with evolving an entirely new genre over the span of a single game.
* Most early titles will sell small numbers, but will end up being decently profitable due to their low cost. The example given of Brain Training on the DS, which was created in a mere 4 months comes to mind. Even though it isn’t selling what are typically considered ‘blockbuster’ numbers, it is an unqualified financial success. During this period a large number of new genre attempts will be successfully vetted.
* Only after a year or so will 2nd generation ‘polished’ games start to emerge. The cream of the core game mechanics tested in the first generation will be layered with all the traditional trappings of a modern video game.
* One or two ‘major new genres’ will emerge. These will be highly profitable and Nintendo will attempt to turn some of them into exclusive franchises. Mario Kart and Mario Party are good examples of this from previous generations.
So when games come out slowly and only appear to be technology demos, I wouldn’t worry too much. A ‘gimmicky game’ is really just another name for a new core game mechanic that hasn’t been polished. Donkey Kong is considered shallow and gimmicky by children playing it for the first time in this modern age. Yet it sported the same core game mechanics that eventually blossomed into an entire genre of highly polished 2D platformers.
In the past, Nintendo built these new genre attempts internally. They got to own the IP and enjoyed the resulting success that comes from being one of the few to understand the benefits of innovation. The result has been a focus on a small number of 1st party development efforts and a trickle of titles. Unfortunately for them there are other innovative people in the world. New genre successes such as GTA on other consoles provided substantial and painful competition.
I see this changing somewhat with the DS. We are starting to get some wacky ideas from smaller companies and Nintendo seems to be a bit more welcoming of others. Nintendo needs to pursue this path further by allowing new companies to join the experimentation stage.
Conclusions
Nintendo’s strategy of pursuing innovation benefits the entire industry. It brings in new audiences and creates new genres that provide innovative and exciting experiences. The radical new controller is a great example of this strategy in action.
Surprisingly, this also benefits Microsoft and it benefits Sony. As the years pass, the hard core publishers that serve mature genres will adopt previously innovative genres and commoditize them. Their profits will be less, but they’ll keep a lot of genre addicts very happy. Everybody wins when a game company successfully innovates.
I see both of these strategies as a necessary and expected part of a vibrant and growing industry. Industries need balance and Nintendo is a major force of much needed innovation that prevents industry erosion and decline.
Everything in the quoted article is from the Lost Garden article. Nothing is of my own creation, just thought you guys would like some light reading while I try to get Chapter 22 ready.
[Edited on 9/21/2005]