Nintendo will need better casual games to continue their console war

Infendo

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As most of you have no doubt read, Nintendo President Satoru Iawta is concerned that the Wii is in an unhealthy state, and that it is urgent for Nintendo to recover sales momentum. This statement, coupled with recent numbers confirming this sales drop, has left many to point the finger at Nintendo’s Blue Ocean Strategy, which disrupted the video game market by bringing a wider audience into gaming with casual titles, as the cause of this drop. They suggest that Nintendo needs to move away from this strategy and focus more on games for the core gamer to regain sales momentum.

I think that a shift away from the Blue Ocean Strategy of developing games for new audiences would be a mistake on Nintendo’s part. The decline in Wii’s sales does not prove that Nintendo’s Blue Ocean Strategy has failed. Rather, it illustrates how Blue Ocean requires constant innovation following the initial market disruption.

If Nintendo wants to see the return of explosive sales for the Wii, it needs to refocus the platform so that it is once again the home of innovative fresh titles that draw in the broader audience.

The Wii was successful because it offered something different

Remember that Blue Ocean Strategy is about creating new market space instead of competing in existing and crowded market space. Companies that create this new market space enjoy almost no competition, which allows for rapid and extremely profitable growth. These days, the video game industry is extremely crowded – a so-called “Red Ocean” where competition is high as companies fight over existing market share. At some point during the Gamecube era, Nintendo realized that competing in this Red Ocean wasn’t working out (maybe it was when they actually stopped manufacturing Gamecubes due to low demand) and that the best course for survival was to create new demand in a “Blue Ocean” by developing a radically different console that targeted a market distinct from their traditional competitors. By going after different audiences than both Sony and Microsoft in this round of consoles, the Wii has become Nintendo’s second best-selling console after just three years on the market.

The key to Blue Ocean Strategy is to innovate in a way that creates high value for the consumer for a low price. When the Wii was launched, the value to the consumer was that Wii provided more accessible, fun gaming than its higher-priced competitors. Much of the value for the expanded audience was tied to Wii Sports and Wii Fit and the fresh approach to gaming that Wii offered.  Returning to a focus on the core market at this stage in the console’s lifecycle runs contrary to the Blue Ocean Strategy. If Nintendo were to dive back into the Red Ocean of focusing entirely on core games to revive sales, they would undoubtedly lose, just like they did with the Gamecube and, to a lesser extent, the N64.

Core games will increase console sales, but only to a limited extent

I don’t want to downplay the role that core Nintendo franchises have played in Wii sales. The entries for Mario, Zelda, Metroid, Mario Kart and Smash Bros. have all been excellent, and contributed greatly to Wii sales since launch. When I look at the lineup that Nintendo has for core gamers in 2010, I am sure that Wii owners will be happy, but I’m not sure how these games will return the Wii to the explosive sales numbers it had in 2008.

I struggle to think of someone who will buy a Wii for Super Mario Galaxy 2 that didn’t already buy one for Super Mario Galaxy.  How many people passed on Metroid Prime 3 or the Metroid Prime Trilogy to buy a Wii for Other M? Don’t get me wrong – these games will likely be outstanding, they will sell well, and I am absolutely thrilled that they are coming out, but I’m not sure if these are system-sellers at this stage in the Wii’s lifespan. The target audience for these games likely picked up a Wii sometime between launch and late 2007.

I should be very clear here: I am not advocating that Nintendo give up on core games. These games are a critical part of the Wii’s userbase. The keep it diverse and interesting and are, quite frankly, my favorites. They also make Nintendo lots of money. What these games will do is serve the audience who complains that their Wiis are collecting dust, which is a very good thing, especially when consumers are considering whether or not to purchase Nintendo’s next console. Gamers who feel burned by a company will be far less likely to purchase their product. Look what happened to Sega.

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