It is not everyday that you see an Industry so confused about itself. There is no doubt in my mind that the Video Game Industry has entered into a “Market Myopia” situation about itself. What is Market Myopia? It is a famous business article made in 1960. It is about industries who think they are on the cusp of, practically, unlimited growth but are actually on the threshold of decline. “Market Myopia” is when an industry does not know what business they are in. Historical examples would be petrochemical company thinking they are in the petrochemical business when they are actually in the energy business or railroads who think they are in the railroad business when they were actually in the transportation business. Although it might be surprising to some, the fact is that the video game industry is not in the video game business. The definition of a video game is a market myopia that would have companies not see new markets. This is why Miyamoto praised Wii Music for not being a ‘video game’. A truck is not a train but if the railroad companies expanded their transportation business to automobiles, the railroad industry would not have collapsed.
Listen to this interview with Tose:
How do you feel the Japanese market has changed in the last two years, with the advent of new consoles?
In the past two years, the DS and Wii have become the dominant players in the industry. Sony took a large marketshare in the industry with the PS2, but has been a little bit behind for the PS3. Overall, the industry is still growing.
The third-party publishers of the industry have been growing, but Nintendo’s growth is too significant. So for me, that is not good for the publishers. That is just good for Nintendo. For us, we still can have lots of projects for many companies for the Wii and DS, but for the publishers, it’s not a good situation.
Is it a more attractive position for Tose to be in than before?
More projects are coming to us than before. Not only from traditional game publishers, but also new companies publishing DS products which are not games, like brain-training titles.
These two answers disagree with one another. If the new market, such as brain-training games, are adding to Tose’s business, then how is the DS and Wii expansion only good for Nintendo?
The reason for this imbalance of rationality is ‘market myopia’ meaning that the conventional wisdom was that video games was ever growing, ever rising in popularity when the truth was the opposite. We have all heard Nintendo say this. The Wii and DS are designed entirely around the belief of a shrinking market. Yet, it appears absolutely no one has absorbed this. People are trying to explore why and how Nintendo was able to do what they did. And once they do, they’ll be shocked to find that Nintendo is operating on a totally different premise.
The analysts are quite confused as well:
Lazard Capital Markets analyst Colin Sebastian said in an investor note on Monday, “At this point, we believe the consensus opinion among industry professionals is that the next significant hardware refresh is unlikely to occur before 2011, and more likely in 2012.”
But he said Nintendo’s next home console could arrive before then. “One possible exception to console timing may be Nintendo, which could opt to upgrade the Wii with faster processing power, DVD capability and/or greater storage.”
The original Xbox had roughly a four year run before its successor Xbox 360 came to market. PS2 was out for about six years prior to the release of PS3, and Nintendo’s GameCube had a five year run prior to Wii’s launch.
No commentary is needed about what Sebastian has said. Everyone saw it for what it was.
Predictably, many people are having fun with the story. Strangely, Chris Kohler is defending Sebastian and saying that…
What Sebastian actually said was that, while the next “significant” release of new gaming hardware likely would not happen until 2011 or 2012, Nintendo might possibly release an upgraded version of Wii with functionality like DVD playback or extra storage space.
That’s not a next-gen system, guys. That’s a Game Boy Pocket.
I emailed Sebastian after reading Edge’s story just to confirm that he didn’t mean Nintendo would be firing first in the next-gen wars, and that he was simply referring to an upgraded Wii. “Your interpretation is correct. There are clearly some features and functionality that Nintendo could add to the Wii, without changing the way the games are played, as you say,” he wrote back.
The Game Boy Pocket analogy is, I think, the closest thing to what Nintendo’s actual strategy with Wii will be, going forward. Competitors had higher-powered systems on the market immediately following the release of the Game Boy — the color Atari Lynx shipped a mere month after Game Boy’s American launch — but Nintendo just stuck with its super-popular, cheaply priced model.
The improvements it eventually made to the system, a full seven years later, didn’t fundamentally change the games that were played: They were things like a better screen, smaller form factor, and lighter weight.
As such, any upgraded edition of Wii won’t feature 720p output or anything that actually changes the games themselves — it’ll be things like DVD movie playback, storage space, etc.
And that will almost definitely happen, as Nintendo knows how to keep demand for their consoles going when sales start to dip — witness the DS Lite. “If they treat the Wii like the handhelds, then they will have a ‘successor’ waiting in the wings for when the timing is right,” Sebastian writes.
If the Game Boy business model holds up, Nintendo will likely not introduce a brand new gaming platform until after Sony and Microsoft unleash the Xbox 720 and PlayStation 4 into the wild. Wii is too successful.
Since when did Chris Kohler become Sebastian’s PR Agent? There are numerous problems with what Kohler is saying.
-Sebastian mentions increased ‘processing power’ which indicated a ‘more power’ type platform.
-Sebastian starts off by talking about the consensus opinion among analysts. There is also a consensus that analysts believe Nintendo will ‘upgrade’ the Wii to a type of HD platform with faster processor. This is what Pachter says after all. Why talk about consensus of analysts if Sebastian is going to go against the grain?
-Why in the world can’t Sebastian fix this issue himself?
-Why in the world doesn’t Edge Online correct their story if it is ‘wrong’? Edge Online, at least the magazine equivalent, has a very large reputation for quality.
-Why in the world is Kohler trying to help out an analyst? Why not let the analyst fix his own issues?
-Why not print what Sebastian actually said in his report to investors? It is pretty odd that Edge Online would make such an inflammatory headline and story (of Nintendo triggering the Next Gen) by getting the content of the report wrong. But that is what Kohler is saying. Is Kohler saying Edge Online can’t do their job?
-Other versions of PS3 and Xbox 360 have appeared with additional storage space as well as other features. And we know more will follow. Yet, these versions are not mentioned. Only Nintendo’s new ‘version’ which points to Sebastian implying a new upgraded platform since analysts are convinced that Wii cannot last without it being HD or less processor speed.
-Nintendo has no history of putting out updates to consoles, only handhelds. Consoles are only ‘updated’ by new colors (which will be hitting Japan soon) and putting cheaper parts into the console as time goes on. This has occurred with the NES, SNES, N64, and Gamecube. It will likely continue with Wii.
-Even if Sebastian is saying that a new Wii would come out to be a new update like Gameboy Pocket, it is still absurd. New colors haven’t even yet come out and it is approaching 2009. Sales momentum is still so fast that even an ‘update’ to the hardware is a little ridiculous.
Either three things are happening here:
a) Edge-Online are a bunch of idiots and the online site does not deserve the reputation of Edge Magazine.
b) Sebastian is an absolute idiot who does not know how to communicate in messages to investors.
c) Sebastian majorly screwed up, became the joke of the Internet, and game journalists have begun to circle the wagons around him.
One thing that is true is that it is not analysts’ jobs to talk to the press. It is the journalists who seek out the analysts and get their ‘thoughts’ so the lazy journalist will have a story on a silver platter. How easy it must be to take an email from Pachter and go, “Pachter says…” and call it a day? Analysts participate since they view it as free advertising for them. It is an incestious circle, my friends.
Wrong Way:
Analyst: “Blah blah blah.”
Reader: “OMG! Who hires these guys? By their thinking, even my pet cat can become an analyst.”
Right Way:
Analyst: “Blah blah blah.”
Reader: “OMG! Who is the journalist that is quoting this guy? Why doesn’t the journalist bother to find a real expert instead of waste time on these clowns who aren’t getting anything right. Oh, I forgot! Journalists are too damn lazy.”
The reason why analysts keep getting quoted is not the analysts fault. It is the journalists (or their editors’) fault. It reminds me of the mainstream media (of American media which is part of the reason why they are in serious decline lately) when they discovered ‘polling’. What happened when they discovered ‘polling’ was that every poll became a ‘news story’, and it was an easy way to create a story. Enthusiast sites are pulling the same thing whenever they are able to get an analyst to open his/her mouth and place every utterance onto a pedestal as a ‘story’ and call it a day.
It’d be nice the next time an analyst says something absurd as “Nintendo will make a HD Wii next year!” the journalist interrupts the analyst to say, “WHAT did you say!? Do you REALLY believe that?” This is what the readers want to know.