Posted by: seanmalstrom | February 1, 2017

The Myopia of Generations and Handheld Blindness

There were two reasons why the conventional analysis of the Wii was so off: Myopia of Generations and Handheld Blindness.

Myopia of Generations

What does this mean? It means everyone was unable to see the full breadth of the video game generations. They were tunnel visioned in seeing only last generation and making patterns based on that generation. Gamecube sold worse than N64. Therefore, Wii would sell worse than Gamecube.

But what is the relationship of the data to the generation? What we find is that there is little correlation of consecutive generation and sales performance. I am certain that analysts of the 1980s dismissed Sega’s ‘Genesis’ because the Master System did so bad. Then, they hailed the coming success of the ‘Saturn’ because the Genesis did well. Each generation is its own space with its uniqueness in time and macro-economics. The marketplace of 1986 is very different than the marketplace of 1996 or 2006 or 2016.

It should be argued that the Gamecube was a worse disaster than the Wii U. The reason being is that the Gamecube existed among above average to good macro-economic currents. The Wii U had bad macro-economic currents.

Nintendo designed the Wii to be different than the Gamecube. “But it uses the same architecture! OMG!” I am referring as a product offering. The Wii was based on the NES. It had the NES controller style. The marketing was picked up from the Atari Era of showing people being happy playing games.

There was no interest in the generations. There was no interest in the games. How the hell can you analyze the upcoming generation without knowing prior generations and understanding the games?

It is the failure of quantitative analysis and the triumph of qualitative analysis.

A similar occurrence happened with the 2016 presidential election. I ask very smart people, why did you trust the analysis from the Nate Silver 538 site? The answer was that these ‘smart’ people saw only the quantitative parts, the graphs, the charts, and it made them feel they were looking at something technical. Those trained in political science and history made a more accurate prediction (there are various stories of a professor’s ‘model’ or two constantly picking the winning candidate).

What does this have to do with the Switch? Once again, history is replaying itself. The analysts get tunnel visioned and look only at the last generation: Wii U. But what about the Wii? Oh no, they still don’t know what happened there so they keep ignoring Generation 7. What about the other generations? No answer.

The failure to analyze all eight prior generations worth of data is why they will be wrong about Switch. Dead on arrival my ass.

But let us move on to…

Handheld Blindness

What is this!? Before the Wii came out, the DS skyrocketed and began selling out in Japan and America. Would the success of the DS transfer to the Wii? It is not a bad question to ask. However, the analysts SCREAMED a response:

“NO! Handheld and console markets are DIFFERENT.”

Note how generations are never different. In Analyst World, Sony wins every generation. The generations prior to the PlayStation do not truly exist and are The Land Before Time.

In the Handheld Market, one thing is true: Nintendo Wins Everytime.

When you look at the home console market, you see different winners and losers. But in the handheld market, there is only one winner every single generation. Every generation! Since the 1980s! It is amazing! Incredible! Business books should be written on this. And yet, video game analysts do not seem curious about it.

During Generation 7, the DS came back and ultimately outsold the PSP due to expanded market gamers (non-gamers and lapsed gamers). This trend carried over for the Wii as well.

So what does Handheld Blindness have to do with the Switch?

The Switch is a Nintendo handheld. Analysts having orgasms comparing the Switch to the Wii U are forgetting the 3DS. Despite what Nintendo says, the Switch is the heir to the 3DS and the handheld line. Nintendo continues the 3DS because Nintendo is not Sega. Sega went out of business because with the floundering Saturn, Sega ceased supporting every other non-Saturn system cutting off tons of vital cashflow where Sega products were selling in distant places in the world such as Brazil. 3DS is still supported because it prints money. NES and Wii were still around because they printed money. Wii U did not print money so Nintendo got rid of it.

The 3DS is interesting because despite being such a spectacular handheld failure for Nintendo, Nintendo was able to turn it around and make it a profitable console.

The reason why viral marketers highlight, spotlight, and genuflect before every quote of Kimishima saying the Switch is not removing the 3DS is to eliminate the reality of the handheld market away from a possible future Switch market trajectory.

The Switch is like Link in Link to the Past and stands on the crossroads of two mirror markets: handheld and home console. Any analysis of the Switch must take in account both handheld and home consoles. Comparisons needs to be made of Switch to 3DS more than Wii U.

 

Switch will have no competition in the handheld market!!!!!

This is a first for Nintendo. Gameboy saw competitors. Gameboy Color saw competitors. Gameboy Advance saw competitors. DS saw the PSP. 3DS saw the Vita.

Switch has no handheld competitors. None!

This is huge.

“But Malstrom,” you say. “What about smartphones? Haven’t they destroyed any viable handheld dedicated console market?”

No. This stupid answer comes from our analysts which nothing stops them… not even their contradictions.

Why is 3DS hardware going up? “Pokemon. Duh.” Software. Software drives the hardware. But tell me, brilliant commentator, is Pokemon on smartphones?

*The reader gulps.*

It is! Pokemon is on smartphones! What about Mario? Is Mario on smartphones?

*Reader doesn’t answer. Reader is scared.*

It is! Mario is on the smartphones.

Fire Emblem and Animal Crossing will soon also be available on smartphones. And yet, the 3DS hardware demand keeps rising. How is this possible if the IP is available on smartphones? Clearly, Nintendo’s strategy of using apps as a marketing tool to get smartphone users into the dedicated hardware is working.

“This has never been done before! This marketing of the Nintendo IP to non-dedicated console mediums?”

But it has.

 

Image result for nintendo power

I don’t think the Game Industry understood the Nintendo cartoons and Nintendo Power. To quote Yamauchi: “Nintendo believes in a market: OUR MARKET.” The reason for Nintendo Power and the cartoon shows was, ultimately, marketing the IPs. The Game Industry incorrectly thinks it was just merchandising. All of this was useful to gain console momentum.

Nintendo doesn’t view smartphones as competitors. If they did, they wouldn’t be writing software for them. Instead, Nintendo views smartphones more as the TV of today. It is the screen everyone looks at.

Smartphones are to handheld game consoles as PCs are to home game consoles. PCs can play games too, but no one considers PC gaming a competitor to console gaming (unless you are Microsoft and Sony which puts out crappy PC hardware to connect to the TV and declare it a console). Iwata even began to use this comparison too.

When you view Switch from the context of the handheld market, there is nothing but optimism. First of all, Switch has no competition. This means all the handheld console game software will be coming to Switch. Since handheld gaming is biggest in Japan, that means all the Japanese third parties. Second, the 3DS became a success despite the ‘omg I can’t believe its not 3d!’ weight on its back of the 3d lens in the hardware AND competition from the Vita (whatever competition it may be). How is the Switch going to fail without any crappy hardware like the 3d screen or the Gamepad from the Wii U? And with NO competitors?

People still haven’t figured out that Switch is also the successor to the Vita. Switch will get all of the Vita software pipeline. “But Vita isn’t popular!” It is in Japan.

So for this generational transition to Gen 9 we have:

HANDHELD MARKET:

-Switch (Monopoly)

.
HOME CONSOLE MARKET:

-Switch

-PlayStation 4 (over 3 years old)

-Xbox One (Over 3 years old)
“But what about PlayStation 5? OMG!!!”

PlayStation 5 will come out. But it will be little more than a gigantic GPU connected to a TV.

The software I see isolated here are the AAA games. They NEED the ‘power’ of the PS4 or PS5 to run. But indie games do not. Handheld companies do not.

Switch is in a better position than people think. Now that Nintendo has announced the pre-orders were good and that they will be ramping up production, people are regretting they didn’t pre-order and fell for the anti-hype of ‘DEAD ON ARRIVAL’.

But there was one voice that defied all that crap. “No. Switch will be successful.” Good ‘ol Malstrom had to set it right… again. Even my email box was full of people screaming about how terrible the Switch is and how Nintendo was doomed.

While the Switch will be unto itself, the closest console’s trajectory I can compare it to would be the DS. DS launched well with solid hardware (even though it got revamped, people loved how DS had the SNES button layout finally). The DS launch software was quite pitiful. But it was all turned around and the rest is history.

3DS was also turned around. But the 3DS started out in a much deeper hole.

Switch will be small bull to big bull.

Nintendo has a 100% win rate of their handheld consoles being successful land outselling their competitors. Do you really want to bet against that? There is a decent probability that Switch will be the dominant console of Generation 9.

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