Happy dogs waggle tails, happy gamers don’t waggle controllers
I once gave a presentation in a crowded room about the role that innovation has played in the gaming industry. I specifically spoke about the great strides that were made by Nintendo in capitalizing on the largely untapped ‘casual gamer’ market with the Wii. To prove a point, I showed the audience a blackened out silhouette of just the Wii console sitting on a stand. Old and young alike immediately recognized the familiar shape and everyone in the room knew exactly what it was (unless they were scared to answer incorrectly- like how I would raise my hand during hearing tests when I saw other kids do it). Nintendo has done the impossible by capturing the market segment containing people that introduce themselves as “Jason” more often than “CODfiend1977” (old people….seriously), and like me on a first date, Nintendo has largely misinterpreted their intentions.
Some background: Nintendo was in trouble. In 2005, Sony had sold 90 million Playstation 2 consoles. That equates to almost one out of every three United States citizens being able to go home and pop in SOCOM at a moment’s notice. Nintendo sold 1/5 that. No one owned a Gamecube and no one cared. So Nintendo had to make the very difficult decision of whether or not to pull a SEGA and ditch the console race to become a game making only company.
|In 2009, IGN.com named the Gamecube the 16th best gaming console of all time - I dare you to even name 16 consoles period.|
Instead, Nintendo set its sights at the non-hardcore gaming populace. This was a task that was incredibly hard to do. At the time, society looked at games and gamers in the same way I look at ice cream truck drivers: “Any grown man who chooses a profession/hobby that simultaneously repels women and attracts little children has got to be creepy”. Enter the dragon…I mean Wii-mote. That little piece of plastic and motion controlled technology won the hearts of millions of parents and grandparents looking to purchase something fun for their children that they can play too. As a result, Nintendo sold over 95 million Wii Consoles, outselling competing consoles almost 2:1. If cartoons taught me anything, it's that Nintendo should be on top of the world and the CEO must be swimming in a sea of gold coins. Fast-forward a few years to October, 2011. News reports now say that Nintendo is reporting $925 million in losses for the first six months of their 2011 fiscal year. A billion dollars in six months?? How in the world could this juggernaut lose any amount of money with an install base of almost 100 million? Here’s what Nintendo misunderstood: 1) High console sales don’t automatically mean financial success. 2) Casual gamers are still casual gamers. And 3) They’re betting on the wrong pony.
Obviously, having 95 million people own your product is nothing to scoff at. Instead, it should be commended. Nintendo has finally helped us reach an age where gaming has become more acceptable than ever before and they did that with the enormous amounts of Wiis they sold. However, what’s more important than 95 million people buying a single console is 95 million consumers purchasing a lot of games for which the console maker gets a cut. Think of it this way, let’s pretend Nintendo, Sony, and Microsoft are companies that make money on gasoline. In order to make more money on gasoline, they will sell you cars that use it. What good is selling a million cars if no one drives them enough to purchase more gas? The average Wii owner will buy 2-3 games over the lifetime of the console. Over that same time frame, Xbox 360 and PlayStation 3 owners will buy 7-8 games. Also, I read an article on forbes.com (because I'm fancy like that) detailing the breakdown of where your $60 goes when purchasing a new game.The console creators (Nintendo, Sony, Microsoft, Etc.) take for themselves a percentage of the sale that equates to roughly $7 for every game sold. Assuming that if you’re reading this you’re a video game liking, pocket protector wearing, “Zelda is the princess and you’re referring to the Kokiri boy named Link” interjecting nerd, let’s do some math. If 95 million Wii owners buy 3 games (brand new), and Nintendo gets $7 per game, that means they have made a total of $1.995 billion. If 60 million PlayStation 3 owners buy 8 games each (again, brand new) and Sony gets the same cut on each game, they would make $3.360 billion. Sony and Microsoft may be losing the hardware race, but that doesn’t seem to matter anymore does it? This brings me to my next point…
As it turns out, casual gamers don’t drive the gaming market. A hurting company that captures the casual market is the same as the fat guy that decides to buy those weird shoes that are supposed to tone your butt when you walk—it’s not actually fixing the problem, it’s just treating the symptoms and results in a toned up fat butt. It's easy to think when one reads that Nintendo sold almost 100 Million Wiis, many of which went to people who don’t normally buy video games, is that they will do it again. Nintendo falsely believes that they have turned 100 million casual gamers into hardcore, wait in line for days to get the next unnecessary peripheral type that will follow them into the next console generation. They tapped a market that won’t be ready to be tapped again for a long time. Casual gamers aren’t looking for better graphics or more games. As I stated above, they were looking for something that both they and their kids could enjoy. Wii bowling still fulfills that need, so why would they need anything else?
In regards to the Wii-U, Nintendo intends to maintain popularity by getting better games (yay!) and the introduction of the tablet-esque controller (boo!). Games not only sell systems, but they are a major driving force in the financial stability of a company. I was so excited to hear that Assassin’s Creed III will be coming to the WII-U. The only problem here, though, is Assassin’s Creed III is actually the 5th entry of the franchise. In this day of very few new IPs and the endless supply of story driven sequels, it will be hard for early adopters of the Wii-U to jump into the 3rd, 4th, or 5th iteration of a franchise that Wii owners were never exposed to. Do they hope that they will siphon consumers from Microsoft or Sony? Fat chance, these consumers are largely considered to be in the ‘hardcore segment‘ and can’t stand using anything but traditional control schemes. On top of that, 1/5 of all people now own at least one tablet-like device and would most likely feel no need to buy an expensive proprietary tablet/controller from Nintendo that probably won’t do much outside of literally just being a controller for a game system.
It will be interesting to see what happens in the future. With rumors circulating that the next version of the Xbox won’t make it easy for gamers to sell their used games, it becomes increasingly hard to predict how the Wii-U will perform. One thing, however, is certain, Nintendo is fighting an uphill battle.
And now I present, Wii Fails.
And now I present, Wii Fails.
Donnie Fewkes is a business analyst for a company that has literally nothing to do with video games. He doesn’t get paid for this, but would still love to hear what you have to say about his writing and horrible jokes. Please follow him on Twitter @Captain_Skaggs for more lame similes and let him know if you have anything you want him to write by posting below or by sending an email to firstname.lastname@example.org.
If boredom were a crime, I’d be a super hero