http://www.youtube.com/watch?v=9joAb4XMaUs&feature=related
Didd you already see this guy’s videoblog? When I read the post about comic books being disrupted, (that I agree with, BTW), I was reminded of that video, that, amazingly, compared the video game industry to the comic book industry, a year ago.
He doesn’t use, or seem to be aware of the disruption terminology, but it is a very good and funny presentation of the situation.
Warning: foul language used in the video. So not safe for work.
I watched the entire video. I don’t know anything about the comic book industry, so those more familiar will have to make the call on his observations.
He is essentially correct about the ‘big picture’ mentality concerning the games industry. Nintendo has spoken specifically on this subject. We go back to November 2005 before the Wii was even released. Reggie Fils-Aime holds a ‘breakfast’ sort of meeting with various game journalists (the Penny Arcade guys are there as well!). Since he cannot talk about Wii in any specific way, he talks about the business strategy of Nintendo! Hahaha, you could tell the journalists were pretty bored. I think they slept through the meeting. But it is in this meeting where Nintendo unveils most of its plans that have been so critical for me to trying to figure out what they are doing.
This is the meeting where Reggie cites two books to understand Nintendo’s direction: The Blue Ocean Strategy and “Innovator’s Dilemma”. Reggie then brags about meeting Christenson.
But most important are the specifics Reggie cites as to why Nintendo must expand:
Let’s look at the install base for the last four generations. First thing to note: As recently as about a year ago, projections were made that the current generation would reach 60 Million household penetration: Ain’t gonna happen. Ain’t gonna happen. Another couple tidbits: So this chart is pure number of units sold. It doesn’t take into account duplicate ownership, and doesn’t take into account population growth. You overlay those two facts to get a percent population with a console in the household, and that’s what it looks like. 8 Bit years, 31% of households had a gaming system. This year, where is going to end up? Somewhere between 31-32%. The growth we have seen has been driven by population growth, and by duplicate ownership.
I’m about to lay down some more bad news. Let’s talk about people who are playing games. This is a study from Piper Jalfray. They have been doing this for the last three half-yearly installments. This looks at young teens, and who is increasing their game play, and who is decreasing their game play; just a rough measure. The red is the % of teens that are saying they are decreasing the amount of time they are playing games. It’s gone up; gone up fairly consistently every time they have run this study. And the amount of teens that say they have increased their game play have been stagnant, and down fairly substantially from fall of 04. Couple other tidbits. This is our core audience in terms of that pipeline of young boys that are coming into the US population. As you can see 2004 there are less male 10-14 year olds in that area. A little more bad news: The group that feeds into this are down another 8-10%. So fewer teens; our key gaming audience here in the US. That’s why we are stepping back and saying “more of the same is not going to motivate this industry.” That’s why we are stepping back and saying “we have to disrupt this marketplace that we helped create 20 years ago in order to be successful in order to move forward.” How are we doing that?
Nintendo’s ‘Big Picture’ is relatively simple. It is the premise that the Core Market’s expansion for the past couple of decades was due to population growth and multiple console ownership. Since the trends for population growth are now in reverse, of population decline, Nintendo must find a way to expand the number of gamers or else watch the industry shrink and die. I also suspect that Nintendo, as any long range projecting Japanese company, knows about the Depression coming and is racing to expand the game audience in order to cushion the blow such a severe downturn will unleash.
Nintendo doesn’t have to ‘beat’ Sony and Microsoft. Sony and Microsoft’s path is doomed because the Core Market is inevitably doomed. It makes no sense to fight over the Core Market since it will just slowly shrink away.
The video in the email talked about the need to get children for the next generation. However, Nintendo is saying that the ‘pipeline’ of teenagers and young kids is shrinking and gaming isn’t as interesting to them anymore. Therefore, expand gaming to non-teenagers or die.
Here are some quotes from the meeting that I think are interesting to read four years later:
Q: I’m curious what your thoughts are on having DS as a web browser. Is that soothing you are going to steer clear of since it is a kids platform or is that something you could look into?
A: Actually having a web browser on the DS? I think it is a provocative idea. I think it is very provocative. And again, looking at it with our “Disruptor Lens” by saying “how can we bring new people on board to buy DS and play DS” I think having a web browser would be highly disruptive; I would love to do it.
Note that a DS browser did come out for the DS. It is also was included with the Wii and DSi. Disruptor Lens indeed.
Q: Do you see Microsoft and Sony as competitors the way you are building the Revolution’s strategy?
A: I see Sony and Microsoft pursuing the same strategies. Center of the home, multipurpose, very expensive… Ya know I got a kick out of the latest comments on the PS3 and its frame rate. It is like 3X the rate that your eye can see a difference! I mean talk about overshooting consumer needs and creating an opportunity for a disruptor to come in and say “look at this different solution.” So going back to my examples, do I think Southwest thought of the other airlines as competitors? Well sure I did. Do I see Sony and Microsoft as a competitor? Sure I do. But they are on a different path. I’m not saying one path is right and one is wrong. I am just saying that one has the potential to lead to a very very different marketplace. I see that it is working based on Nintendogs and Mario Kart. It isn’t either/or. It is doing both.
Remember, this was said back in 2005 folks. Four years ago. It would be more than a year before the Wii launched.
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