Drowning In The Blue Ocean

From time to time, the Infendo mail slot will flop open and a reader submitted article will drift into our offices. Today we share with you an essay entitled “Drowning In The Blue Ocean” by Sean Malstrom.

lifepreserver.jpgI wish someone would offer a prize, of piles of money, ribbons, and a piece of chocolate cake for a good, simple definition of the word: “Generation”.

What an immense service it would confer on the industry!


What is it? Where does it come from? What does it do? What ought it to do?

All we know is that it is a mysterious personage; and, assuredly, it is the most promised, most hyped, most accused, the most invoked, and the most provoked of any personage in this industry.

I have not the pleasure of knowing my reader but I would stake ten to one that for six months he has been imagining new Killer Apps, and if so, that he is looking to the next “Generation” for realization of them.

And, should the reader happen to be a gamer demanding more from the present “Generation”, I have no doubt that the gamer is sincerely desirous of seeing all his dreams for fantastical epic games be easily made, if only the next “Generation” would only undertake it.

But, alas! That poor unfortunate personage, like Figaro, knows not to whom to listen, nor where to turn. The hundred thousand mouths of the press and analysts cry out all at once:

“Integrate online gaming with everything.”
“Instruct your consoles to output to my HD TV.”
“Re-introduce the old arcade games.”
“Make experiments with online advertising.”
“Offer gaming work-kits to gamers.”
“Play DVDs.”
“Plant the new high definition disc into the console like Blu-Ray!”
“No! Offer HD-DVD add-on for those who choose.”
“Make online free with virtual worlds.”
“No! Offer subscription online for integrated experiences!”
“Deliver us Achievements to make Pavlov proud!”
“Encourage the arts by telling your developers they are the new Shakespeare.”
“Rear and perfect even greater epic games.”
“Nurture bald space marines.”
“Discipline us with brown. Colorful games are kiddie.”
“Use cutting edge technology. Turn the console into an entertainment computer.”
“Cure Cancer.”
“Defeat Hollywood at their own business model.”

“Do have a little patience, gentlemen,” says the young ”˜Generation’ in a beseeching tone. “I will do what I can to satisfy you, but for this I must have resources. I have been preparing new business models to tax you, which are quite new, as well as incredibly large hardware prices. You will see how pleasurable it will be to pay them.”

Then comes a great exclamation:

“No! Indeed! Where is the merit of doing a thing with high costs? Why, it does not deserve the name of next ”˜Generation’! So far from loading us with fresh costs, we would have you price drop your hardware immediately to a manufactured suggested retail price of $200.

You ought to suppress

“Hardware replacement costs.”
“Paying insurance on your hardware.”
“New revisions of systems after I bought mine.”
“Software prices.”
“Online subscription prices.”
“Talking to Indian guy ”˜Sharma’ about my broken hardware.”
In the midst of this tumult, and how one ”˜Generation’ melts into another, let us hear the wise sages of the industry who, like angels flying above us, have carried their wisdom from their esteemed mountains to us lowly ”˜average’ people:
“We expect the dominant console at the end of the next cycle to be the Sony PlayStation 3 primarily due to our assessment that Sony will win the high definition DVD format war,” ”“Michael Pachter, Senior Analyst of Wedbush Morgan Securities
“I think the Wii bubble is about to burst” -Steve Kent, Author of ”˜Ultimate History of Video Games’
“Nintendo Revolution to be console winner this generation” ”“Gamespot’s 2006 April Fool’s Joke.
“[We] recommend that Nintendo abandon its traditional console-exclusive software publishing strategy and publishes its games across multiple platforms.” ”“Strategy Analytics, 2003.
“Videogames are technology-driven and yet Nintendo continues to dismiss new, important technologies. It’s unfathomable. It’s like a painter throwing away his paintbrushes because they are too expensive. I mean, I’ve tried to understand this approach, but I don’t think it can be understood. No matter how you look at it, it makes no sense.
“Gloom and doom mostly over. I’m quite sure that despite this lunatic decision Revolution will have its unique appeal. It’ll still have a place in my living room. But I think it will become more niche due to a domino effect that’s sure to happen. I predict less third-party support because cross-platform ports are sure to be more difficult. And as a result, I’m sure Revolution — like GameCube — will become a console for Nintendo fans.” ”“Matt Casamassina. Senior Editor for IGN Nintendo (2005)
In 2004, when Nintendo announced the DS”¦
“I can’t understand why two screens are required rather than a split screen.” He went on to say, “Everyone will produce at least one game on the DS in order to learn the mechanics, but if it launches with 12 games, it will look a lot like the N-Gage.” (The DS would launch with six.) “I think that PSP will be a category killer with older gamers.

Indeed, the lackluster specter of Nokia’s poorly received game deck is already hanging over the DS. Doubts about its very concept are rampant. “I can’t understand why two screens are required rather than a split screen. If the device is a GBA SP with two screens, I don’t think it will command much of a premium.” Michael Pachter, Wedbush Morgan
“Some industry insiders were less kind, comparing the DS to Nintendo’s greatest hardware debacle, the Virtual Boy. “The DS sounds very gimmicky to me,” a source at a major publisher told GameSpot. “It’s like a ‘Crazy Ivan’ response to the PSP.” -Gamespot News covering the unveiling of the DS
Poor observers! How off they were in their diagnosis of that mysterious personage known as “Generation”! The next “Generation” simply zagged when they thought the market moved zig. And yet, they still predict their old predictions to, somehow, come true. Nothing stops the sublime analysts, not even contradictions, as “Generation” keeps ”˜surprising’ them month after month.
In the midst of this tumult, and now that the market has again changed its leader, for instead of “Generation” satisfying all of people’s demands, I want to show that they were contradictory. Each “Generation”, the weak hardware wins. Yet, each “Generation” is defined by its more powerful hardware characteristics. But, what could I have been thinking about? Could I not keep this unfortunate observation to myself!
If the winners of each generation are not defined by hardware, then how can we define “Generation” by its hardware? Hence, the question this article asks: “What is ”˜Generation’?” And don’t give me the ”˜new’ “Generation” of Nintendo’s marketing talk compared to the ”˜next’ “Generation” of Sony and Microsoft. If the market doesn’t care about hardware, then why does it abandon the 8-bit generation, for example, for the 16-bit generation? How does “Generation” exist in the first place?
Microsoft, Sony, and Nintendo have invested billions of dollars in different interpretations to the definition of “Generation”. It reminds me of the coffin scene in Shakespeare’s “Merchant of Venice”. Except this time, “Generation” is hidden inside a console. Sony would choose the gold console, Microsoft would choose the silver console, and Nintendo chose the wooden console. “Generation’s” portrait is, like Portia’s, hidden in the wooden box where no one expected.

The Wii Tidal Waves

The first clue we have to discover the mysterious definition of “Generation” is this current generation. Wii’s early success was as if a gigantic blue tidal wave crashed down on the fragile decade old hut-like contexts that lined the industry’s shores sparking panic among the traditional residents. The natives ran around in circles for fear of the Blue Ocean’s incoming waves destroying all they were. The analysts, however, mimicked Xerxes as he, too, went to the rising tide, held out his hand, and said, “Thus far shall you come and no further!” Xerxes retreated from the waves before he drowned. It remains to be seen if the analysts will do the same.

There are only two explanations as to why the analysts and commentators, the jesters of the industry, keep marching on two dumb feet of clay. The first is that after being wrong on the DS, wrong on the PS3, wrong on the Wii, they make no attempts at reassessment of the shockwaves or hold a flicker of curiosity’s light in the wake of the darkness of the Nintendo market megaton. “Yes! Yes!” you say. “But the Alexander Pope was made to say, ”˜To err is Human.’“ You speak truly, reader. But the Einstein was made to say, “The definition of insanity is doing the same thing over and over and expecting different results.” Alas for the analysts! Nintendo keeps embarrassing them! And despite the repeated proclamations spilling from their lips on bubbles bursting and the rise of HD gaming, the market does the complete opposite! The other explanation is that moneyhats have been dished out to commentators who feed on it like a horse in its trough. Words mean things. If one’s integrity has been subverted by money or other outside factors, in politics, they call it corruption. In gaming, they call it a day’s work.

*Malstrom puts a pipe in his mouth and a Sherlock Holmes hat on his head.*

Our first clue, dear gamer, of the identity of ”˜Generation’ is that he is not defined by hardware. If he were, the PS2 and Wii would be outsold by the Xbox 360 and PS3 by now.

“But Malstrom,” you ask. “Why do we define ”˜Generation’ by bits and displays, by only through hardware?”

Good question, reader! Journalists are easily influenced by marketing. After all, how much did we hear from journalists about this generation being the ”˜High Definition’ generation (obviously Sony and Microsoft talking points). How much fuss, last generation, was made over Halo being the greatest thing ever though the Xbox sold around what the Gamecube did? Who can not forget journalists talking about the glory of 16-bit generation and its “blast processing” or Playstation making gaming ”˜mature’?

Layers of dried up marketing cover console history similar to layers of rock and sediment covering fossils. If we are to uncover the definition of “Generation” and find the missing link, let us throw off the old marketing like the compost it is and study the fossilized consoles in a new light.

Value Break-Downs of the Generations
The following is an assortment of values from the consoles of previous generations. The format used is the official Blue Ocean Template.
You will notice how some values change each generation. This is not the case of the author selectively applying the variables but that some oddball variables pop up a generation. An example of this is consoles playing DVDs which was big in Generation 6 but, now, it is insignificant. Online gaming, also, is a recent variable.
As for the more consistent values, I am using them as large umbrellas. The “size of library” refers not just the size of the library but the support of third parties. The “variety of software” means exactly how it sounds. Consoles that easily become stuck into a certain demographic or type of software will have a low value rating in this.

Seventh Generation


One of the Oliver Twins correctly stated, “Nintendo zagged when others zigged.” As the ”˜zigs’ of Microsoft and Sony go one way, Nintendo goes the other way. An inverse is seen.

While it is common to say that Nintendo is “not competing”, a more accurate assessment would be to say that Nintendo and MS/Sony have different values. The Wii’s value-jumps match the DS in rhythm while PSP’s value is similar to the PS3.

I am sure someone will look at the graph and go bonkers with saying, “Oh no, how did you place the PS3 value above Xbox 360 on this matter!? (or vice versa)” These are approximations, not absolutes. What is important is that the context should be seen. MS/Sony and Nintendo hold two diametrically opposite values this generation.

This generation proves that “Generation” is not defined by hardware.

Sixth Generation


In this generation, there is no inverse. The lines are all on top of one another with two major exceptions. Playstation 2 had a huge library and variety of software that went beyond their competitors. This differentiating factor was the number one focus for Nintendo in Generation Seven (investing in building new studios, getting third party support, bringing outside companies in early, etc).

Also, there is a sharp value difference between Nintendo (and Dreamcast) with Sony/MS when it came to DVD playback. It is this difference that is why Nintendo planned on making a DVD-playback enabled Wii. Nintendo pulled back on this feature of the Wii not just because it added extra cost, but it became clear that this value may not exist anymore for game consoles (DVD players became cheap and numerous). It will be interesting to see if Nintendo continues on with that DVD playback Wii but my guess is that they won’t.

Fifth Generation


Again, the value lines are all on top of one another creating another ”˜red ocean’. And, again, two differences become clear. The first, as with Generation Six, is that the Playstation has a huge and diverse library of games which was the main reason the hardware rocketed up in sales. The other is third parties. Why did I list third parties as a separate value from ”˜Size of Library’? The ”˜Third Parties’ value this generation encompasses the software format differences (cartridge and CD) as well to highlight Sega and Nintendo’s licensing issues with third parties. When you bought a N64 or Saturn, there were little third party games. Saturn’s low marks in this also reflect the difficult development for the Saturn’s two processors, and how Sega wasn’t working with third parties well. Saturn was a surprise launch.

*Malstrom puts on the Sherlock hat and puts the pipe in his mouth.*

Now, dear reader, we come across the second clue to that mysterious, but always invoked, personage known as “Generation”. In the past three generations, we find the size of library and variety of software values being differentiating factors.

The first clue was that “Generation” had nothing to do with hardware. The second clue is now that “Generation” has something to do with software. But what? More clues are required! Let us continue digging.

Fourth Generation


This is the so-called great ’16-bit war’. Turbographx-16 drops down on the bottom of the values taking a big hit in the variety of the software (the console’s library is basically shmups and clones of other genres).

The SNES and Genesis were basically on top of one another in what could be described as a perfect ”˜red ocean’. A major difference was that Sega kept putting out additional hardware from the Sega CD to 32X which hurt the system.

What is interesting about this generation is that it set the media ”˜template’ for the ”˜console war’ sales horserace. What we can learn from “Generation” in this era is that additional hardware is often a negative. Why? It is because “Generation” refuses to be defined by hardware (despite the marketing of bits and processors to the contrary).

Third Generation


What is this!? The inverse has returned! This generation, the era of NES, is the closest in precedence to our current generation.

Historians keep getting this generation wrong by comparing NES’s competition to the Atari 7800 and Sega Master systems. But remember that those two systems came out as mostly a response to the NES’s success. When NES founded a ”˜blue ocean’ twenty years ago, competitors jumped in. But they were not the NES true gaming nemesis.

Gaming was well and alive in the mid-1980s in America, and they were on the computers. When the console market crashed, the computer market soaked up the gaming remains. It was believed that consoles would always crash and gaming would return on computers. Each year of the NES Era, analysts (obviously prototype incarnations of our current model analysts) proclaimed, “Nintendo has had its last good year,” for then the market would suddenly ”˜crash’. They kept saying that even into the 1990s.

But the game centric computers were in their own red ocean. They were going into the 16-bit generation while the NES was, graphically, a generation behind in the 8-bit generation. Those who think the Wii’s processor is outdated should look at the NES’s processor which was from the 70s. But people do not play graphics, they play games. NES had amazing software. The user interface of the NES, sitting in the living room playing on the TV, trumped sitting at a desk huddled around a small monitor with the computers. Kids flocked to the NES simply because it was fun while computers were more like ”˜work’. NES games loaded instantaneously while one had to wait a while for the computer games. NES also sported a new controller that seemed odd when joystick was king. Like the Wii, NES had non-games from Duck Hunt, Track & Field, and the R.O.B. games. The Wii Generation will look back fondly on these ”˜non-games’ and likely turn them into cultural icons as the NES Generation did.

Some old computer gamers may blow a gasket at some of the value ratings I placed the computers (especially on the topic of software). Consider twenty years later, we still obsess over NES games while no one hears a peep about these old computer games. Because of that, I place the higher value of the software on the NES.

Notice how the Wii matches the value points that the NES did. In fact, the Blue Ocean Strategy applies to no other console in the past except the NES. Well, that and the handheld”¦.


Again, the Gameboy performs a Blue Ocean Strategy as its values are inverse to the competition.

I could go back to the second and first generations, but it becomes messy due to the industry crashes. (In the same, I did not include the 3DO, Atari Jaguar, or other systems because it would clutter the graphs, and they were obvious failures anyway.) Nintendo wasn’t making systems then so those generations aren’t relevant to this discussion. But one could describe Atari as a ”˜blue ocean company’ way back then as well.

*Malstrom puts on the Sherlock Holmes hat and puts in the pipe.”

We are now at the final clue as to who and what the mysterious personage known only as “Generation” is. The clue is hidden as an obvious truth in Nintendo’s current strategy.

Dearest reader, the Blue Ocean Strategy did not exist twenty years ago. So how did Nintendo pull it off with the NES and Gameboy?

Or a better question, that no one is asking, is how did the examples in the Blue Ocean Strategy do what they did? The answer is the truth behind the so-called ”˜Blue Ocean Strategy’.

Casual Gamer Myth

I have never seen a book more cited and little read than The Blue Ocean Strategy within gaming circles. The myth that is going around, even hilariously believed by third parties, is that the Blue Ocean Strategy means going after ”˜casual gamers’.

Really? Where does it say that in the book? Notice how no one ever cites the Blue Ocean Strategy saying that. They are too caught up in the metaphor for Blue Oceans vs. Red Oceans to really get into the guts of the book. They are only applying the metaphor to the games industry as opposed the strategy and contexts themselves. So they see only Sony and Microsoft competing for the hardcore with Nintendo’s new direction they mistake for aiming at casuals.

If one reads Nintendo’s words carefully, they do not cite the Blue Ocean Strategy in terms of ”˜casuals’ but only in terms of non-competition. Let us listen to what Reggie (who obviously understands Nintendo’s business strategy better than anyone else) really said:

“In the past, you’ve heard us talk about blue ocean strategy and innovator’s dilemma and our role in this industry as a disruptor. But let me showcase for you another way to think about what it is that we’re doing in this marketplace — another way to look at our strategy.” ”“Reggie at the Nintendo Summit for Summer 2007

Reggie then talks about Nintendo aiming at casual and expanded audiences before the typical hardcore. But isn’t that the Blue Ocean Strategy? Why is Reggie referring to the aiming at expanded audience as different from the Blue Ocean Strategy? It is because the popular stereotype is not true, that Blue Ocean Strategy does not mean ”˜aiming at the casual audience’.

Blue Ocean Strategy means competing against disinterest and aiming, primarily, at underserved markets. With the console market, the underserved markets have been females, families, and more casual players. But had the underserved market been hardcore players with everyone competing for, say, females, then the Blue Ocean Strategy would be to expand interest to include the hardcore as well as the ”˜traditional’ audience (in this hypothetical, the females).

Consider Iwata’s quote from the Fortune article on the Wii: “Even before someone invented the term blue-ocean strategy, we were exercising it. It is an unwritten company credo, something that runs deep in our DNA.”

So what was Nintendo exercising? What was Iwata’s mandate to the company? “We are not competing against Sony or Microsoft. We are battling the indifference of people who have no interest in videogames.” Even worse, Iwata has said previously in the past that the ”˜core’ gamers are Nintendo’s priority. Isn’t that a contradiction for Nintendo to aim to satisfy their core fans while aiming, as the stereotype goes, for casual gamers? The answer is below.

The Legacy of the Playstations

Why did the Playstation 1 and 2 succeed? Much has been written on it from ”˜mature games’ due to gamers “growing up” but that is all crock. Much of it is marketing hype from that period being cemented into people’s minds. NES had deep RPGs as well as violent games (viva la Shadowgate).

The real reason why the Playstation 1 and 2 succeeded was because Sony corrected (to a point) the licensing issues of Sega and Nintendo but more due to the fact that Sony flooded their console with software. The number of software available for the original Playstation was beyond any other system ever. It was this vast library that shot the Playstation up.

In an interview with Gamedaily.biz, Nolan Bushnell even said, “It wasn’t anything brilliant that they [Sony] did. With the PS and PS2 it was timing. They had the right pricing at the right time [and were] almost the accidental winner.” Anyone applying the Blue Ocean Strategy to the Playstation is just insanely wrong.

In the “Putting the We Back in Wii”, the New York Times says, “The other thrust of Nintendo’s new strategy is to enlist software developers like Namco Bandai to write more games for Wii than they did for previous Nintendo machines. Nintendo’s hope is that this will help erase one of Sony’s biggest past advantages: the far greater number of game titles available for its machines. The more games a machine has, the industry theory holds, the more gamers want to play it.” Another quote: “Analysts say one reason for Wii’s popularity has been its larger number of available game titles. At present, there are 58 games on sale in the United States for Wii, versus 46 for PlayStation 3, according to the Sony and Nintendo Web sites. That is a huge contrast with the previous generation of game consoles: to date, PlayStation 2 has 1,467 titles, overwhelming GameCube’s 271 titles.” The last number of Gamecube’s titles is wrong and is probably around five hundred but the point stands. The reason why the Playstation succeeded was not because of ”˜mature’ games or ”˜casual games’ or any other marketing hype gamers swallowed in the mid-90s but because the Playstations pushed out a vast amount of software. In the issue of Game Informer where the first Red Steel images were first revealed (remember that one?), an interview with George Harrison appeared where he elaborated that Nintendo learned Sony’s huge library strategies with the PS2 and were set to emulate that with the Wii.

Aside from being a box with tons of software, the more pressing legacy of the Playstations is that, as opposed to the popular belief of growing the market, they have been shrinking the market. Gamers’ drift is very real and can be seen in Japanese data where the number of players has been shrinking. Since console trends begin in Japan before they come to the West, this became worrisome for Nintendo whose livelihood is gaming.
When Iwata revealed the Wii controller for the first time at TGS, he said:
“Many in the industry think as long as we keep on doing the same things … the industry will continue to grow. I’m afraid this idea is deeply ingrained in many minds. Will video game players become bored and cause the industry to shrink? We have to expand the market. To do so, we have to abandon the memories of the past and get back to the basics. The whole industry must make an effort. First, unless we can increase the number of people who are willing to play, we can never expand the market. If we cannot expand the market, all we can do is just wait for the industry to slowly die.”

Tragically, many in the gaming community wrote the above comment off as ”˜Nintendo marketing’ despite the Japanese data and stagnant market growth in the West. Many organizations attempted to portray gaming as expanding by leaps and bounds by pointing to increase of revenue but without putting it in context of higher prices and gamers buying more than one system. And while they did that, they repeated, like zombies, what was Sony’s marketing with the Playstation: that gaming had become ”˜mainstream’ with the Playstation. If gaming was so mainstream, then why was there such social stigma against it? The Wii’s explosion on the market as soon as it was released proves that gamer drift was real all along.

The purpose of the Wii is not to aim at casual gamers or non-gamers. It is to make gaming more interesting again. By making gaming more interesting, current gamers keep playing and don’t end up in ”˜gamer drift’. Non-gamers may find gaming interesting enough to try out. And former gamers will find a reason to return to playing video games.
The reason how Nintendo can aim at both core gamers and new gamers is because they both fall under the umbrella of ”˜removing disinterest’. Nintendo fears that traditional gamers will get bored and stop playing (such as Japanese did with Zelda). In that light, there is no difference between the hardcore gamer and the non-gamer.
The Passion Strategy

The examples of products shown in The Blue Ocean Strategy were mostly not done by decision makers looking to exit the ”˜red ocean’ and enter a ”˜blue ocean’. They were made by entrepreneurs passionate about an idea or a solution. The very first example, the circus company Cirque du Soleil, is very much an example of creating a circus to the founder’s passion and creating ”˜a blue ocean’. Like Nintendo, Cirque du Soleil started talking about the Blue Ocean Strategy well after his success.

From the preface, we find:
“Our research confirms that there are no permanently excellent companies, just as there are no permanently excellent industries. As we have found on our own tumbling road, we all, like corporations, do smart things and less-than-smart things. To improve the quality of our success we need to study what we did that made a positive difference and understand how to replicate it systematically. That is what we call making smart strategic moves, and we have found that the strategic move that matters centrally is to create blue oceans.”

Blue Ocean Strategy is nothing more than a study on these passion strategies: of why certain corporations were able to create a new market, skyrocket in profits, while other corporations were not. After studying this, the Blue Ocean Strategy puts out tools for companies that are in ”˜red ocean’ type of thinking to get into a ”˜blue ocean’ type of thinking.

There is absolutely no mention of casuals or ”˜watered down’ products in the book. To the contrary, Blue Ocean Strategy is a book about building new values and lessening ones that are overshooting the market.

What the Blue Ocean Strategy does is also to point out the focus on ”˜the big picture’ and to avoid militaristic comparisons. After all, we label this ”˜race’ as the ”˜console war’ where one system ”˜dominates’, ”˜destroys’, and ”˜dooms’ another console. On message boards, discussion of the market sounds like people are playing a game of Risk with games, as soldiers, ”˜conquering’ a territory. It is silly. It is absurd.

But to better illustrate how the Blue Ocean Strategy works, I will use three well known games that fit the strategy perfectly (which the designers didn’t know they were doing the strategy at the time. Hell, none of the examples in the Blue Ocean Strategy book knew they were either).

Three Blue Ocean Games

Starcraft- When Starcraft came out, the game was praised for its own merits but when compared to other RTS games at the time (RTS was then at its peak in popularity), Starcraft was panned for being Warcraft in Space, for not being in 3d (as Total Annihilation was), for lacking many of the unit AI and doing little with elevation (as Dark Reign had), and not as complex (as Age of Empires). In the expansion, Blizzard would mock these reviewers such as having one hero say, “This isn’t Warcraft in space! It is much more sophisticated!”

Unlike the other RTS games, Starcraft wasn’t trying to compete against them. The game was following its own tune. A decade later, Starcraft is still played while those other RTS games are not. More amazingly, Starcraft became a huge phenomenon in Korea. Only a blue-ocean title could do that.

One person said to me, “Blizzard does not innovate. They simply take an existing game, extract the good parts from it, take away the bad parts, and turn it into a streamlined product that is easy to play but hard to master,” to which I responded, “Good sir! You have described the Blue Ocean Strategy.”

World of Warcraft was designed to ”˜fix’ the MMORPG by removing annoying elements and focusing on the more fun elements by being inclusionary with players rather than exclusionary. World of Warcraft aimed at not just the hardcore MMORPG gamer but the casual gamer and anyone else who had disinterest in MMORPG. Quests would give good directions. Rewards were a plenty in the early parts of the game. One could rest at an Inn and get experience bonus so people who didn’t have as much time wouldn’t fall behind so fast. In the end, the game’s success stunned even Blizzard.

Even Starcraft 2 is a blue-ocean title. A Blizzard rep mentioned that they wanted the game to find new markets and audiences as well as keep Starcraft interesting to current players (that whole focus on ”˜combating indifference’ thing you hear Iwata mention). While all of Blizzard games are guided by the developers’ passion, passion is the key for any product to transcend competition and create new markets.

Mega Man 2- Capcom was not interested in making a sequel to Mega Man, but the developers felt so strongly about it that they made Mega Man 2 during their spare time at night. They focused on the elements that worked from the first Mega Man game, took out the elements that didn’t, and created a consistently fun product that made a new market. Mega Man 2 created the huge franchise that exists to this day. As you can see, even sequels can become blue ocean products.

Wolfenstein 3d- id Software loved Castle Wolfenstein so much that Wolfenstein 3d held identical ideas (and id negotiated to use the name Wolfenstein). Castle Wolfenstein was that you were stuck in a castle full of Nazis. You could shoot the guards or avoid them. The game held a high degree of adrenaline and action.

Wolfenstein 3d was taking those experiences and putting them into 3d form. The game became id Software’s breakout hit and created a new market: FPS.

For Blue Ocean games, I could have easily listed The Sims, Myst, or Sim City. But I figured listing games well loved by the hardcore would help reveal that The Blue Ocean Strategy is about passionate people creating new industries and markets and have nothing to do with focusing on casual users.

Look through gaming history yourself, and you will find that most classics are Blue Ocean titles. As they created a new market (genre), tons of competitors entered to turn it red. The premise that the Blue Ocean Strategy means passionless watered down products ”˜for the masses’ is untrue. Rather, the Blue Ocean Strategy means to create so much value the product no longer feels like a commodity. One of the reasons for the gamer drift of last generation was that games began feeling like soul-less products as they competed against other software.

Soul of the Wii

As the Wii shoots up like a fountain, consider the spray to be the Blue Ocean Strategy and Innovator’s Dilemma. But what is the source of the fountain itself?

Aside from the Wii, there is only one other console ever created that matches the Blue Ocean Strategy and disruption of Innovator’s Dilemma. This console is the NES. It created new markets while disrupting the game centric computers at the time. Ironically, Bill Gates and Ken Kutaragi label their systems as game centric computers rather than consoles. And, just like twenty years ago, the analysts are proclaiming the Wii to be a bubble that will ”˜burst’ and gaming will return to the game centric computers.

“We were the disruptors twenty years ago and now we are so again,” said Reggie concluding Nintendo’s 2006 E3 Press Conference.


Above: The NES, designed and marketed as a family system with a focus on new controllers as opposed to graphics, disrupted the solo-orientated graphic-centric game computers of the time.

While it is true that simply putting out a new machine with better graphics will not slow down gamer drift, imagine how bored Nintendo developers must be. Many of them have been making games longer than some gamers have been alive. If you are getting bored with playing video games, imagine how the old veterans feel making the same games with better graphics.

There is a saying in the entertainment industry that if the entertainer is not amused by his act, the audience will be bored. If developers are bored, that boredom is translated into the product itself. While Nintendo upset the apple cart to correct gamer drift, they also did it for themselves.

“Generation” Revealed

*Malstrom puffs on his pipe and wears the Sherlock Holmes hat.”

Good reader, what have you learned of the “Generation” so far?

“He is not hardware. If he did, superior hardware would win each generation.”

Very good. And what else?

“He is defined by software. The console market revolves around software, not hardware.”

Excellent, reader, most excellent! But there are many great games in the past. Why do we need “Generation” anyway? Why are we still not playing our original consoles?

“You eventually get bored of the same thing all the time.”

Quite true! The entertainment business is about feelings. No matter how awesome something is, too much of it will kill interest. This explains why a “Generation” cannot last forever.

“So the purpose of a new ”˜Generation’ is to create new interest?”

Yes. If it didn’t, gaming would just stagnate, and we would sit around waiting for the industry to die. But while this is the purpose of “Generation”, what is “Generation” itself?

“I know not.”

Go back in time. When people first played Pong, it was something they never experienced before. Bushnell remarked that one woman asked how the TV signal got to the TV studio and back so fast. The idea that the interactivity was locally being generated on that TV was baffling to them.

The Atari 2600 generation was also confusing. It took a while before people realized the system could play more than one game. It was when Space Invaders came to the home version that Atari 2600 sales began to skyrocket. The ability to play arcade games at home was a new type of experience.

When computer gaming began to become popular, it was about the new feelings these games could produce. The computer had a keyboard and a disk which allowed more inputs and saving. Adventure games like King’s Quest series, RPGs like Ultima, and even user created maps from Lode Runner created experiences gamers had not seen before.

The NES succeeded also due to these feelings. Remember the first time you played Super Mario Brothers or The Legend of Zelda or even Contra? Remember the feeling when you played Duck Hunt, Dragon Quest, or Metroid? One benefit the NES has was that the games were mostly Japanese which felt and played very different from the Western titles popular at the time. Gradius was far a different experience than previous shmups. When Super Mario Brothers 3 came out, well nothing the West had done could compare.

The Genesis did not immediately succeed. But the games that came out created different feelings that the NES games could not replicate. Genesis games were far more beautiful, faster, far better music, and more intense. As the SNES got going, games like Donkey Kong Country, Super Mario Kart, Star Fox, and Street Fighter II created new feelings that gamers had not had before. This is why they became so popular.

The 3d Revolution created new feelings for gamers. Many gamers wax poetically about the first time they played Mario 64, Zelda: Ocarina of Time, and Final Fantasy VII. The addition of 3d was allowing old games to produce new feelings.

The Playstation 2 generation continued the 3d Revolution. Huge virtual worlds were now the thing. Grand Theft Auto 3 created feelings games had not done before (which were not solely about the violence). The addition of CDs and DVDs allowed games to simulate the feelings of cinematic experiences that made Metal Gear Solid popular.

When people play for the first time the Wii versus the Playstation 3 or Xbox 360, the difference in reactions is remarkable. After swinging the racket in Wii Sports, they are often amazed. The Wii was creating feelings they never got from games before. Many decided, “I must have this immediately! It is so much fun!” Meanwhile, with the HD consoles, if interested the reaction is more like, “Meh. I will wait.” Analysts have misinterpreted that response of “Meh. I will wait” to mean that once price cuts and a better game library come out the HD consoles will explode in popularity. What it really means is “This is not fresh”. The proof of this comes that the Playstation 2 still outsells the HD consoles in all markets.

So what is the definition of the glorious personage of this industry, that wonderful “Generation”? Shall we have an answer? Here it is:

The “Generation” is nothing more than a grand sum of surprising and unique user experiences.

What a boring answer! But listen to gamers talk, and you can tell how they relate their gaming through experiences of feelings. Consider the definition of “Generation” tumbling out of Reggie’s mouth:

“Over the years, our industry has come to accept progress simply by what’s on the screen. I know many of you were back in our audience in 1996 when Super Mario 64 jumped to life in true 3d. And you said, “Man, that looks great.” But that leap toward a revolutionary form of gaming wasn’t really about the looks. Even then, it was about the feel. Moving your character and your viewpoint, independently, in any direction, all in real-time. And the memory of that moment was also the starting point for Wii.

“In the same way that Super Mario 64 changed everything, we asked, “How do we make video games that make everything feel new all over again?” This week, every one of you will FEEL our answer.” ”“Reggie (2006 E3 Press Conference)

Now, all contradictions are solved. The reason why consoles with the largest library tend to do the best is because they offer the most experiences and, naturally, the most feelings. Better hardware, unless it produces new feelings, is irrelevant.

“Different also defines our approach to our next home system. It won’t simply be new or include new technologies. Better technology is good, but not enough. Today’s consoles already offer fairly realistic expressions so simply beefing up the graphics will not let most of us see a difference. So what should a new machine do? Much more. An unprecedented gameplay experience. Something no other machine has delivered before”

“I could give you our technical specs, as I’d know you’d like that, but I won’t for a simple reason: they really don’t matter. The time when horsepower alone made all the difference is over.” ”“Satoru Iwata

Every time a new console creates fresh unique experiences is when a new “Generation” is born. Decades from now when historians write on this period, they will definitely place Wii as the start of a new “Generation” and Playstation 3 and Xbox 360 will be seen as the peak experiences of the Playstation 2 Generation.

What! You are astonished that I would place the HD systems as a “Generation” behind? After all, we have heard from many that the HD systems were a “Generation” ahead and that Wii, itself, was part of the Playstation 2 generation. But stop looking at hardware and look at user experiences (which is what “Generation” is). It is no coincidence that the biggest competition the Xbox 360 and Playstation 3 have is the Playstation 2.

Fallacies Through The Generations

Within every generation of gaming, a business myth is created, catches hold, and becomes insanely believed by gamers and even some publishers. Let us go through the list:

Generation One (Pong Era)

MYTH: The beginning of the business of personal computers and video-games are entirely separate.

(History on computing has whitewashed gaming out. Steve Wozniak admitted that the Apple II was designed mostly as a gaming machine. And how many young people did “Space War” and other games inspire to start programming in their youth?)

Generation Two (Atari Era)

MYTH: After the Atari Crash, mainstream media and Wall Street declared video-games a fad whose time had passed. PCs were the future, consoles were forever dead, and that PCs would take over every digital function in the household.

(The NES of the third generation would shatter this myth completely. Using a processor from the 70s, the NES showed that not only does the console market lives, the NES destroyed the dream that PCs would be the nexus of everything digital.)

Generation Three (8-bit Era)

MYTH: Nintendo persecuted and kept third parties down under an iron boot of draconian licensing, manufactured shortages, and uncanny censorship of brilliant tortured artists and their masterpiece games.

(Nintendo’s approach to third parties was to insure that the Atari Crash would not happen again as their business model became copied with every other console maker onward. Keep in mind, at the time, every analyst and journalist kept predicting doom and crash for Nintendo up to 1992. The simple sprite changes for religious symbols or anything that could be interpreted as racist was self-regulation in a hostile political environment. There was no ratings system at that time.

This myth is unfortunately still around and propagated by Sony fan-bots who fall prey to the typical monopoly myth. If Nintendo had 90% of the market, then the worst things their detractors (especially Atari, bitter about they lost their industry and sued the hell out of Nintendo for it) HAD to be true, right? But Nintendo did not have 90% of the video-game market: historians forgot to include NES’s true competitors of game-centric computers that rose like mushrooms after the crash as well as the then-popular arcades.)

Generation Four (16-bit Era)

MYTH: The “Console War” between Sega and Nintendo was the best thing since sliced bread. Such competition created the best games! Oh, why can’t we have more console wars! They are so good for gamers and the business!

(The “Console War” was the worst thing ever for the industry and gamers. Instead of focusing on growing the market, as Nintendo was determined to in the 8-bit generation, the company began to lose its way inside the Red Ocean. The ‘competition’ resulted in crass advertising campaigns and games that mimicked one another. It was horrible for gamers as Sega threw silly hardware onto the market from Sega CD to 32x. The “Console War” mentality would, in time, destroy Sega and cripple Nintendo allowing an opening for newcomer Sony to take the market.

Luckily, the “16-bit Console War is awesome” myth appears to be dying this generation due to Nintendo’s ‘non-competitive’ approach.

Generation Five (3d Era)

MYTH: Nintendo lost to Sony because the N64 used cartridges and not CDs.

(Saturn had CDs so why didn’t they prosper? It is because third parties were looking to escape Nintendo’s heavy licensing and thought Sega was the salvation with its Genesis. But Sega wanted to BE Nintendo and had similar licensing. Sony carefully watched the third party companies jump back and forth and Nintendo and Sega go at each other.

The N64 failing had more to do with Nintendo’s change of direction during the ’16-bit war’ everyone so mistakenly loves and failure to update their business practices after the crash-solutions from the 8-bit era.

The DS surpassed the PSP in both sales and third party support with DS using cartridges and PSP using discs. The point is that the problem was deeper than the surface nature of the format.

Generation Six (Cinematic Era)

MYTH: PS2 sold so much because it was also a DVD player!

(Early adopters and some poor gamers might have bought the PS2 also for its DVD capacity, but PS2 succeeded because of its game library. It was also at a mass market price.

Ironically, Sony, Microsoft, and Nintendo bought into the myth that PS2 did well because it was a DVD player. Nintendo made a DVD playing Gamecube (that went nowhere). Xbox playing DVDs did not skyrocket the system. Sony so believed in this myth that it made the PSP play UMDs (which died on the market) and PS3 to play Blu-Ray discs (which are going nowhere in the market).

Happily, this myth appears to be dying this generation.

Generation Seven (Disruption Era)

MYTH: Nintendo’s rise to heaven is because of casual gamers instead of focusing on the hardcore.

(Like previous myths, this one is spreading like wildfire and becoming cemented in the minds of gamers, the media, and some third party companies. So how did this myth get started?

With Nintendo saying they are not ‘competing’ with the Xbox 360 and Playstation 3 this generation but are focused on ‘growing the market’, everyone interpreted this to mean Nintendo to ignore the hardcore and focus on ‘casual gamers’ (under the impression the game market has been casual-less and hardcore centric). This myth comes from people being enchanted with the metaphor of the “Blue Ocean Strategy” of avoiding blood-soaked red oceans for blue-oceans where there is no competition.

As Iwata has said repeatedly, Nintendo is competing against disinterest. Who has disinterest? Disinterest can be found in those who have never played a game, former gamers, and even hardcore gamers. Iwata then says hardcore gamers are the main priority because if they become disinterested, their best customers are gone.

Wii: The New NES

The NES is the model for the Wii. Not the SNES, not the N64, and heaven forbid not the Gamecube! The reason why many gamers got the Wii wrong is because they are young (in twenties or below) and did not know how the industry was pre-NES. The reason why ALL analysts got the Wii wrong was because they stubbornly refuse to incorporate a ”˜sweep-of-time’ analysis that involves all seven generations. They study only the last couple of generations as a predictor of events for the future. Had they studied all seven generations, they would have accurately predicted the Wii explosion. Remember that the last consoles that recreate interest in primarily cold markets were the Atari 2600 (after the PONG crash) and the NES (after the Atari crash). Studying the Atari and NES generations will yield more insight for the Wii generation than studying any other generation. It is not a coincidence that many Wii games share an eerie similarity with those generations from Wii Tanks to Combat, Excite Truck to Excite Bike, and even Wii Tennis to PONG. While Nintendo is praised for bringing back simpler gaming, older gamers will remember that Nintendo was the destroyer (http://gregmaletic.wordpress.com/2006/10/04/nintendo-destroyer-of-casual-gaming/).

History will be very kind to the Wii. The Atari 2600 and NES reached a high echelon dwarfing following systems in terms of their culture shock, altering how society perceived video games, and defined their era. Just as most reviewers today are mostly from the ”˜NES Generation’, most reviewers twenty years from now could be from the Wii Generation. They will grow up with motion controls and will write feature stories about the ”˜glorious year of 2007′ when their parents bought them a Wii. In 2027, people will probably remember the PS3 as an Atari train wreck, the Xbox 360 as a hardware disaster (with no Xbox 360s working then unless specially modded), and the Wii for saving gaming as the NES did. Today, there are Atari fans who, after two decades, are still bitter about the NES success. Many game computer fans of the early 80s still believe the NES ”˜destroyed gaming as we know it’. The funniest surprise await the PS3 and Xbox 360 stalwarts who despise Nintendo’s business moves as their blood pressure rises with any mention of ”˜Blue Ocean’ or ”˜New Market’. Twenty years from now, their children will be reading about the success of the Wii in all the business textbooks (as the NES is today).

The Flood

Before the Wii launched, I wrote a series of articles for The Wiikly describing the incoming tidal wave of the Wii and not just that the generation belonged to Wii, but that Nintendo would pull the rug from the top box war of Microsoft and Sony. I received many emails with some being downright nasty. The idea that Nintendo could overwhelm the console market was shocking at the time, and they refused to believe it was probable, let alone possible. I had to have been a wishful Nintendo fanboy or a convert viral marketer to have said something so preposterous. Over half a year later, business magazines echo much of what was said. Why? It is because Blue Ocean Strategy and Innovator’s Dilemma were not marketing talk but real strategy books and highly respected within the business community. Nintendo hid their business strategy by placing it in plain sight.

Unfortunately, with all the media attention on the Blue Ocean Strategy aspects, there has been little talk of the disruptive properties of the Wii. This is probably due to the ”˜LOL casual gamers!’ myth that is the craze now. As you have witness in my above wall of words that “Generation” revolves around software, not hardware, and specifically to user experiences the software, working with the hardware, create. The motion controller is not the disruption; it is the software working with the controller. Genre by genre, franchise by franchise, the Wii is disrupting its competitors in a systematic fashion. No one will accept playing tennis or bowling game on the HD systems, even if the games are more ”˜complete’, because Wii Sports disrupted how we play those games. Why push button combinations when it is more natural to swing one’s arm? As development with Wii controls improves, the ”˜novelty’ factor of Wii games blossom into a disruptive nature. While God of War type games are certainly going to be made for the HD systems, what if a Wii one was made with precise motion controls? It would be far more interesting and intuitive to gamers that turn it to disrupt the competitors’. Iwata won’t shut up talking about how Wii is ”˜natural’ for FPS games. What Iwata is really saying is that he intends the Wii to disrupt FPS gaming despite the early lame attempts. Could this be a reason why magazines are saying Metroid Prime 3’s controls are a ”˜FPS revolution’ since the original Halo? We will have to wait and see. Star Wars games have been consistent sellers as well. Iwata also won’t shut up about a Wii light saber game. If such a game was made, would anyone really care to push button combinations of light saber fights on the HD consoles? How about strategy games using the pointer versus the analog sticks? Other disruptions will be lesser in nature such as RPGs played with one hand versus two. As these disruptions mount, the Xbox 360 and PS3 software become less and less interesting. Do not forget how the DS software made the PSP games, despite their graphic superiority, seem tired and used.

Yes, we have already disrupted handheld and it worked. Yes, we have already disrupted Wi-Fi and it worked. We disrupted the very definition of a game and that is working, too. In a few weeks, you will better understand how to disrupt console gaming. You will play, and you will see. -Iwata (GDC 2005)

You may think the revolution has come and gone, but I am here to tell you it has just begun. So far, the Wii has been little more than tidal waves slamming the shores and sweeping over the industry. Every month, people stare at Wii NPD numbers in wonder. “Oh heavens, PLEASE be a fad. Please!” This Fall is as critical to the success of Wii as the launch. It is from here that those irregular tidal waves will become a longstanding flood. Many people sold their DS systems the first year because “there were no games”. Now, the DS has “too many games”. For those who sold their Wii systems, good luck trying to buy another one this Fall. This Fall will begin to have ”˜too many games’. Nintendo will also unveil hardware you already have (but didn’t know about) in order to ”˜surprise’ the market.

What is more fascinating than the expanding gaming market is the expanding Nintendo. Nintendo is now one of the top ten most valued Japanese companies whose market value surpassed Sony. Nintendo of America has decided to send the sales and marketing staff to New York and San Francisco. This move shows that Nintendo wants to be a participant in Silicon Valley and foreshadows more ambitious plans to come. So far, the Internet has been used primarily for information. It has not yet been fully utilized for entertainment. We are on the cusp of another Net Boom but this time it will take place in entertainment. This is the reason why Sony and Microsoft shoe-horned all these digital entertainment eccentricities into their monstrosity consoles because they want to get there first. Nintendo designing the Wii hardware from the ground up to be an online console shows they know which way the trends are heading. Japanese companies think in long-term, and Nintendo is positioning itself to take advantage of the huge change coming ahead.

Regardless, some people (they know who they are) have been so embarrassed by the sudden change in the market that they are now saying, “Nothing to see here! This is simply a market change like the changes of the phase of the moon.” Or they say, “Nintendo did nothing! Microsoft and Sony just screwed up!” While that shows the typical ”˜blame the disruptee’ attitude when a market gets disrupted, it doesn’t explain why EVERY analyst put their bets on Playstation 3 or Xbox 360 to come out ahead this generation. Sometimes, they would not think it worth including Nintendo’s ”˜Revolution’ into their analysis!

This generation is unlike any other in two major ways. First, Nintendo is introducing new business models and concepts that every console manufacturer will emulate from here on out. We have not seen this since the NES. Second, ”˜console wars’ are caused by people wanting their hardware to be a ”˜good investment’. No one wants to be stuck with a turkey. Unlike previous generations, competing systems now cost two to three times more let alone the high costs of HD televisions and sound systems some gamers are insanely buying just for their game machine. The higher the buyers’ remorse, the more bitter the tears.

As the flood slowly rises, ignore the screams from the ”˜elite’ gamers as they drown in the Blue Ocean. Let these ”˜sophisticated’ and ”˜cultured’ gamers swim with the other ”˜sophisticated’ and ”˜cultured’ consoles from the past such as the Atari 7800, the Sega Saturn, the 3DO, and 1980 game centric computers. Let them sink into their underworld of alternate realities as their games become nothing more than fading embers from a gaming age long past. While the old continent sinks below, the surface above has revealed an unexplored realm. Iwata said, “When I think of what faces all of us right now, I imagine what it must have been like for the explorers who first set foot on a new continent. For them, it was impossible to imagine all the adventure that lay ahead.” For above the Blue Ocean awaits the New World.