Work is being done on three articles. One is ‘Avalanche’ which was supposed to be done quite a while ago which talks more about how Wii gained so much traction in the market. The other two are about the implications of E3 2008. I don’t know which one will appear first.

Nintendo’s direction is very transparent. Their conference mentioned ‘disruption’ numerous times, and Iwata came on stage to discuss ‘paradigm shift’. “What does it mean, Malstrom?” I’ll let you think about that for now. I prefer to let the articles do the talking for me. Here is a clue. It is from “Finding Nintendo’s Shield”:

But there is one sacred cow, mooing relentlessly, whose milk is slurped up more than any fanboy kool-aid. Can you decipher the moos? Listen. The cow turns to you and says:

Nintendo does not intend to battle Microsoft and Sony.

Really!?

“They will see our results, and they’ll see how much of a challenge and dogfight this new era of gaming will be.”

-Reggie Fils-Aime. Seattle Times, “Putting Nintendo Back in The Game”, 2006

The stages of disruption are…

-First is the ‘aggressive growth’ phase by the disruptor.

-Second is the ‘counterattack’ by the incumbents.

-Third is the fallout from the counterattack. Most of the time, the counterattack is unsuccessful and the incumbents are made *gone*.

Reggie’s quote, asked in the context of ‘CONSOLE WAR’ by the journalist, first says Microsoft and Sony will see Nintendo’s results (their aggressive growth), and then will see how much of a ‘challenge’ and ‘dogfight’ the new market will be.

It should become clear that Nintendo doesn’t intend to battle Sony and Microsoft in the old market but in the new one. While Nintendo, as a company, may not have the resources to battle in the old world, Nintendo has become demi-god-like in the new world where process matters, not resources. In the New World, the strengths of Microsoft and Sony become liabilities while Nintendo’s weaknesses become strengths. Through disruption, Nintendo has re-defined the battlefield.

There Will Be War

”Like the 16-bit War between Sega and Nintendo?” said the reader with hope.

Oh, no. This will be much more intense. When MCI disrupted, it had a period of aggressive growth that AT&T ignored (for MCI was taking non-consumers: the lower rungs of the market AT&T didn’t see worthwhile). Eventually, AT&T HAD to respond and the result was the phone wars of the 1980s.

If you’ve ever wondered what a ‘Console War’ would look like over the Expanded Audience, Nintendo’s press conference should give you an indication. Keep in mind that if Nintendo loses their hold over the Expanded Audience, their disruption fails. (That’s all I’ll say about this for now.)

-Motion Plus sent every ‘Core’ game Nintendo was working on back to the drawing boards. Everything about Wii Sports Resort screams ‘rushed’, even more so than Wii Sports which had to be done for the Wii launch. Motion Plus would also change the very nature of HOW the core games should be. Take Zelda for example. Motion Plus begs Zelda to be a 1:1 sword control. Of course, all that has to be tested and a game has to be made around the concept. And Nintendo is nowhere near that since they are barely scrapping together Wii Sports Resort.

The real question is why Wii Music wasn’t sent back to be ‘enhanced’ with the Motion Plus (as something like the drums could really use it). Corporations, like everyone else, had to look at it from a tactical nature. They chose to delay other games to be ‘enhanced’ and send Wii Music out to die.

-For those wondering, Microsoft did not perform a counterattack. Even the so-called ‘casual’ games Microsoft showed were tit-for-tat against Sony products. Avatars are not so much an attack on Miis as they are on Home. Lips was to go against Singstar. In the Movies was to go against Eye Toy. Microsoft never said going for the new market was ‘important’. Instead, they said that beating the PlayStation 3 was the main issue. It is a retreat from the disruption if not a momentary one. It really reveals that the soul of the entire Xbox Franchise is about tearing down PlayStation. Sony, of course, is retreating. Remarks from Stringer saying that Wii is an ‘expensive niche’ is a classic sign of not seeing the disruption for what it is. It is common for disruptive products to be seen as niches at first from competitors.

-I did get amused on some commentators screaming, “Look! Malstrom is wrong!” Yet, how was Malstrom wrong? They don’t say. There are literally hundreds of pages about Nintendo’s strategy among other commentary spread out over a couple of years at my site, and my haters are still grasping at straws despite such a large well of content to choose from. “But you said there wouldn’t be a Wii Sports 2!” I didn’t say that. Iwata said that, and he is the ‘expert’ of Nintendo. But Iwata had good reason to make a sequel. “Why is Nintendo making a sustaining change with Motion Plus? Aren’t they the disruptor?” The path Sony and Microsoft have gone has put them in a box. Nintendo wants to make sure they stay in that box. Sustaining change is a sign of war. The industry will be quite surprised to watch current lamb-like Nintendo transform into aggressive lion should a competitor enter their Expanded Market. By getting Motion Plus out there, Nintendo will have developers used to working with it way before a competitor can come up with their own proposal. Again, look at the above quote from “Finding Nintendo’s Shield” about the change of battlefields and how in this one, Nintendo has the cultural and corporate advantage over its competitors. It’s a New World.

-There is no point to talking about the hardcore meltdowns. They speak for themselves. We have not yet seen the peak of it yet. An event is coming that should cause them to go even more nuclear provided their emotional reservoirs aren’t fully empty by now.

-Kudos to N’gai “Sir Dreadlocks” Croal in his reply to Pachter’s crazy reassertion that Nintendo will release a HD Wii within a year. I wonder if Pachter even believes his ‘media’ comments.

-There’s been much talk about ‘Hardcore’ vs. ‘Casual’ in regards to Nintendo lately. MTV’s Stephen Totilo wrote that Nintendo was speaking a different language than fans (meaning the ‘hardcore’). Nintendo’s use of ‘Core’ and ‘Expanded Audience’ matches the disruption literature very closely and is transparent. The hardcore’s use of language has zero basis and is nothing but nerd slang. When they hear ‘Core’, they think ‘Hardcore’, and when they hear ‘Expanded Market’, they hear ‘Casual’.

-Much of the gaming press deserves blame. Nintendo has even had private conferences with the gaming press where they did little more than discuss “Blue Ocean Strategy” and disruption. What does the gaming press do? They ignore “Blue Ocean Strategy” and disruption. “But Malstrom!” you say. “They care about games, not business.” Then why do they go giddy talking about engineering specs? The absence of information spreads misinformation. By either choosing not to explain Nintendo’s strategy or admitting they are unable to, all the literal garbage of ‘hardcore’ vs ‘casual’ rot is amplified by the information vacuum. In Stephen Totilo’s piece about Nintendo ‘communication problem’ with the so-called hardcore, I ask: who is supposed to bridge the communication between company and gamer? It is the Press. It can be no one else.

You might ask, “Why won’t Nintendo talk in OUR terms of hardcore and casual?” The reason why is because that language is nonsense on stilts, is nothing but Internet slang, and it frames the new market as a ‘threat’ to gaming (where it is actually its salvation). The real question is why won’t the press adopt Nintendo’s language (which comes from Christensen literature) about ‘core’ and ‘expanded’? Numerous times Nintendo executives have tried to point out what they mean and the gaming press, (so arrogant?), refuses to speak such language. Want an example? A Nintendo executive in Europe, Laurent Fischer told the press, specifically, that their definitions of hardcore and casual were wrong.

Nintendo is using language from their strategies for essentially all of their speeches and interviews. The company is very much on the same page, and they speak the same language. The press refuses to acknowledge Nintendo’s definitions and keeps ramming down ‘hardcore’ and ‘casual’ down our throats which has no foundation in anything business or gaming (but sounds like some sort of ideology). Personally, if I was an editor, I would forbid journalists from reading internet forums as memes and slang, like bad gas, is infecting the content (which most people don’t read the Internet forums and don’t care about meme of the week). The reason why Internet is killing some printed game journalism is because there is little difference. If I am to read Internet memes and slang in a magazine, I might as well read the Internet anyway.

-The press wasted their time, and executives’ times, in their interviews. This is how they sounded.

<First Journalist>

“Mr. Miyamoto, where are the hardcore games?”

“Mr. Miyamoto, where is the storage solution for Wii?” (note that the question is framed in such a way to establish a premise instead of allowing the interviewee to state the premise).

“Mr. Miyamoto, how is Animal Crossing City Folk considered a ‘hardcore’ game?”

<Second Journalist>

“Mr. Miyamoto, where are the hardcore games?”

“Mr. Miyamoto, where is the storage solution for Wii?”

“Mr. Miyamoto, how is Animal Crossing City Folk considered a ‘hardcore’ game?”

<Third Journalist>

“Mr. Miyamoto, where are the hardcore games?”

“Mr. Miyamoto, where is the storage solution for Wii?”

“Mr. Miyamoto, how is Animal Crossing City Folk considered a ‘hardcore’ game?”

You get a sense of the pattern. Do we really need so many journalists to go and ask the same exact questions? The joy of past E3s was that regular gamers and bloggers (referred to as ‘mouth breathers’ by the ‘proper’ journalists) was that they asked more unique questions and had a better bond with the gamer community. Previous E3s, I would always turn to a non-aligned gaming press person. It is the asking of the same exact questions, over and over again, which likely caused Laurent Fischer to finally say something like ‘look guys, only geeks and otaku care about this’ comment. And the press framed that into an ‘insult’. (Note: the press turns on you when you challenge the premise of their questions).

Nintendo has spoken much about disruption and spoke more about it and paradigm shifts at this E3. Reggie even announced Nintendo was going to make a company whose only goal was to find how to disrupt Nintendo (which puts it in line with my very last disruption article: “Why Nintendo Must Destroy the Wii Before It Destroys Nintendo”). Yet, I cannot recall hearing ANY questions about this new company, disruption, paradigm shifts, or anything else despite it being prominently said in the press conference. The press seemed more interested in product announcements, which is fine on one level, but everyone knows how tight the Nintendo ship is. Outside Iwata and Miyamoto, no one has the liberty to announce new products simply because a journalist asked.

If the press learned the disruption language, they could have asked better questions and got better answers. Instead of asking, “Where are the hardcore games?”, it would have been better to ask, “Disruption is about disrupting one’s competitors. Has Nintendo taken it too far and disrupted their core customers?” It asks the same question and does so in their language. A NOA executive would have given a more interesting and elaborate answer. While they cannot speak about products not announced, they can chatter all day about their strategy. When one looks at the ‘Revolution’ speeches, one finds that Nintendo hints at what they intend to announce through business strategy talk. Such talk is better than canned after canned answer of, “I’m sorry. We cannot announce anything now.”

-The reason why I’m being harsh on game journalists is because they act like innocent bystanders when their audience blows up. Who was feeding their audience expectations? Who was ‘confirming’ Kid Icarus? There is no problem with game journalists being ‘hardcore’. The problem is that many are being ‘hardcore’ first and journalist second when they should be journalist first and ‘hardcore’ second.

-I interpret meltdowns, anywhere in life, to be walking in an incorrect context when reality thunders from somewhere. The lack of real research, of information, about Nintendo’s strategy is what is fueling the meltdowns. Simply saying, “Nintendo is going for new gamers, not just core” obviously doesn’t cut it anymore. Simply saying “Blue Ocean” doesn’t cut it anymore (for no one seems too interested in saying what it entails). Rogues like myself cannot fill the huge gaping hole of explaining Nintendo’s direction. Until Nintendo strategy is seriously investigated, the meltdowns will continue as gamers are led into a false context.

-The announcements of DS undergoing ‘experiments’ in airports, having a cooking game come out in the West for it, and all was a (blatant) signal that the DS is moving to the third tier of the Blue Ocean Strategy (Distant Users). This is what was meant by DS being seen as a ‘companion’ device. DS, with it being 50% female users or so, has essentially milked the second tier (customers who refuse the product) for all its worth. These ‘experiments’ may be integral to determining the new DS re-design (and it will come). Any DS re-design will be announced on a late January well after the Holiday season. I’d expect the re-design to have better firmware so the DS could be that ‘companion’.

-The reasons for taking sabbaticals around E3 are numerous.

1) E3 news is scattered out and new interviews are posted weeks later (I hate it when they do that).

2) The news signals shifts in strategies which take time to absorb and research.

3) With the Internet and its blogs and message forums, there are too many ‘instant reactions’. There are many “articles” placed out in a short amount of time that are like ‘fast food’ reactions to E3. I’m not knocking them. But I think a more ’slow roasted’ article satisfies better. Investigating creates better content than reacting, in my opinion. In order to remove oneself from the temptation of ‘reacting’, I’ve thought sabbaticals are necessary.

4) Hell, it’s good to get away.

5) While I have my thoughts, it is fascinating to me to watch others’ reactions. “It is because you only want to hear what others say so you can craft your own!” a cynic would say. I’ve been sending emails back and forth with finance guys. I’m just getting caught up on the more ‘gamers’ that have emailed me. No, the reactions are useful to me as it shows me who ‘gets it’ and who is in ‘the ballpark’. So far, most people appear to be saying that either Nintendo abandoned the ‘core’ to go where the money is (no) and/or that Nintendo is taking the safe route (also no). Matt Casamassina, in the IGN podcast after E3 2008, veered very close to what was going on when he said that Nintendo was ‘very aggressive’. But Craig then said “No way, Nintendo played it safe” and Matt went along with that.

-Some have said that Nintendo has become inverted in thinking they are really cool, that everyone loves them with their E3 2008 show (which is what the hardcore tell themselves so they can justify screaming a little louder). Nintendo is, and always was, focusing on the Big Picture. If you miss the Big Picture, you’re going to confuse the forest for the trees. Nintendo gave out major information to investors and ‘business guys’ at their conference. “Why don’t they tell it, plainly, to gamers?” Because you guys don’t want to hear it. “Then why not tell the press?” They have. The critical information just washed past the press like water from a duck’s back.

-The hardcore, the lovable hardcore, truly do believe the industry revolves around them. The hardcore narrative is this:

*Nintendo is in another universe and shows unspectacular show and doesn’t include much core announcements.
*Hardcore complain to let Nintendo know what it wants.
*Nintendo, who is so stupid and doesn’t know anything about gaming, are knocked silly by the hardcore complaints for they thought everyone reallly loved them.
*Hardcore high five one another when Iwata ‘apologizes’ for they believe their message has been heard by Iwata and that he is truly filled with remorse about the hardcore. Nevermind the fact that Iwata tends to apologize for anything these days, be it DS and Wii shortages, to games not coming out soon enough, to too many games coming out, to literally anything. Remember, he sees himself more as a servant. If I went up to him in person and said his haircut sucks, he’d probably apologize for that too. He’s just that type of guy. I prefer the Laurent Fischer approach where is more of ‘in your face’. Hardcore do not get nuance. They only get the two-by-four.
*When Nintendo shows off their ‘core’ titles (which they undoubtedly will), the hardcore will believe that they were the cause of these core games, that they were the engine, the spark, the kindling. They literally will believe vast million dollar projects just ‘became’ due to their ‘protests’ on the Internet. They are that self-deluded.

-The reason why the hardcore are unhappy is not because there are lack of core games. The reason why the hardcore are unhappy is because they are no longer the lead customers for Nintendo. They feel their ‘core games’ should get all the spotlight while the ‘expanded’ games should be shown on the side. Instead, Nintendo does the reverse and this is what is causing the infuriation of the hardcore. They are so used to being the lead customer that when they suddenly aren’t, it is literally a shock to them. Currently, they are in tunnel vision where they can’t see anything else than their undershot customer dreams. This tunnel vision is the marketing myopia that, like a black fog, shrouds the industry’s view of the real market. Nintendo has changed the ‘lead customer’ since 2006 and even before then probably. Miyamoto showcased Wii Sports and Wii Fit, not Zelda: Twilight Princess and Mario Galaxy in 2006 and 2007. In 2008, Miyamoto showcases Wii Music instead of Pikmin 3 or something else. What the hardcore need to get through their adorable heads is that they were only the ‘lead’ customers because that was where the growth was at. When the market overshoots, listening to undershot customers is corporate suicide.

-Sony and Microsoft are sooo screwed. “But Malstrom, they have tons of money!” That doesn’t matter. Actually, all that money will poison their latest offerings. In a disruptive battleground, tons of money isn’t an asset. It is a liability. “How can that be?” Think about it.

-I should be caught up to the rest of the emails soon.

-I pretty much see the Disruption Chronicles winding down. There is a large amount of content to still write, but the end of the tunnel is very clear now. My thougts and feelings now bend toward the Luddology section. That’s going to be wild. I have no idea if people will love it or hate it. But I believe everyone will say, “I can’t believe what I am reading!!!” Oh, it is going to be fun!

-Third party companies are under enormous pressure from investors to tap into the New Market. This is why they have been so loud in trumpeting their ‘casual’ success. But scratch beneath the surface. All the ‘casual’ games they say are so successful are children’s games. Children are actually part of the Core Market, not the Expanded Market including young girls. Children are, literally, retarded adults (as anyone who deals with children know). This is why the ‘Birdmen’ strategy works with children. But this is nothing new. Children’s games have been working, with often horrible licensing, for every console cycle. Yet, all of a sudden, success in children’s games (male and female) are now declared to be success in the New Market? This is fraud. No third party has yet followed up with a hit similiar to Wii Sports and Wii Fit. The ’semi-hits’ like Carnival Games sell primarily to children.

If the audience existed on the Gamecube or on another console in a prior cycle, by definition, it cannot be part of the Expanded Audience. So how the Hell did children’s games become ‘New Market’ games? And why the Hell are people willing to let companies re-arrange the goal posts so they can declare success?

-Many have written in thanking me for introducing them to Christensen and disruption as they find it very fascinating (and even are buying his books). The labryinth of Human Nature is always fascinating and that is what disruption is. Many people, including developers in any entertainment medium, mistakenly believe that business revolves around the developers and that marketing is nothing more than that stupid arm out there who deal with the more finished product. It is actually the reverse. Business revolves around marketing and the engineers and developers are the arms, not the center. The idea of disruption is an attack on traditional marketing as taught in schools. When an engineer or developer begins crafting a product and must think about how a customer uses it, that is marketing. Whether they like it or not, developers are performing marketing. Christensen literally has said that the problem that he is trying to correct is that what business schools teach is what is destroying industries and why successful managers fail.

-Last hint. And it’s a major one showing the Big Picture of what is really occurring in the video game market.