Nintendo's motivation behind the DS and the Wii wasn't something as short-sighted as "profits" from "casuals", but more along the lines of them seeking to secure longterm survival in a global economy that is facing serious upheaval. Nintendo has existed for over a hundred years, and a company that old doesn't get to be that old by routinely making bad business decisions in the longterm, or thinking that selling a product for a loss is a an awesome business strategy.

Speaking of business strategies, let's talk about Sega for a moment. Sega had the luxury of making games and game consoles during a period of economic growth. Yet they still exited the console business, despite the Dreamcast being well-received and to this day looked back upon fondly by gamers. So why did Sega leave the console business when they seemed to be getting their second wind with the Dreamcast?

The answer is the Sega Saturn, the Sega CD, and the 32X. Sega blew so much time, money, and resources on these flops (the Saturn financially flopped), that by the time Sega made the Dreamcast, they had simply run out of money. They could no longer afford to be in the console business. So they bowed out and decided to make games for the companies left standing.

Sega was a very good company that put out very good games, games that to this day many people consider classics. But this illustrates an important point: A game company can make good consoles and awesome games, but they still fail to be financially savvy, which ultimately winds up being their downfall sooner or later. But this hasn't happened to Nintendo yet, even in all it's years in the entertainment business. Why is that? Because as I illustrated in an earlier post, Nintendo understands business.

And to understand business, you must understand your customers first, and know how to look at business in the longterm second.

Up until recently, Nintendo was not interested by the fact that they were "losing the console wars." Never has Nintendo sold their consoles and handhelds for a loss ever since they entered the console business. While Sony and Microsoft hemorrhaged money with the Playstation 2 and Xbox (and now with the PS3 and 360), Nintendo was making money off their consoles, right from the get-go. They were perfectly content with "losing" the console wars, but then something seemed to light a fire under their ass. Before they talked about the "Revolution" and the Dual Screen, they were talking about "disruption" and "Blue Ocean Strategy" and expressing their concerns that the gaming industry as we know it might be facing serious decline. Nobody listened.

Now of course the reason that Microsoft and Sony didn't seem to mind selling their consoles for a loss was because they aren't just in the games business. They do other things. They saw games as an opportunity to tap into a brand new revenue stream to help secure their companies' primary points of interest. What helped Sony with this was getting a great deal of third parties secured to make games for their platform, something Microsoft later replicated with the Xbox. What aided them in all this was the fact that the world was enjoying economic prosperity and population growth. It was a tidal wave of good fortune that they rode all the way to the bank.

But neither Sony or Microsoft banked on that tidal wave crashing itself on the rocks and very quickly receding, leaving both of those companies dashed upon the jagged edges of financial ruin. When your products are too expensive for people who no longer have the luxury of economic growth to waste their money on, your high-cost-of-entry gaming becomes a liability to customers and to the industry itself. The values that brought the game industry alleged prosperity now becomes a burden that is slowly breaking the financial back of the game industry itself.

If you want a contemporary example to liken the dilemma that the game industry now faces, then we needn't look any further than at the businesses that have come crawling to Washington asking for a bailout. These companies took the economic growth for granted, and instead of preparing for the day that the growth would recede, they blew their money on short-term products that would ultimately lose their longterm value to customers once money started to get tight once more. These companies have only themselves to blame for their short-sightedness, but yet have the gall to ask taxpayers to foot the bill for their ineptitude.

Sega, like Nintendo, was only in the console business. Nintendo isn't run by a bunch of financial yokels. They very likely saw Sega's departure from the console business as a sobering reminder of the fact that you can be riding high, but still ultimately fail because of a few financial missteps. Because gaming is their primary source of revenue, they don't have the luxury of merely "throwing money at the problem" like Sony and Microsoft does. They were concerned about what would happen if that economic prosperity came to an end. They weren't interested in the "war" with the other consoles, seeing as the only war they were worried about winning was having the right to remain in the gaming business in the foreseeable future in the eyes of consumers.

"But the game industry is doing just fine, they're still making profits! You're just crazy!" you might say. I'm sure that's what the business geniuses during the Atari 2600 era thought when they flooded the market with crappy games nobody wanted. They blew their financial load and the gaming industry as they knew it back then went completely tits up, until Nintendo took a defibrillator to it with the NES a few years later. And trust me, they had to try real hard. Like, "Ed Harris beating the shit out of Mary Elizabeth Mastrantonio in The Abyss to bring her back to life."

The primary difference between the decline that the industry faces today and the collapse that destroyed the industry back then, is it happened almost instantaneously during the Atari Era. You could liken the demise of the game industry at the time as an accidentally self-inflicted gunshot to the head. They never knew what hit them. Today, the industry is suffering from being gutshot. It's very painful, but it's not immediately fatal. In fact, it doesn't have to be fatal.

Microsoft and Sony and Nintendo are like three oil companies that are drilling in the same oil field, but have been oblivious to the fact that they are eventually going to run out of oil Nintendo, realizing this, has gone off to drill for oil elsewhere, where they are forced to use different methods to get at that oil, meaning that they have to change how they've been doing things and take risks they never took before. In the meantime, Sony and Microsoft have continued to drill in the same field, and finally they and the third parties are beginning to realize they have passed their peak oil production. There's nowhere else they can go now but down.

But they seem to be in denial. They won't openly admit that the well is going dry. They try to spike their production numbers by charging their customers for downloadable content, charging them to play on Xbox Live, jacking up the price of their games, and nickel-and-diming tactics along with any other sorted means to try and make themselves look like they are financially better off than they really are. Even though they've spiked their revenue, it does not change the fact that they are now well into the declining end of their customer bell curve.

Now Microsoft and Sony are ready to start drilling for oil with Nintendo, but unfortunately "drilling" isn't going to work with the audience that the Wii and DS are catering to. They don't care about HD graphics and processing power. They don't care about online gaming, and because Nintendo has their fingers' on the customers' collective pulse, they never put much effort into the Wii's online because playing games online is not something that the Expanded Market values. Nintendo didn't neglect their online because they were "lazy". They didn't bother with it because that's not what their customers care about.

That's where focusing on your customers and looking at your business in the longterm has paid off for Nintendo and where it is going to utterly decimate Microsoft and Sony. They see what Nintendo's done, but they don't understand how they did it. Nintendo sees customers, whereas Microsoft and Sony see "casuals" as some kind of mythical "demographic" and a potential revenue stream to exploit. They begin trying to drill this market based off the notions of "power" and "graphics" "online capabilities" and "media hub", and doing motion controls "better" than Nintendo, when those things are not what attracted the Expanded Market to the Wii and DS in the first place.

Right behind them are the third parties, ready to exploit the "casuals", only the Expanded Market isn't buying what they are selling. On the 360 and PS3 third parties could just throw money at graphics and being "edgy" and expect the money to roll in while stifling competition with the high-cost-of-entry. But the Wii and DS get their oil by using different techniques and methods. The Expanded Market isn't interested in photorealism and processing power. The third parties have done things the old way for so long that they are at a complete loss as to how to get money out of this new market. So when their games flop, they blame this market when the blame truly lies entirely on themselves.

Even worse (for them), is that because they are forced to compete for this new market on different values, this means that their deep coffers of money are completely useless in the face of smaller third parties who are using these new values to make games that sell better than the games made by the third parties with more money and resources to throw around. They try to compete on production values when that's not what the Wii's audience values. So they make games that nobody on the platform values, and then cry about the fact that nobody understands them when it is in fact they that have failed to understand this new market and adapt to it. This is also why you continue to hear the third parties parrot about Nintendo making a "HD Wii." They don't actually like to compete with other companies.

Also note: I said the reason that the game crash occurred during the Atari Era was because the market got flooded with crap games. Now let's look at current events. A lot of major titles and releases that were slated for the holiday season are getting pushed back all the way into next year. Why? If the game industry is really having all this "growth", then there should be plenty of customers around to buy all your games to recoup your development costs...unless that is in fact not the case. The truth is that the core gamers haven't been growing. That market has become stagnant and has been steadily declining. They are either leaving gaming or changing how they game due to real life and responsibilities, which very likely means what the Wii and DS offers them now becomes much more appealing than what the rest of the game industry offers.

If the Core Gaming market was healthy, then there would be no need for developers to push back their games and avoid competing with each other. But they can't because there's not enough of those gamers (and their revenue) to go around for all of them. There are too many games with over-inflated budgets and not enough demand for them to recoup the costs. The Core Market is eventually going to collapse. Reality is eventually going to come back to bite them in the ass, no matter how hard they try to stick their fingers into their ears and ignore the train that is coming straight for them.

But sadly, for the game industry anyway, what they want is not what the customers want. Nintendo understands this, hence their success. Either Sony, Microsoft, and the rest of the game industry adapts to the changes and challenges that now face this "industry" or they will go the way of Atari. It happened before, and it will happen again, unless they wise up. But something tells me that's not going to happen.

edit: I keep forgetting that this site posts my blog from the time I started typing, not when I publish it, I'll try to keep that in the mind for the future.

My first console was an Atari 2600. My mother routinely kicked my ass at Pac Man. When my cousin gave me his NES, my grandfather would play Super Mario Bros. with us. When I got a SNES, my mother stayed up until the dark hours before she had to work playing Vegas Stakes. My father's logging buddies playing the NES, and in fact is where I got my copy of Super Mario Bros. 3 from. I remember watching on the news once, where an old lady in her 70s or 80s called a Nintendo hotline to help her get through A Link to the Past. Nobody derided this. Everyone thought it was cool back then.

But then once games started to go 3D, and the console wars began to seriously flare up, something began to happen. My mother showed no interest in playing video games. Everyone I knew and worked around looked down on video game in a derogatory sense. Gaming was no longer cool to the mainstream. It was no longer entertaining.

Of course, as an old-school gamer, as a fan I continued to buy game consoles, but eventually even I began to become disenchanted with the direction the game industry was going, and how it was treating fans such as myself with their lousy attitude towards their customers. If it wasn't for Monster Hunter, I would have been done with gaming altogether.

But then came the Wii. I was still very much disenchanted with the game industry, and I continued to rope in Nintendo with the rest of them. I saw the Wii controls as a merely a "gimmick" that wouldn't catch on. But then something very interesting began to happen.

People that I never thought would have played a game in their lives were talking to me about the Wii with a look of elated glee on their faces. Then they would tell me about the old days when they played an NES or an Atari. People I would have never pegged as gamers were talking to me about games, not derisively, but from the perspective that they were cool.

My friends' parents were talking about playing Cooking Mama on their Dual Screens. They were in their 40s, and I live in Tennessee, mind you. My mother and stepfather showed interest in playing the Wii! Whenever my young nephew comes down, he wants to watch me play Monster Hunter Tri Super Metroid. He'll play Secret of Mana with me. Up until recently, I worked in a nursing home, washing dishes, and every week or so the manager would bring in his Wii to let the residents play. I'd look out the door while clearing off the carts, and I'd see them playing Wii Sports, or some other game. And I would think "My god, they did it. They finally made gaming fun again, and not looked upon as a social stigma."

And viewed from that perspective, I can find nothing wrong with Nintendo's business strategy to expand gaming. Gaming has once more become mainstream, which carries with it a great many benefits to the game industry and to gaming at large. Such as not as easily becoming the target of media and political criticism, since the stigma and mystery of what games are to people that normally don't play them is beginning to ebb away with the Wii and DS's success.

In my youth, I played many games that I could associate with on the Wii. Trauma Center reminds me of M.A.S.H., which I played for the 2600. Most of the Wii's games are in fact arcade games that are being played in a different context. Most people have played pinball at least once in their lives. A lot of people have been to arcades and played Pac Man and Donkey Kong. It's easy to see the correlation between DDR and Guitar Hero. In fact, I remember all sorts of people coming into the arcades to watch other people play DDR.

"Casual" gaming is a derogatory term for old-school gamers who were left out in the cold by the game industry's self-aggrandizing. Everyone on Earth is a potential gamer. It's that simple. The key thing to understand, however, is that all the people I mentioned, they want to play games not play movies. The game industry has gotten to have this line of thinking that games have to be cinematic, and having storytelling, and be like "art".

You know what? As someone who has played games since they were blips on a black and white TV screen, I don't give a shit about that, and nor does most other people. We give a shit about our games being fun. We want arcade-like games that don't require any time sinks to get enjoyment out of. We want games we can play forever, games that we can go back to years from now and still be entertained by. We'll play actual games for years and years, but we'll perhaps play our movie-games once or twice, and never look at them again. For most people, the Wii and DS fulfills those aforementioned criteria, while the rest of the game industry continues to push those old-school gamers away.

Those old-school gamers have always been there, waiting for someone to start making games for them again. That company happened to be Nintendo. The funny thing is, these latent gamers aren't on forums talking derisively about the hardcore and core gamers, yet more often than not whenever Nintendo gets mentioned, they and their mainstream audience of old-school gamers get mocked and derided. Of course, I know that's not everyone, that'd be rather asinine of me to paint with such broad strokes on a community of gamers. But it's not just fans. The rest of the game industry has shown utter contempt and disdain for Nintendo and their audience.

Perhaps this is because they aren't susceptible to the industry's hype machine and marketing? Maybe it's because they aren't going for their overwrought Hollywood Blockbuster games with bloated budgets? Maybe it's because most of these game developers that talk about "art" and business models and demographics are only interested in making games for themselves and not for the enjoyment of many? Maybe it's because with Nintendo's Wii it's impossible for third parties to shove digital distribution down the mainstream audience's throats?

Maybe the truth of the matter is that the game industry has lost touch with gamers. Don't laugh. Trent Reznor remarked that the same people that were running the game companies were the same kind of people running the music industry. The music industry now only markets to "demographics". Nobody makes music for older people anymore. The elderly still have to listen to Johnny Cash and Elvis and Bob Seger and John Fogerty. But what about now? The industry isn't interested in them. They are not only out of touch, they have attacked their customers, their fans, and now they are being marginalized to the point that they will eventually vanish from the cultural landscape. And the game industry seems perfectly fine with following right in their footsteps. Except for Nintendo, who still wants to stay in business and entertain people, hence the Wii and DS.

The mainstream are happy with their "casual" games. Yet, core gamers and the game industry are happy to put them and Nintendo in their sights to make mockery of them. Until it comes time to talk about all this wonderful "growth" the industry is seeing, when in fact it's all coming from Nintendo. Their revenue growth is only them trying to find more ways to fleece their core gamers for more money. Something that is impossible for them to do with the Expanded Market. I guess that means they'll have to start treating them respect and making games that they'll wanna play, like any other sane, rational industry that wants to stay in business. Or they'll go the way of the music industry.

My question is, why do you mock Nintendo and its audience of old-school, arcade gamers? What did they ever do to you? Maybe it's not what they are doing, but what they represent: Gaming going back to its roots, where games were simply games, not movies. I must say, as an old-school gamer myself, I really couldn't be happier.

The Wii's success dictates that motion controls are the future of gaming. To say otherwise is foolish. All that matters now is to understand why it happened in the first place:

With their high-end gaming, Sony and Microsoft and the rest of the game industry snubbed low-end gamers and potential gamers with their consoles and games. This gave Nintendo an opening to cater to those shunned customers, hence the DS and the Wii. Their success shows that Nintendo knows how to do business in the longterm, whereas we are now seeing that Microsoft and Sony completely fail to do that.

Whereas Sony and Microsoft and most third parties cried and pouted and pontificated at the notion of making games for the masses, Nintendo saw it as an opportunity, and they took it all the way. You don't make customers by ignoring them, and you don't keep customers by treating them like shit and looking down on them. It's like that in every business, so why should it be any different for the game industry? The answer is that it is not, and the industry is suffering for looking down on "non-gamers" and "casual gamers" because they priced themselves out of the market, and with the economy in decline, nobody is willing to spend money on HDTVs to play their hardware. They see no difference in the graphics, so they choose the one that offers the most entertainment value for the least amount of money: The DS and Wii.

Nintendo isn't "competing" with Microsoft or Sony because competition means competing over the same values, in this case Microsoft and Sony are competing over the same customers and the same values (HD graphics and processing power), whereas Nintendo has disrupted them by changing those values (changing the context by which we interface with our games). Nintendo didn't zap customers with some kind of evil Hypno-Ray to brainwash customers to buy their hardware and software. The customers liked what Nintendo was offering, and they gladly gave them their money because they saw that the price was right for the entertainment value that the Wii offered. Not to mention that it offered an experience that the other two consoles could not offer.

The "game industry's" response to the Wii and the new market was to deride it. To mock it. But time has vindicated Nintendo and their business strategy, as it has put them ahead, while Microsoft and Sony rush to make their own motion controls to "exploit" this new market. However, this may all be for naught, since there is something that needs to be taken into consideration:

Nintendo has always sold their consoles in the green. Sony has been selling their consoles at a loss (as has Microsoft). They may have gotten away with just "throwing money at the problem" during the tidal wave of economic growth, but now that it's receded, we're beginning to see that neither of these companies are the financial geniuses they've made themselves out to be. Customers are not buying into HD Gaming, and that means they are not buying into their games. As a result their games are quickly losing market value.

Grand Theft Auto 4 cost 100 Million dollars to make, yet today you can buy it for less than 30 dollars new, or for much less used on Amazon. This is happening to most of the HD Games. Nintendo's first-party games (and a fair amount of third-party Wii and DS games) have managed to retain their full retail value for a long time, and some still do. That means their games are still selling for full price. That means that customers value those Wii and DS games more than most (if not all) of Microsoft and Sony's HD games. That means over time they will outsell their HD counterparts because they will sell more over time while retaining their full retail value. As anybody with half a brain would expect, you don't cut your prices when you are winning. The market is saying that don't care about HD Gaming. If they won't buy into what Sony and Microsoft are selling, then the idea of "Hollywood Blockbuster" games with outrageous costs and spending is unsustainable. Eventually the bubble will burst, and core gaming as we know it will collapse, leaving only the new market as a brand new frontier of gaming.

So I think it has become pretty obvious who has shown their business chops this generation. Microsoft and Sony's fickle spending is coming back to bite them in the ass, and with core gaming on the decline, both their gaming divisions may very well go under before they can do anything of merit with their attempts at trying to cash in on the market that Nintendo has created. The next few years (hell, the next few months even), are gonna be very interesting to watch.

I'd like to ask Mr. Miyamoto, and Mr. Iwata, and everybody in the video gaming community--everyone from the Hardcore, to the Core, to the Expanded Market, and everybody in-between--a few questions.

First off, what business is the video games industry in? The answer is the entertainment business. Now, having answered that question, there's a few others I need to ask, to Mr. Miyamoto and gamers at large:

--If I tried to sell you a comic, with no illustrations inside of it, would you buy it?

--If I tried to sell you a novel without words, would you purchase it?

--If I tried to sell you a movie on a blank DVD, would you buy that?

So Mr. Miyamoto, what makes you think myself and the rest of the gaming community is gonna buy into Wii Music when we rejected it the first time?

Mr. Miyamoto, you and Nintendo and the rest of the game industry are in the entertainment business. That means you are in the content business. Wii music and other games like it, the so-called "User-Generated-Content" games, do not sell for the simple fact that they feature no content. Now let me ask another question to add on to the list I have just made:

--If I tried to sell you a game with no content, would you purchase that?

Mr. Miyamoto, when you pitch us Wii Music, you are asking us to pay you money to do your job for you. That's the same thing with all user-generated-content games. They don't sell because "gamers don't understand it," they don't sell because developers are asking us to do the most important part of making a game for them: Putting in content. You are asking us to pay you money, to do your job for you. I would just like to reiterate that, so that it would sink in and resonate.

Mr. Miyamoto, if myself and gamers at large wanted to do your job for you, we wouldn't be tinkering with Wii Music; we would be busy coding our own games. You are in the entertainment business, Mr. Miyamoto, and I only keep repeating this because it seems that you yourself and Nintendo don't seem to fully understand that notion. If I were in the entertainment business and tried to sell something to the masses that was completely devoid of entertainment value, I would go out of business, and rightfully so. So why is it so hard to accept that your game, which was devoid of entertainment value, flopped?

As for any gamers that are reading: This is why Nintendo's sales have slowed down, and why they had a price drop: Nintendo has been complacent, and instead of churning out games with content, they've been wasting their time with science experiments and pet projects, when they should have been putting out games with content to keep their console's momentum going. Their foray into UGC has taken the wind out of the console's momentum diminished their market value as a company in the entertainment business.

The most valid criticisms of Nintendo are that they have been slacking in game development (and I mean actual games, not UGC), and that they have been ceaselessly rehashing their old games to the point that they've lost their value to the gaming community at large. And instead of revisiting older franchises that have been neglected in recent years, or trying to create new IPs with actual content, they instead try to market unfinished games with no entertainment value as "the next big thing" for gaming. To quote my grandmother: "Bullshit!"

The facts tell us otherwise: Every attempt at user-generated-content in gaming has failed to sell in any significant manner, and always well below expectations. Don't cite sales of Wii Music in regards to the product's "success." Nintendo only gauges their software as a success if it helps sell their consoles. Wii Music did not sell consoles. And games like Smash Bros. Brawl that feature level editors don't count as UGC. Those games had actual content in them, with the UGC added in as an extra; it wasn't sold as the entire game. UGC games have always backfired, and cold hard reality routinely proves this to us: Spore, Little Big Planet, Wii Music, and many others asks the customer to bear the burden of content creation, whereas that is the developer's job--the developer's job to entertain.

If I tried to pitch a film in the movie industry with no script or storyboards, I'd get laughed out of every meeting I pitched. If I tried to publish a novel of blank text, nobody is gonna buy it. If I sold a comic full of blank pages, and told you to just imagine all the awesome stuff that could be happening on the pages, you'd throw the damn comic in my face and walk off--as you rightfully should.

What makes Mr. Miyamoto think he's somehow above the laws of supply and demand? What makes the entire game industry think that they are above the laws of supply and demand? There is no demand for games that are not finished, games without content. As horrible as Superman 64 and Mission Impossible were, those games still had content, which puts them well above Wii Sports and any other attempts at UGC, seeing as they are actual games and not unfinished pieces of software lacking any sort of redeeming entertainment value.

The reason I am posting this, is because Nintendo's business strategy stated that they were fighting against disinterest in gaming. That there was their entire motivation behind the DS and the Wii. So if their mission statement is to fight disinterest in gaming, why do they continue to dabble with UGC. Fighting disinterest in gaming means putting out games with content. Wii Fit, as much as people bash on it, is a game with content, that connects to the user in a meaningful way. It has a job to do and it fulfills the task that the customer asks of it. And it does a hell of a lot more than Wii Music.

Nintendo: You have no real competition right now thanks to your business strategy, but your success has made you complacent. With economic turmoil looming on the horizon, you do not have the luxury to indulge in science experiments and pet projects. Your mandate is entertainment, and entertainment means content. Mr. Iwata, reign in Mr. Miyamoto. He makes great games, but he's also human and like all humans, he makes mistakes. His obsession with UGC is a mistake that is going to bite your company in the ass just as surely as the high cost of entry of the 360 and PS3 have bit Microsoft and Sony in the ass. In fact, seeing as your console has recently seen a decline in market value, it already has. Start making games with content, start revisiting older IPs, and start investing in new IPs with content, not pet projects that serve only to entertain the developer's own fancy. And remember:

Film-goers do not go to the movies to stare at a blank screen.

Anyways, I've written this to spur discussion about UGC and Miyamoto's pigheadedness in regards to it. So send it to anyone that might be interested, discuss it, and maybe someone at Nintendo will get a clue, and remind Miyamoto that he is not in the entertainment business to entertain himself, but all of us.[/size][size=12]