Emily Rogers has this to say:
Instead of focusing our attention solely on hardware, we should really be having a discussion about NX’s software.
Of course, we should. You will not believe how many people have a big presence on message forums and game websites that are influenced somehow by a check from Sony or Microsoft. This is why discussion about Nintendo and the NX is not… calibrated… correctly.
“But Malstrom,” they say…
“NX hardware determines much.”
“NX controller will determine how things are played.”
“The accessories of NX are profitable which is why NX must be modular.”
The console is just a box we buy to get to Mario. I didn’t say that. The Great One, Yamauchi, said it. Miyamoto and Iwata mocked that saying when the Wii U was released and look what happened.
Yes, Nintendo is making new hardware, new controllers, new accessories, new online strategies, new IPS, and so on. None of this works without games.
Nintendo’s hardware development is governed by the software development. If the software guys do not want it, then the hardware guys are not going to put it in there. It’s that simple.
The reason why you are not seeing discussion of Nintendo’s software strategy, which dooms any true inquiry into Nintendo’s business strategy, is because it is not part of their profitable universe. What type of hardware, controller, and such is all interesting for third party and wannabe third party companies. The consumer, which is the axis of which all gaming revolves around, is not that concerned about it. To the consumer, hardware is nothing but junk unless games are presented. I expect NX hardware to be announced with NX games.
Nintendo also makes quality games. Having discussion about games instead of ‘hardware’ is more favorable to Nintendo in a marketing persuasion. Many industry interests do not want this.
The big, big secret to console success is due to the software output. Let’s take a trip down memory lane.
In the Second Generation, when games were separate from the hardware (the invention of the cartridge), it is clear that the consoles with the most games did the best. Atari 2600 was going to be pulled off shelves like the Channel F console until the release of an arcade port called Space Invaders. Space Invaders rocketed the Atari 2600 up, spurred more game releases, which snowballed.
Now, the Second Generation imploded most spectacularly. So many games were being released in 1983 that no one could buy them all. So many of the games were of terrible quality. The Game Industry declared the game console a dead relic with the future only being in arcades and computer PCs (see Trip Hawkins, founder and president of Electronic Arts).
Nintendo takes a big investment gamble and releases the NES in the United States. What is significant here is that this was seen as madness after the Atari Crash. This is why “ROB the Robot was made so the NES could be sold to distributors as ‘toys’ instead of video games. The founder of NOA had market research saying this was a stupid move. But he ignored the market research. Why? People were still playing video games in the arcades. The Famicom was successful in Japan. Why would Americans be so different?
The software strategy of the NES is extremely important to understand the NES. The NES had a lockout chip (which Atari would try to bypass and then hold Nintendo up in courts). Nintendo also limited third party companies to five games a year (!) on the system. Some companies would make shell companies to release more games. This was to force quality into the game making. You had the Nintendo Seal of Approval. You also had Nintendo Power and all that really pushed and highlighted the more quality games (and no, not all were Nintendo made. You should see Howard Phillips spazzing with glee over a preview of Mega Man 2 in the first issue of Nintendo Power). Nintendo even gave away Dragon Quest 1 while devoting a huge guide to Final Fantasy 1.
Third parties do not like Nintendo’s controlled market of the console. EA’s Trip Hawkins goes so far to backwards engineer the Sega Genesis and dictates terms to Sega saying they are going to make whatever games they want. Sega has no choice but to agree (but Sega imposes the similar restrictions as Nintendo). Nintendo lost the sports games to Sega which hurt Nintendo badly.
Sony, who had no experience with the Atari Crash like Nintendo or Sega had and who had consumer electronics in other markets, had another approach to the game console: flood it with software. Much to do has been made about Nintendo 64’s cartridges versus PlayStation’s CDs. Cheaper costs wasn’t so much about ‘stealing’ third parties as it was about flooding the console market with them. Anything and everything was pushed out on the PlayStation. PC game makers also pushed out ports. As more PC game makers switched to the PlayStation console, this would trigger a defensive strategy from Microsoft to keep PC game makers on Microsoft’s architecture.
The PlayStation 2’s success is said to be a number of things from the DVD capability to being released a year early. The reality is that it was the games. The PlayStation 2 did not have the best launch lineup. However, it did have the best software pipeline ever. There was this one game on the PC called Grand Theft Auto. It was OK. The sequel was OK. But when Grand Theft Auto 3 was put out for the PlayStation 2, it rocketed and rocketed the console as well. You never know where the next hit game is coming from, and so it is best to have a broad software strategy. This is the lesson Nintendo learned for the Seventh Generation.
The reasons why the Wii succeeded are said to be many from being ‘omg casual’ to ‘gimmick controls’ to ‘cheap’ and such. But what is never discussed is that the Wii put out more software than the PS3. Nintendo also did the same with the DS versus the PSP (despite DS having cartridges and PSP having discs reversing the N64 ‘cartridge’ myth). However, Nintendo’s strategy was right with the software pipeline but the hardware still couldn’t take the PC ports. The PC ports favored Xbox 360 mostly. When Call of Duty 2, a sequel to a PC game, came out on the Xbox 360, it began to rocket the console up. The sequels of Call of Duty further rocketed the Xbox 360 console. The port to the PC game called Minecraft also rocketed the Xbox 360 up. While ports of these games found their way to other systems, Xbox 360 greatly benefited from these PC ports.
There’s not to mention here except how poorly Nintendo put out software for the 3DS and Wii U. Microsoft no longer sees Sony as a threat so it appears Microsoft is beginning to cease using its console as a defensive strategy and more as another part of the Windows universe.
This remains to be seen. If Nintendo is serious, it will have a MASSIVE SOFTWARE PIPELINE. This can be done by combining the handheld and home console teams. It can also be done with hardware easier to put on PC ports.
The Great Software Pipeline isn’t about Nintendo games… though those matter. It is about all games on the system. If you ask Reggie Fils-Aime, “Reggie, what games should I buy with my new NX?” Reggies reply is going to be: “All of them!”
The truth is that Sony’s console success has never been to uber hardware (Sony’s hardware has generally sucked) or DVD/Blu-Ray or marketing. Sony’s console success lies almost entirely on the Great Software Pipeline. Nintendo was able to outpace this pipeline in the Seventh Generation because Sony and Microsoft handicapped themselves with the early push to High Definition.
Can Nintendo outpace Sony in the Great Software Pipeline without such a handicap? The answer would be no because Nintendo is split between handheld and home console. Sony, also has handheld, but not in the way Nintendo does. Sony’s PSP push might have hurt its PS3 push, and it might explain Sony’s tepid Vita push as Sony focuses on PS4. With combining the handheld and home console, Nintendo is removing a handicap it has had around itself. Microsoft, of course, has no handheld to make software for.
I see Sony hurting itself by going into the VR and 4K area (hurting itself meaning hurting the Great Software Pipeline). This gives an opening to Nintendo. Microsoft doesn’t seem to care about consoles lately, but we’ll see what they say at E3.
Above: Selling game consoles is about creating a Great Software Pipeline of both First and Third Party games. It is not about the hardware. It also isn’t about the Killer App. It is about the probability of creating killer-apps. The best way to increase that probability is release as many games as possible.