A game console should be affordable by… everyone. Not during the course of its ‘life-cycle’ but at the beginning.
Hardware is the least important part of a game console. Everyone hates buying it. People buy it only to get to the software. As Yamauchi said, “It is the box people buy to get to Mario.”
In order for the Game Revolution to succeed, console hardware must not be an obstacle. In the Console Graveyard, many console makers forgot this. And keep in mind that almost every game console was designed and marketed for the mass market. They just thought the ‘computer elements’ of the console would give it ‘higher value’ like the Pippen or CDi.
The only console not designed for the mass market was the Neo Geo. It wasn’t even intended to be a console to be bought but only to be rented… at first. Games cost $100 on the system. But the system was never orientated towards the mass market. Every other console was.
Lately, there has spread an industry belief very popular with the marketers that game console hardware should not be sold this way. Instead, game consoles should be sold in a ‘staggered’ fashion.
-Launches at a high price (Early adopters and ‘hardcore gamers’ are to buy it at this point)
-Decreases in price by $50-100 in a year. (Semi-hardcore gamers…)
-Decreases another $50-100 next year. (Typical gamers… Expects to move most volume at this time…)
-Decreases another $50-100 next year. (Family gamers…)
-Decreases in price even more as the next new console is coming out. (For the ‘poor Latinos’ or whoever the marketer ‘believes’ is out there.)
This approach is absolutely wrong and goes against the spirit of the gaming revolution. You do not aim your game console at some imaginary ‘market box’ (e.g. “Derp, the ‘early adopters’, DERP!!!”). You aim your game console at…
“Everyone!” interjects the reader enthusiastically.
Take the PlayStation 3 for example. It was made by the minds behind the best selling console of all time: the PlayStation 2. They designed the PlayStation 3 to be what they wanted. The marketing plan was precisely for the PlayStation 3 to target the ‘early adopter, hardcore gamer, and Blu-Ray enthusiast (hahaha)’ at first. Then each year, the price would come down and ‘new market segments’ would ‘open up’. It is as if these marketers were playing a RPG game where ‘new lands’ would ‘open up’ as their console price went down.
This approach is so, so wrong. The PlayStation 3 was way too expensive, and we saw its price come down in a hurry. Despite the price drops, the PS3 isn’t rocketing up. The price drops this generation, for all consoles, are doing nothing but seeing these consoles tread water. Market performance is not ‘growing’ for Xbox 360 or PlayStation 3. It is flat. If you think these ‘percentages of growth’ are growth, then you need to look at the actual unit sales and not the distorting ‘percentages’. This is why the market is in overall decline.
Now all the marketers for the game consoles believe this is how you sell a game console. Make the price a little to much so you can get the ‘early adopters’ and ‘hardcore gamers’ and then ‘work your way down’. When their minds go over this process, the marketers have an orgasm about how ‘logical’ and ‘wonderful’ it is. Then, they high five one another with how brilliant they are.
Nintendo is adopting the above ‘high console price’ approach that Microsoft and Sony are doing. Much of the blame can go to Reggie Fils-Aime and his merry band of marketers. They totally did not understand why the Wii performed like it did.
The Wii was Nintendo’s most expensive home console ever made. It cost $250. It immediately sold out in the US and remained sold out for around three years. And this selling out had nothing to do with lack of supply. Nintendo was breaking all sorts of records.
At the time, Nintendo VPs were asked, “Do you wish, in retrospect, that you would have charged a higher price for the Wii?” On Ebay, the Wii was costing more than a PlayStation 3 in early 2007. Used Wii systems were selling more than new Wii systems (which no one could get their hands on). The Nintendo VPs were very careful about answering that question, but the implication was ‘yes’, Nintendo did wish they charged higher for the Wii.
This is what amazes me about this industry. You would think Nintendo would be very thankful about the Wii’s performance. Instead, they got angry that they think they priced the Wii too low. That is why they believe it sold out. The ‘low price’ was hitting too many ‘market boxes’ all at once. Instead of properly staggering with the ‘early adopters’ to ‘ hardcore gamers’ at first, Wii was hitting the ‘medium gamers’ and even ‘housewives’ all at once.
Nintendo doesn’t even believe the dramatic decline of the Wii has anything to do with them or their software. In the marketer’s mind, since they ‘opened up’ all these ‘market boxes’ at once, this caused a lopsided wave. Now that all those ‘market boxes’ were tapped, there was less to tap later on. This is why, in their minds, there is such a decline.
The Wii has received two price cuts since its launch. The first was in latter 2009 and the other was just recently. At December 2009 NPD, Wii sold four million. It was more than any game console had every sold in a month in the NPD. Now, we, the gamers, knew why. Super Mario Brothers 5 was a main driver to this. The game essentially sold out and remained sold out as did the Wii (which Reggie was on TV saying he was sure there wouldn’t be any supply problems). The higher ups at Nintendo, such as Iwata, considered this success was due to the price drop in combination to releasing three different software all at once (Wii Fit, Wii Sports Resort, and Super Mario Brothers 5). Iwata had this belief that a ‘social phenomenon’ could be ‘sparked’ on the market by releasing games all at the same time. Iwata has since abandoned this idea.
But the Wii’s first price cut and the resulting Wii selling extremely strongly shortly after made the Nintendo marketers confident that, “If we drop the price, we open up another ‘market box’! And that is what increases sales!”
So then comes the second price drop of the Wii. Wii performance remained flat which is ‘bad’ for a price drop. In other words, no new ‘market box’ opened up. But this will not deter them. They will think that ‘market box’ was probably opened up earlier. And they will think this is why their next console must launch at a higher price!
Developers will like the higher price. That means the machine can have ‘more power’ so they can have more ram and speed. And if the developers and marketers agree, it usually is a done deal.
“How do you know Nintendo will go this direction, Malstrom?” asks the curious reader.
Look at the Wii U. Or better yet, look at the 3DS.
The 3DS costs $250 to $300 which is ‘expensive’ for a handheld console. The PS Vita will also be $250 to $300. But in Sony’s case, they are following their ‘marketing belief’ of the staggered console price. After the first year, Vita will likely cost $200. Year after that, $150. Year after that, $100. By using parts off the shelf, Vita can retain profitability coming down in price unlike the PlayStation 3.
With the DS, Nintendo cut the price fairly soon. So why hasn’t it done so with the 3DS? It is perhaps the 3DS is as priced as low it can be while remaining profitable, but it is also because the 3DS is in the ‘early adopter and hardcore gamer’ ‘market box’. Nintendo appears to be following the Sony model on this.
How expensive is the Wii U going to be? Assuming the Wii U console deck is about the same or better than the PS3 or Xbox 360, and both of those systems are around Wii’s launch price of $250 today, let’s start at $250. How expensive in that controller? More than $50 for sure. $100? $150? The Wii U will likely launch somewhere around $350. It is clear Nintendo intends to follow the Sony model for the Wii U.
So how should a game console be sold? Let us look to the Blue Ocean for that.
On page 101, we read:
“[On making new markets] To achieve this, companies should challenge two conventional strategy practices. One is the focus on existing customers. The other is the drive for finer segmentation to accommodate buyer differences. Typically, to grow their share of a market, companies strive to retain and expand existing customers. This often leads to finer segmentation and greater tailoring of offerings to better meet customer preferences. The more intense the competition is, the greater, on average, is the resulting customization of offerings. As companies compete to embrace customer preferences through finer segmentation, they often risk creating too-small target markets.
“To maximize the size of their blue oceans, companies need to take a reverse course. Instead of concentrating on customers, they need to look to noncustomers. And instead of focusing on customer differences, they need to build on powerful commonalities in what buyers value. That allows companies to reach beyond existing demand to unlock a new mass of customers that did not exist before.”
Note that the ‘Blue Ocean Strategy’ is impossible with the Sony model of a staggered console price. Wii didn’t sell out because it was ‘cheap’ as it was more expensive than the Gamecube. And when Xbox 360 and PS3 prices came down, their market performance remained flat.
A console hardware’s price should be low enough to not be an obstacle. The focus, of course, should be on the software. If people wanted the console hardware to do things, the NES would never have sold in the 80s and Amigas and Commodore 64s would have remained dominant.
Blue Ocean Strategy does offer a tier system for those marketers who insist on ‘checking boxes’.
For all you Industry people who run around like chickens with the heads cut off saying, “It’s the price, Malstrom! It’s the price! Once the price comes down, OMG! Sales will EXPLODE!” any price cuts remain in the first tier of the Blue Ocean Strategy.
‘Soon to be’ customers are people who say, “I want to buy your product, but…” The issue could be ‘price’. It could be ‘lack of games’. It could be ‘waiting for a re-design’. Note that Iwata’s talk to investors about the lack of 3DS sales, he specifically said market research that mentioned people who ‘wanted to buy the 3DS, but…’. Iwata was saying this to investors as if it was a ‘good thing’. As if the 3DS had hope. As if the 3DS was like the DS in that it, too, started selling sluggish at first. That market feedback was only from people in the first tier of the Blue Ocean Strategy. They were the ‘soon-to-be’ customers.
The point is that the 3DS will NEVER take off. In order for it to do so, the 3DS must reach the tier 2 and tier 3. It is still struggling with tier 1.
These Blue Ocean tiers are interesting, and I believe they present three different personalities of consumers.
Tier 1: Soon to Be- These customers are aware of the product, and they want to buy it. But something is preventing them from buying it. It could be price. It could be games. Usually, these people populate gaming message forums. These people could be ‘Zelda gamers’ who are waiting for the next Zelda to appear on the Nintendo console before they buy it. These people are erroneously called ‘Hardcore Gamers’. They are all Tier 1, ‘soon to be’ customers. These customers are the easiest to get, but note how small Tier 1 is in the picture above.
Tier 2: Refusing to Buy- These people are aware of the product, but they refuse to buy it. They cannot be persuaded by ‘price’ or ‘games’. They are rejecting the system, not ‘how’ the system is done. This personality is very interesting. They tend to be quiet but volatile. They do not populate the gaming message forums. The perfect example of this noncustomer is me. The ‘anger’ you might sense on this blog is actually just the ‘refusal to buy’ emanations coming from this tier. I actually think I am providing a valuable resource by trying to illustrate that this blog is a microscope over the ‘refusal to buy’ customer.
Here are some examples how this customer works. I liked the DS. I should like the 3DS. However, with the 3DS, Nintendo changed the landscape of the barrier to customers to just being about gaming. It became gaming and 3d output. And this ’3d output’ is causing Nintendo to only create N64/Gamecube-esque games. I absolutely refuse the 3d output. “But you can turn it off!” Yet, you are still paying a ton for it. But the other issue, I refuse to buy a system whose philosophy for gaming is Gamecube-esque. I refuse these New School games. I don’t even see them as ‘games’. They never feel right.
Take the Virtual Boy. With it, the issue went beyond trying to sell gaming. Nintendo had to sell the ‘virtual reality’. I went from a ‘soon-to-be’ customer of Nintendo consoles to a ‘refusing customer’. Even if 2d Mario came out on the Virtual Boy, I still wouldn’t buy it. That ‘virtual reality’ issue was keeping me at bay.
When you combine Malstrom (and those who think along the same lines) with Tier 2, many things begin to fall into place.
On Super Mario Brothers Mii- The including of the Miis as well as the NAME and IDENTITY of the game revolving around the Mii turned me from a ‘soon to be’ customer into a ‘refusing’ customer.
On Wind Waker- The cell shaded art style and ‘fairy boy’ Link turned many ‘soon to be’ customers into ‘refusing customers’. Ironically, Nintendo seems to acknowledge this but refuses to acknowledge the other times they created ‘refusing customers’ from their tier one customers (which has only drastically shrunk thanks to the ‘creativity’ of Nintendo’s developers).
On Metroid: Other M- Metroid fans are ‘soon to be’ customers of a new Metroid game. Every Metroid game must present the issue of whether or not it is a good Metroid game. Other M presented another barrier by introducing ‘maternal instincts’ and cutscenes. This turned many ‘soon to be’ customers into ‘refusing’ customers.
On Puzzelda: Many of the customers who are responsible for the rise of the Zelda series have become ‘refusing customers’ due to Zelda adopting a gameplay skeleton that revolves around puzzles. The gameplay skeletons of earlier Zelda didn’t revolve around puzzles. And this is causing these customers to refuse Zelda because they no longer see it as Zelda. Ocarina of Time should have performed Grand Theft Auto III numbers especially with lack of all competition (classic Zelda always had intense competion), but it didn’t even get close.
On Puzzelda II: There is another faction of Tier 2 Zelda customers. These are the ones who refuse to buy Zelda because Nintendo isn’t creating a game up to the quality of Ocarina of Time. Ocarina of Time is the most coherent universe and game world Nintendo has ever created. When making games like Wind Waker or Spirit Tracks, it is obvious Nintendo has no intention of making a coherent universe. And these customers are entering the ‘refusal’ tier 2.
On 3d Mario: There is a sizable group of Refusing Noncustomers who object to 3d Mario. I’ve been aware of this group (I am included in it) ever since the N64 came out and have always been insisting that if a new 2d Mario (in similar quality to the earlier 2d Marios) was released, it would perform better than anyone could imagine. NSMB DS sold over 20 million. “But that is handheld gaming,” I was told. “That can’t work on the home console.” Super Mario Brothers 5 came out and sold superbly well. An argument I was making for twenty years is no longer hypothetical. 2d Mario has more customers than 3d Mario.
Miyamoto’s response to this is in thinking these 2d Mario customers are in the Tier 1. That they ‘want to buy 3d Mario’ but something is keeping them away. So in Mario Galaxy 1, he made the game more linearized and simpler. In Galaxy 2, he did it even more and added a standard map screen. Now, in Super Mario 3DS, he trying to make the 2d Mario skeleton work in 3d. This will only work with the consumers in tier 1. The 2d Mario crowd isn’t even in tier 1. They are refusing customers. They not only refuse the 3d Mario, they are hostile to the Gamecube-esque direction. If 2d Mario fans were ever going to buy a 3d Mario game, it would have been on the Wii. Many of them won’t even consider buying a 3DS no matter what game is put on it.
Most people know me through the Blue Ocean and disruption information that I presented, and they got confused or angry that I began to talk more specifically about games (e.g. saying 3d Mario ‘sucks’). In my mind, I’m not separating the two. Saying why I refuse certain games is a microscopic view of disinterest, and how Tier 2 thinks. Every other gaming website and message forum on Earth only talks about how Tier 1 thinks.
Tier 3: Remote Markets- These people are not aware of the product. They do not hang out at the Gaming Message Forum. These people include those who bought Brain Age and Wii Fit. They are the retirement homes who bought a Wii.
I can’t say much about this personality. Tier 3 noncustomers are the hardest and most remote of any noncustomer. But the only way to reach Tier 3 customers is through Tier 2. If Tier 2 isn’t on board, there is no way Tier 3 will as well.
Tier 3 noncustomers are incorrectly labeled as the ‘Casual Market’. While everyone considers the Wii’s success was due to Tier 3, no one ever mentions Tier 2. Also, with the failure of Kinect and Move to get at these so-called ‘casuals’, note how Tier 2 was not penetrated. In order to have a shot at Tier 3, one must be successful at Tier 2. All roads to mainstream gaming run through Malstrom.
The ‘hardcore’ and ‘casual’ slang appear to have been derived from observations of the personalities of the consumers. But people like myself do not fit either of these ‘slang’ groups. The great secret of Generation Seven is the Tier 2 customers, the ones that the ‘hardcore’ and ‘casual’ slang appear to leave out. Unfortunately, I’ve adopted a slang word myself to describe them as ‘Old School’ (since all Old School gamers are refusing noncustomers of Modern Gaming).
A game console must be aimed at all three tiers of the Blue Ocean. The Wii was designed in such a way to make sure no one could possibly refuse it. The system was small, the controller was as innocent as a TV remote, the name was cute, it was affordable, the games were family friendly and multiplayer friendly, and it offered old school games from the Golden Days of Console Gaming. Who could possibly reject it?
Wii Fit was the only intentional move Nintendo made to go into Tier 3 (user generated content wasn’t a move, it was a disaster). But the other successes in Tier 3 were surprising to everyone because Tier 3 is so remote. I do not believe Tier 3 can consistently be planned for success. But since Wii Sports was designed so no one could refuse it, i.e. Tier 2, then this opened up the possibility for Tier 3 successes. You cannot get to Tier 3 without Tier 2.
Now doesn’t this make so much more sense than this staggered price and ‘market box’ cliches that are used?