Nintendo: Third Mover Advantage

If video games and consumer speculation bore you (not to mention aggressively mediocre writing) you may want to skip this one.

Shortly after Microsoft announced the Xbox 360 rumors began to fly about system specifications and launch titles. The new console’s muscular hardware made many gamers swoon with anticipation, and the $399 price tag for the high-end bundle seemed in line with estimates. With pre-sale claim checks in hand the world waited for something from Sony, whose Playstation 2 had held a slight edge over the first generation Xbox in terms of sales and user base. Weeks went by. Photos purporting to show a batwing-like controller from Sony appeared and disappeared, but still the giant was silent.
After months of tight lips, Ken Kutaragi finally conceded in the press that in contrast to the Xbox 360 the PS3 would be “expensive.” Sounds like an outrageous thing to say when you’re trying to sell consoles, and you’ve already lost first mover advantage. But rumors of an expensive price tag had swirled about before Microsoft had announced any price point; it’s a safe bet Kutaragi was trying to goad a price war. But what was the reasoning now?
Without much fanfare 9 months ago, Nintendo released pictures of a concept version of its Revolution (now called Wii) game console. Realizing the console wars were in full swing by now, Nintendo made several definite announcements about its new product. Soon photos of almost every component of the system—including its wild new controller and many new Mario theme launch titles—were making the rounds on the internet. E3 was approaching. Sony and Nintendo had everything to lose should they give bad demos of their systems at the all-important gaming con. Leading up to E3, Nintendo landed several swift punches; the console was renamed, which brought it back to the attention of the media and gamers; actual screenshots of game play originating from Nintendo showed many titles that included fan-favorite characters like Mario; and best of all, Nintendo announced a $199 price point.
This is the blow that stopped any hope that Sony ever had of winning this round of the console wars. Why? The day before, Sony announced that a high end PS3 would retail for $600 at launch. So much for shot in the arm Sony needs after losing the iPod war, and after the PSP sales slump. Sony has also elected to include a Blu Ray hi definition DVD drive in the PS3 at a time when HD-DVD looks poised to become the de facto standard. So, our lines are drawn. All that’s left to do is look at what makes Sony commit these kinds of blunders.

I. Not Made Here syndrome
Sony has a big problem with anything they didn’t invent or in which they had no hand in development. Kutaragi feels that providing his flagship product as test case is a wise move, and will provide an instant installed base of Blu Ray drives equal to the number of shipping PS3s. Unfortunately, as with any number of Sony-helmed media and media devices, it’s just not. Anyone remember Beta? Minidisc? Rented a UMD movie lately? Yeah, me neither. We have standard media for a reason, a reason Nintendo picked up on when it included an SD card reader on the Wii. The “not made here” syndrome is why Sony has tried five times with five products to unseat the iPod with zero success. Sony is uncomfortable in any arena unless it built said arena, which brings me to my next point.

II. Sony created this market, and now wants to change it
There’s nothing wrong with flipping the script if you’ve got the chops to do it. MP3 players were nothing until Apple re-imagined them, and one could argue that the portable audio market was solely Sony’s until that very day. And in much the same way, though Nintendo really made video game consoles “cool”, it was Sony that re-imagined consoles as “media centers”. They see the PS3 as the logical progression of the PS2; faster, more complex, more capable, and therefore more expensive. And this is true to a degree. I think what Sony and Kutaragi fail to realize is that essentially what they’ve done is make a Media Center PC. By trying so desperately to change the battlefield and its rules—and take over in the process— they’ve simply left the battlefield. In a way I feel for Sony because they seem like pre-1999 Apple when they do this sort of thing. For years Apple was forced to share shelf space with beige PCs that were so often slower and less compelling. But trying to convince someone to buy a Mac over a PC based on intangibles like value and performance was damn near impossible when the Pentium 90 was $1499 and the PowerPC 120 was $2599. I can see the novelty in fighting this battle, but I can also see Sony losing it to the tune of millions just like Apple did. How did Apple fix it? Lots of ways, starting with their own chain of retail stores. Listening Sony?

III. Sony makes other stuff they can’t afford to cannibalize
When the PS3 ships, Sony will be trying to sell standalone Blu Ray players as well. Can you imagine the nightmare of trying to prevent the cannibalization of those sales? Sony’s logic says that if it prices the PS3 well beyond standalone Blu Ray players it will spare those sales. And it will; but at what cost?

Unfortunately there are more anecdotal reasons that Sony can’t win. For starters Microsoft will surely reduce the 360’s price tag for the 2006 holiday season, probably to the tune of $100. This will put them in direct competition with Nintendo for the hearts and minds of the gaming public. There’s also the bad press of crashing E3 demo units and pre-rendered “game footage” that doesn’t look anything like the real deal. Nintendo has been cleaning up at E3, though, with lines forming on the show floor for a chance to test the Wii for just three minutes. Not to mention the fact that the Wii’s graphics, gameplay and hardware make it easy to buy and fun to play. If you want to know why Nintendo has been doing this for 25 years look at the Wii. It isn’t all about titles, or badass hardware. It just plays games—fun, exciting, challenging games. While Microsoft and Sony are designing overpriced, purpose built PCs that happen to connect to your TV, Nintendo still remembers how much fun Duck Hunt was. The Wii will succeed for the same reason the GameCube didn’t do so well: we’re finally tired of reading spec sheets and watching a billion polygons a millisecond. We finally just want to play cool games. And in a field of consoles that stress hardware over fun, the Wii wins by being different —just like the GameCube—in a moment in time when we’re ready to just have fun.